Bufetico
Lexi Smith’s family always had a plan: land big enough for several houses, so their boys could grow up right next door to the grandparents. They settled just outside Abilene, Texas, and until a few years ago the only things around them were other ranches. Then, in 2024, work began across the street on one of the world’s biggest data centers.
She teaches school, and her husband is an accountant who also co-owns an electrical company. Together they run a fireworks stand down the road, and she marks time by fireworks season. Two or three seasons ago, she told KUT, Austin’s public radio station, things were completely normal. Since then, she says, the construction has brought traffic, damaged roads and worse air and water, and the house has lost its value as a home: if they ever found a buyer, it would only go as commercial property.
The family got taken, she says, when you look at the kind of money being thrown into the project. To her, no amount of money would make it worth it.
The site is the flagship of Stargate, the AI project that Oracle and OpenAI, among others, pitched to Abilene with the promise of thousands of jobs. To keep the investment coming, the city council gave it an 85 percent tax break. On its page for the site, Oracle says it expects the project to support 1,000 ongoing jobs within the first two years after construction is complete. KUT says construction is due to finish in 2027.
So the Smiths are living through the part that comes first, and so is the town. KUT reported rents in Abilene up nearly 50 percent in a year. A case manager at one shelter said finding someone a place to live can now take up to six months, where it used to take just over a month, though he isn’t even sure the data center is to blame. The ongoing jobs come later. Oracle is waiting on promises of its own, on a longer calendar than the town’s.
Data centers like the one across from the Smiths are how Oracle delivers what its customers sign up for. At the end of August, those customers had signed $664 billion of contracts for work Oracle hasn’t done yet, which the company calls remaining performance obligations. Its latest quarterly filing says it expects about 13 percent of that to become revenue in the next twelve months, and most of the rest over the four years after that. That schedule is for revenue, and some of the cash comes sooner: from June to August, customers paying ahead made up $11,363 million of the $23,103 million Oracle’s operations brought in. The spending still comes first. In its last fiscal year, through May, Oracle’s free cash flow was minus $23,686 million: once it paid for everything the business needed, data centers included, it came up that much short.
It took the Smiths a long time, and a lot of saving, to build that house. The family budgeted and went without to pay it off, she said, and then “this kind of stuff happens, and you just don’t have any control.” Smith says she resents the city for letting the data centers in at all.
Two things make a dollar promised for later worth less than a dollar you have today: the wait, and the doubt. The wait is pretty simple. A dollar you have now can pay down a debt right away, the way the Smiths put theirs toward the house. A dollar due in five years can’t do anything until it shows up.
You can see the price of waiting in Oracle’s own books, in the rent it owes. At the end of August, Oracle still owed $48,050 million of rent on its operating leases, mostly for data centers and other buildings, but its balance sheet puts that debt at $34,621 million. The filing calls the difference imputed interest, the accounting name for what waiting costs. By my arithmetic, that rent counts today as about 72 cents on the dollar. Oracle’s annual report says its operating leases had about twelve years left to run on average at the end of May, and that it generally discounts the rent at its own cost of borrowing.
The doubt is the other half of the equation. The annual report says that whether all this spending pays off depends on demand and on its main customers being able to meet their contracts. Some of its customers, it adds, may be highly leveraged, which means they run on a lot of borrowed money.
Where this breaks
The filings don’t name the customers behind the $664 billion. Most of what was added over the past year came from big cloud contracts, and I found nothing in the filings about the terms for canceling them. The August quarter’s figures are unaudited, and the Abilene jobs figure is Oracle’s own estimate.
Free cash flow has a blind spot of its own. On that one line, a company spending to grow looks the same as one that’s losing money, and my own model mixed the two up with Amazon until I fixed it. Oracle’s capital spending jumped mainly because of its data centers, and that money has to come back through the contracts, on their schedule.
Fireworks seasons
Lexi Smith marks time in fireworks seasons, and her husband’s grandparents have lived on that land for more than 40 years. Oracle rents nearly all of its data centers, so a lot of its calendar is written in leases.
On top of the leases already on its books, Oracle has signed $288 billion of leases that haven’t started yet, nearly all for data centers, running fifteen to nineteen years. By Oracle’s own schedule, about 84 percent of what customers have signed turns into revenue within five years, and the annual report says its data center leases typically don’t match how long customer contracts run. Unless customers renew, most of the promise runs out before the rent does.