very low (and sometimes negative) equity by design?

1?? The #1 reason: Massive share buybacks crushed equity

Oracle has spent tens of billions of dollars on share repurchases over many years.

What buybacks do to equity

• Buybacks reduce shareholders’ equity

• Cash goes down → equity goes down

• Retained earnings shrink

• Equity can approach zero or turn negative

When equity is small, D/E explodes, even if debt is stable.

Example

 

Debt = 100 Equity = 20 → D/E = 5.0 Equity = 5 → D/E = 20.0 Equity = -5 → D/E = meaningless

Oracle hit negative equity in FY 2022, which is why its D/E was extreme then.

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2?? Oracle uses debt as a capital-allocation tool (not distress)

Oracle deliberately uses cheap long-term debt to:

• Fund buybacks

• Finance acquisitions (e.g., Cerner)

• Optimize capital structure

This is common for mature, cash-generating firms.

Key point:

Oracle’s debt grew slower than equity shrank.

So the ratio worsened mainly due to the denominator, not the numerator.

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3?? Stable, predictable cash flows make high leverage manageable

Oracle has:

• Long-term enterprise contracts

• Sticky customers

• High renewal rates

• Strong operating margins

This allows Oracle to safely carry:

• Higher leverage

• Lower equity buffer

Credit markets price this in — Oracle still has investment-grade credit.

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4?? Accounting effect: goodwill & intangibles

Oracle has made many acquisitions.

Result:

• Large goodwill & intangible assets

• Tangible book value becomes deeply negative

• Equity looks weaker on paper

This inflates leverage ratios but doesn’t mean cash-flow risk.

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5?? Compare Oracle to peers (why it looks “worse”)

Company	Buybacks	Equity Level	D/E
Oracle	Very aggressive	Low / negative	Very high
Microsoft	Moderate	Large positive	Low
Apple	Aggressive	Low equity	High-ish
Nvidia	Minimal	Very high	Very low

Apple’s D/E is also elevated for the same reason, just less extreme.

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6?? Why D/E is a bad metric for Oracle specifically

For ORCL, Debt-to-Equity is misleading.

Better metrics:

• Net Debt / EBITDA

• Interest Coverage Ratio

• Free Cash Flow / Debt

• Debt maturity ladder

These show Oracle is leveraged but not fragile.

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7?? Bottom line (plain English)

Oracle’s debt-to-equity is high because equity was intentionally reduced, not because Oracle is drowning in debt.

Think of it as:

“A house with a big mortgage but very steady income — and the owner chose to keep little cash on hand.”

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If you want, I can:

• Compare ORCL vs AAPL vs MSFT using better leverage metrics

• Show how buybacks mathematically destroy equity

• Pull Net Debt / EBITDA trends over 10 years

Just tell me what angle you want