One number instantly explains why Apple’s investors are having a wildly different year than Oracle’s It’s amazing how the free cash flow line has meant wildly different things for Apple (AAPL) and Oracle (ORCL) investors this year.
Call it an Investing 101 reminder: Cash is king
Quick insight: With tech investors laser-focused on capex, free cash flow has emerged as a major driver of share prices this year. The latest example: Alphabet (GOOGL) reported its first negative free cash flow quarter, and the stock was hammered last week after its earnings. Free cash flow could remain negative for Alphabet in the near-term, based on guidance from its earnings call.
As for Apple, it has generated about $129 billion in trailing 12-month free cash flow. On the other hand, Oracle has seen a $24 billion outflow. It’s not that Apple isn’t investing in AI, but Oracle’s business model requires it to take bigger financial swings.