Oracle Corporation (ORCL) on Q2 2023 Results - Earnings Call Transcript

Operator: Good afternoon, ladies and gentlemen. Welcome to the Oracle Q2 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. And please be advised that this call is being recorded. After the speakers’ prepared remarks, there will be a question-and-answer session. And at this time, I’d like to turn the call over to Mr. Ken Bond, Head of Investor Relations at Oracle. Please go ahead. Ken Bond: Thank you, Bo. Good afternoon, everyone, and welcome to Oracle’s Second Quarter Fiscal Year 2023 Earnings Conference Call. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information can be viewed and downloaded from our Investor Relations website. Additionally, a list of many customers who purchased Oracle Cloud services or went live on Oracle Cloud recently will be available from our Investor Relations website as well. On the call today are Chairman and Chief Technology Officer, Larry Ellison; and CEO, Safra Catz. As a reminder, today’s discussion will include forward-looking statements, including predictions, expectations, estimates or other information that might be considered forward-looking. Throughout today’s discussion, we will present some important factors relating to our business which may potentially affect these forward-looking statements. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from the statements being made today. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events. Before taking questions, we’ll begin with a few prepared remarks. And with that, I’d like to turn the call over to Safra. Safra Catz: Thanks, Ken, and good afternoon, everyone. Well, simply put, we had an outstanding quarter. Total revenue for the quarter was more than $200 million above the high end of our guidance range and grew 25% in constant currency. Even excluding Cerner, total revenue grew 9% in constant currency that’s higher than Q1 and on top of a revenue beat this time last year. The strength of the quarter is even more amazing, given that the currency headwind was higher than what it was when I gave guidance with 6% for revenue and a $0.095 headwind for earnings per share. And yet, we still exceeded the high end of my USD guidance for both, total revenue and earnings per share. And as you can see from the numbers, we continue to experience clear company-specific and product-specific momentum. The reasons are many, but it boils down to a few key points of differentiation. First, more and more customers are recognizing our second-generation infrastructure cloud as being fundamentally better architected for higher performance, better security and unmatched reliability versus the older first-generation hyperscale cloud providers. Second, customers appreciate the flexibility of our service and business model that enables them to deploy our technologies where it serves them best, whether that be in the public cloud, in dedicated regions around the world or in a true clouded customer implementation. And third, customers recognize the value of an end-to-end integrated stack of applications, both horizontal, like ERP and HCM and supply chain, and industry-specific applications that focus on their industries. And all of it is on our Gen 2 infrastructure, which is designed perfectly for them as they move through. As customers increasingly look to better value out of their technology investments, many discover that Oracle is much better compared to other alternatives. Gartner formerly recognized OCI by moving us to Visionary status in its cloud infrastructure and platform services report for the first time. In addition, last week, we were awarded a JWCC award at the U.S. Department of Defense as they also recognized our capabilities. As all of these differentiators come together and our business continues to accelerate, we expect organic growth for our fiscal year 2023 cloud revenues will be over 30% in constant currency. Now to the numbers. As always, I’ll discuss our results using constant currency growth rate. To provide a full picture, both organically and otherwise, I’m going to go over the revenue results, including Cerner, and then some of the revenue results excluding Cerner, so you can see what’s going on. Total cloud revenue, now that’s SaaS and IaaS, including Cerner, was $3.8 billion, up 48% in constant currency with IaaS revenue, $1.1 billion, up 59% and SaaS revenue of $2.8 billion, up 45%. Now, excluding Cerner, total cloud revenue, SaaS plus IaaS was up 27% in constant currency at $3.3 billion. Total cloud services and license support revenue for the quarter, including Cerner, was $8.6 billion, up 20% in constant currency, driven again by our strategic cloud applications, autonomous database and, of course, our Generation 2 OCI. Application subscription revenues, which include support, were $4.1 billion, up 35% in constant currency. Infrastructure subscription revenues, which also include support, were $4.5 billion, up 9% in constant currency. Application subscription revenues, including support but excluding Cerner, were $3.3 billion, up 9% in constant currency. SaaS cloud revenue, again, excluding Cerner, was $2.2 billion and was up 16%. Now, our strategic back-office SaaS applications now have an annualized revenue of $5.9 billion and grew 26% in constant currency, including Fusion ERP, up 28% and NetSuite ERP, up 29%. As mentioned already, infrastructure cloud services revenue was up 59% in constant currency. Now excluding legacy hosting services, infrastructure cloud services revenue grew 69% with an annualized revenue of $3.8 billion, including OCI consumption revenue, which was up 88% and cloud and customer consumption revenue, up 83% and autonomous database up 50%. Software license revenues, including Cerner, were $1.4 billion, up 23% in constant currency and up 9% without Cerner. What is increasingly resonating with customers is that in an environment where IT investments need to have a fast and tangible return on investment, only Oracle offers customers the flexibility to manage their technology estate, so they can deploy incremental investments where it brings them the most immediate value. It also helps that the purchase of technology licenses from Oracle enables them to move to the cloud as they are ready, effectively providing an on-ramp to Oracle Cloud services. So, all in, total revenues for the quarter were $12.3 billion, up 25% in constant currency. Excluding Cerner’s revenue contribution of $1.5 billion, organic revenue was up over 9% in constant currency. As a reminder, we no longer operate in Russia, causing total revenue growth to be negatively affected by over 1% of growth over last year. Shifting to margins. The gross margin for cloud services and license support was 79% as a result of the mix between support and cloud. Last year, Oracle license support revenue with its mid-90s gross margins represented about 65% of the total number of cloud services and license support revenue. Now, it’s down to 53%, and this is happening because our cloud services are growing much, much faster than license support. By the way, license support grew 4% this year. Additionally, I would note that IaaS gross margins improved again this quarter, and I expect IaaS gross margins will continue to improve in response to accelerating demand we have continued to build data center capacity. We have seen that as those centers fill up, margins go up like they did this quarter. Most importantly, gross profit dollars of cloud services and license support grew 13% with Cerner and 6%, excluding Cerner in Q2. Non-GAAP operating income was $5.1 billion, up 12% from last year. Operating margin, including Cerner, was 41% as we continue to integrate Cerner in the quarter. As we drive Cerner profitability to Oracle levels and continue to benefit from economies of scale in the cloud, we will not only continue to grow operating income, but we will also grow the operating margin percentage. Further, I expect that this year, will be the trough year for operating margin percentages. The non-GAAP tax rate for the quarter was 20.4. I think I guided to 20.5. So basically, it worked out where we thought. And non-GAAP EPS was $1.21 in U.S. dollars, down 1% in USD, up 7% in constant currency. The GAAP EPS was $0.63. At quarter end, we had nearly $7.4 billion in cash and marketable securities. The short-term deferred revenue balance was $8.7 billion, up 14% in constant currency. Over the last four quarters, operating cash flow was $15.1 billion and free cash flow was $8.4 billion with capital expenditures of $6.7 billion. In addition, we now have 40 public cloud regions around the world with another 9 being built. In addition, 12 of these public regions interconnect with Azure, giving customers true multi-cloud capabilities. We also have many cloud customer implementations, dedicated regions in another 9 national security regions with increasing demand for more as customers want to have their data protected in their country. We are careful to pace our investments appropriately, but need to continue to build to meet our accelerating demand. CapEx this quarter was $2.4 billion as we continued to invest in our cloud to meet this accelerating demand. With triple-digit IaaS bookings growth the last couple of quarters we now expect to spend about this amount per quarter for the next few quarters as we build capacity for our customers’ needs. This level of spend though will not negatively impact our operating margins as we scale. When I talk about accelerating demand, that demand is reflected in the remaining performance obligation or RPO balance, which is now at $61.2 billion, up 68% in constant currency due to strong cloud bookings as well as to Cerner. I will also note that the organic RPO growth rate in constant currency accelerated to 28% in Q2, up from 22% last quarter and approximately 48% of the total RPO is to be recognized as revenue over the next 12 months. Now, as we’ve said before, I know you’re tired of me saying it, but I will, we are continuing -- we’re committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases, prudent use of debt and a dividend. This quarter, we repurchased 6.1 million shares for a total of $448 million. In addition, we paid out dividends of $863 million in the quarter, and the Board of Directors declared a quarterly dividend of $0.32 per share. Our fundamental principle is to grow non-GAAP EPS while substantially increasing cloud revenue growth. And given our increasing confidence, we will continue to prudently invest as there is strong demand for our cloud services. So now, let me turn to my guidance for Q3, which I’ll provide on a non-GAAP basis. Using currency exchange rates as they are right now, currency should have a 4% negative effect on total revenue and at least a $0.06 negative effect on EPS in Q3. As I say every quarter, the actual currency impact may be different by quarter end, but we’ve got to use a number, so we’re using the number right now. Total revenues for Q3, including Cerner, are expected to grow from 21% to 23% in constant currency and are expected to grow from 17% to 19% in USD. Total cloud growth, including Cerner, is expected to grow from 46% to 50% in constant currency and 43% to 47% in USD. I expect the total cloud growth for the fiscal year, excluding Cerner will be above 30% in constant currency. Non-GAAP EPS is expected to grow between 9% and 13% and be between $1.23 and $1.27 in constant currency. Again, due to currency headwinds, non-GAAP EPS is expected to grow between 4% and 8% and be between $1.17 and $1.21 in USD. And as I’ve said before, Cerner will be accretive to earnings this year, including in Q3. My EPS guidance for Q3 assumes our base tax rate of 20.5%, which is up from 19% last year. However, onetime tax events could cause actual tax rates for any given quarter to vary. And with that, I’ll turn it over to Larry for his comments. Larry Ellison: Thank you, Safra. Okay. I’m going to go over -- primarily, I’m going to go over customers and new wins in infrastructure and then customers and wins and go-lives in applications. But I’m going to start with infrastructure. So, during Q2, we signed multiple customers to contracts exceeding $1 billion, infrastructure contracts exceeding $1 billion. Let me be clear, multiple customers signed contracts for $1 billion worth of infrastructure. So, given -- that’s been added to our backlog, we expect our infrastructure business to continue to grow very, very strongly into the future. We now have 22,000 infrastructure customers. We have a total of 55 regions. That’s public regions plus national security regions and the other kinds of regions and that’s more than AWS or Microsoft or anybody, which may surprise some people. Gartner, as Safra mentioned, moved us into the Visionary Quadrant for the first time. So, let me just start naming specific customers and give you a flavor. I’m going to name large customers, small customers. I’m going to focus a little bit on a bunch of international customers to let you know that our investment in data centers all over the world is really paying off. So, our customers include -- big customers include, FedEx, Deutsche Bank, Tokyo Stock Exchange. Let me take a moment to emphasize Tokyo Stock Exchange. We’re the only ones running a major stock exchange. And this is -- Tokyo is not the only one because our cloud is very secure and extremely reliable. It doesn’t go down. In fact, my favorite quote from a big phone company in the United States was the difference between Oracle’s Cloud and the other clouds are simply that Oracle Cloud doesn’t go down. I think that’s a very important issue when you have enterprise applications like a stock exchange where you can’t ever go down. Fujitsu is another big customer; Vodafone that’s phone company has similar problems. If you’re a phone company, the phone system can’t go down. Vodafone, Deutsche Telekom, Enbridge; Kaiser, a huge health care company in the -- primarily in the United States. NVIDIA has moved and a bunch of others have moved, lots of AI, artificial intelligence and machine learning workloads to the Oracle Cloud because it turns out we’re really good at that. We’re better than that than any of the other clouds, which may surprise some people. Schneider Electric, Telecom Italia, Verizon and lots, lots more. I’m not just going to list them all. We publish a big list at oracle.com and every quarter, we add new customers to that. So, in the quarter, we added United Airlines -- database wins in the quarter, United Airlines, migrating all flight operations to the Oracle Exadata cloud. Albertsons, again, moving to the Exadata cloud service database. Mitsui in Japan, again, moving their databases to Oracle. Again, this is the beginning of a very major, very large business for us as our database franchise moves primarily from on-premise into the Oracle Cloud. Persol Career, a big professional services company in Japan, migrating to -- or moving their Oracle databases to the cloud. Unimed, LAD Healthcare, once again moving their databases to the Oracle Cloud. Penske Truck Leasing, doing using -- moving to autonomous database. HomeServe plc in the UK, government agency is moving the autonomous transaction processing system. So, they’re not just moving an existing Oracle database to the cloud, they’re upgrading from our on-premise Oracle database to our autonomous database, which is only available in the cloud. Iberia Express, a big telco, same thing moving to autonomous data warehouse. They just -- the idea is the autonomous data warehouse makes database administration very simple. In fact, it’s entirely automated. There is no database administration. Delgado Auto Taxi, again, in APAC, a smaller company, again, moving their databases to autonomous system. MaxiTRANS, big transportation company in Australia, same thing, autonomous transaction processing. The Scroll, a big Japanese wholesale company, autonomous -- moving to autonomous database. Banco Safra, this is -- by the way, this is not -- our CEO does not own a bank. This is not an internal -- she didn’t not buy our database. But there’s a big bank in Latin America called Banco Safra and they’re moving all their mission-critical apps to OCI, as is Bradesco, same thing. Yorkshire Building Society in the UK, again, autonomous data warehouse. And Nestlé, a food giant in EMEA is moving their analytics systems to autonomous data warehouse and that’s a huge customer. Okay. I mentioned a couple of calls ago that we have a new version of our MySQL open source database, and we added a new ultrafast query processor called HeatWave to MySQL and that’s doing extremely well. We have a number of companies doing that migration. Medallia, Infonow Credit Club. It’s a long list of people that are moving to MySQL to take advantage of the fact that our query processor in our version of MySQL is 100 times faster. I really mean that. And we have all the benchmarks. We publish all the benchmarks, and we publish the source code of the benchmarks, so you can duplicate those results, 100 times faster than queries than the Amazon equivalent called Aurora; Aurora, Amazon’s version of MySQL. As Safra mentioned earlier, our partnership with Microsoft Azure is going extremely well. We have a number of companies running applications in Azure. And then Azure is connected to OCI, so the database is in OCI and the application is in Azure. The Belgium Railways is one. Honeywell in the United States, Petronas the big energy and utility company, Telecom Italia Mobile A , but that multi-cloud system is doing extremely well. And we think that is the future of cloud. We think the future of cloud is not 4-walled gardens, AWS, Microsoft, Google and Oracle. We think those clouds are all going to interconnect. And then customers will pick the most appropriate service for their particular needs and mix and match between the clouds. Okay. A lot more -- a major city in the southwest, which I’m not allowed to mention is literally migrating everything to OCI. Lambda, which is a big AI machine learning specialist company is moving the bulk of their workloads to OCI using NVIDIA GPUs and our fast -- our very, very fast network to interconnect them. And this is a pattern. Lambda is doing that, Latent Space is doing that. NVIDIA themselves are doing that. So we’re seeing a lot of machine learning and artificial intelligence workloads moving from other clouds to OCI because we’re faster. And again, in the cloud business faster -- when you charge by the minute, faster means cheaper. Give me 1 second. Alexa, be quite. Sorry about that. I think Jeff Bezos did that. Okay. So, Minnesota State Colleges and Universities, National Institute of Health. These are all new cloud customers, new infrastructure cloud customers -- again from very large to medium-sized companies are moving to OCI and lots of them. Twist Biosciences is moving healthcare -- again, AI workloads to OCI using NVIDIA GPUs. AIA Life Insurance Company, a big financial services company, again, is moving to OCI and databases to OCI. In India, Uttar Pradesh Power Corporation, a giant utility, is moving all of their metering and billing applications to OCI. Win Win Intelligent Information Technology is moving their IoT platform from AWS to OCI, and they’re also using MySQL HeatWave. Algar Telecom, Brazilian Stock Exchange, Claro, again, big media telco, moving to OCI; Ncell. Unimed Curitiba, a large health care company in Latin America moving to OCI; Vivo, again, moving to OCI. Banco de Chile, E-Banks another financial services company; Rabobank. DP World, the transportation and logistics company in the Middle East, Austin TranSit Partnership, a municipality in Texas they’re perfect -- an interesting customer because they’ve been using Oracle ERP and EPM and our applications for a long time. Now they’re moving their infrastructure to OCI. Oman Telecommunications. A huge French telecommunication company, I’m not allowed to mention. They’re moving to OCI. Oxford Nanopore, a big -- a gene sequencing company is moving from AWS to OCI where they are going to store gene sequencing, but not only just store gene sequences in OCI, they also do analytics to figure out if -- what they’ve sequenced is a new version of COVID-19 or another pathogen, if the pathogen they’ve never seen before, extremely important application for world health. Reed Exhibitions, Saudi Ministry of Media, Ecobank, financial services in EMEA, GlobeMed Limited, Morrisons, a big retail operation, again, all moving to on OCI. HDFC Bank and Waafi Bank, I’m going to stop there, but we published a long list, but there’s tremendous momentum, tremendous momentum and a large number of customers from all over the world, very large and medium-sized companies moving to OCI, and the business is growing very strongly, as Safra pointed out in the numbers. Okay. In the back -- in applications, I’ll try to do this quickly. We’re just winning in the back office. We have 22,000 customers in infrastructure and the cloud. We have 11,000 Fusion ERP and HCM customers alone in applications, just Fusion customers. We have 11,000 now. We have probably close to 30,000, 30,000 NetSuite customers on top of that. So, we have a lot of customers and applications. We’ve been in the Applications Cloud business for longer than we’ve been in the infrastructure cloud business. We’re extremely strong in healthcare, Cleveland Clinic, Mayo Clinic, Mount Sinai, Providence Saint Joseph, Adventist Health, Kaiser Permanente, National Health Service in the UK, long list of providers, that’s a partial list, are using Oracle ERP, supply chain and HCM applications. But it’s not just the clinical providers that are using our systems, the payers, the healthcare payers. So again, as we tackle healthcare with -- in conjunction with our Cerner acquisition, we’re not just automating providers, we’re also automating payers. We’re also automating pharmaceutical companies as they do clinical trials. We’re trying, to automate the entire ecosystem, not just a fraction of it. So I mentioned a list of providers and payers, UnitedHealthcare, Blue Cross Blue Shield, Humana, Highmark Health, Health Care Service Corporations, Independence Blue Cross, Bright Health, so payers as well as providers. We’re extremely strong in that. I mean, we -- again, I’ll just leave it with extremely strong. Healthcare wins in the quarter in Q2, Cigna, a huge payer win; Emirates Health Services, big provider where we beat SAP; Cross Country Health Services where we beat Workday and SAP. Henry Schein is a provider of healthcare products for -- and there -- we won there. But again, it is the entire healthcare infrastructure that we are focusing on as we try to automate healthcare systems around the world. Go-lives, go-lives in the quarter, Tenet Health, 65 hospitals, 235,000 employees, they went live on HR payroll and recruiting. Cleveland Clinic, is going live. I know it’s called Cleveland Clinic, but they also -- they own hospitals all over the place. They’ve gone live in a bunch of regional hospitals in Florida. University of Chicago Medical Center has gone live. Baptist Health Care has gone live, 12 hospitals with 26,000 employees. Lakeview Center has gone live in the quarter. So, we’re just getting stronger and stronger in health care. And so, let me move on to financial services, our other -- another industry that we deem very, very strategic and key to Oracle’s future is financial services, specifically banking. And we’re very, very strong there, Bank of -- in terms of ERP, HCM, supply chain, our customers include Bank of America, JPMorgan Chase, Citigroup, Bank of New York Mellon, Vanguard, Santander, TD Bank in Canada, HSBC in the UK, UBS, Credit Agricole, Societe Generale, Credit Suisse, Sumitomo Mitsui. It’s a partial list. We are extremely strong in the banking sector. And what you’re going to see in Oracle ERP with our strength in the banking sector is we will be offering loan origination for B2B commerce. One of the things we’re doing with the new version of Oracle ERP is if you’re a customer that’s buying something and you have Oracle ERP, and we -- and you are a company that’s selling something and you have Oracle ERP, the way that B2B transaction will occur, it will be entirely automated within the cloud. So you’ll submit a purchase order, the buying ERP system will submit a purchase order to the selling ERP system. And if you need to borrow money, we will originate a loan with one of our banking partners. If the product has to be shipped, we will schedule the shipping and track the shipment with one of our logistic partners. And our ambition here is to completely automate B2B commerce between buying and selling companies that are running Oracle Cloud ERP and manage all of the financing and insurance and logistics associated with that transaction. We do a really good job, I think, of automating B2C transactions. Amazon does that extremely well. Walmart does that extremely well. But we don’t do a great job of automating B2B transactions. And that’s what Oracle’s ambition is to do that. And we’re in a great position because we are so strong in cloud ERP. So, it’s an Oracle system that’s -- an Oracle procurement system on one end of that transaction. It’s an Oracle order management system on the other end of that transaction. We have very strong partners in finance, insurance and logistics so we can completely automate the entire transaction, where B2B transactions begin to look like B2C transactions. They’re fully end-to-end automated. And that’s a huge new business for us and our partners. Okay. Let’s see. Financial Services wins in the quarter. We’ve added M&T Bank, TD Bank, Daiwa Securities -- Farmers Insurance. Nexi, which is where we replaced SAP at Nexi, it’s an Italian bank. We replaced SAP at TD Bank. Let’s see what else. Financial services go lives. AmTrust, BlackRock, a big go live. They are -- they have $10 trillion of managed assets. Oracle now has 9 of the top 10 asset management firms, running on the Oracle Cloud ERP. FirstRand Bank, a bunch of other banks. I don’t want to take up all the time. So, I’m going to stop there. We have a lot more data on our website that will tell you -- that will enumerate still more customers that we acquired in this very strong second quarter and that went live in the second quarter. With that, I’m going to turn it back over to Safra. Ken Bond: Thank you, Larry. Bo, if you could prepare the audience for Q&A. Appreciate it. Operator: We’ll take our first question today from Brad Zelnick of Deutsche Bank. Brad Zelnick: Great. Thanks very much for taking my question. And congrats on the solid results. Larry, Oracle has a rich history of being a price performance leader in just about everything it does. But technically speaking, why exactly does OCI have an inherent cost advantage? And how sustainable is that advantage? Thanks. Larry Ellison: Well, maybe the most interesting thing is we have a much faster network than anybody else. We have a fundamentally different network than any of the other cloud providers. We have what’s called an RDMA network that we had to build because our Exadata machines and our database -- actually glued together a lot of computers. And when you had a single database application, that could run on one computer or it could run on a cluster of computers, the 2 computers, 4 computers, 8 computers, whatever, so that there was no single point of failure. One of the beauties of the Oracle database, one of the big differences between the Oracle database and other databases is that the Oracle database, a single application could run on multiple computers. If one of those computers would fail, the application would keep running. It was fall tolerant. It would tolerate a failure of a machine. Other people don’t have that. But in order to do that, we had to make our network, if we’re going to have a cluster of 4 machines running a single database app, we have to make that network between those 4 machines very fast. And that’s called an RDMA network. It means that one computer can immediately access the memory of another computer without going through an interrupt. It’s a very fast way to interconnect computers and have them act as a group. We built that for our entire cloud, so we can run our database, our Oracle real application cluster database on any of the computers in our cloud. Now because we’ve built this hyper-fast network, it turns out it has more utility than just running the Oracle database. So, if you’re running a cluster of computers doing a simulation, a car crash simulation, that was one of the first applications people noticed, ran much faster on Oracle. Now, a much bigger application they noticed ran much faster on Oracle was on neural networks and machine learning workloads run much faster on Oracle. So, because our network is just intrinsically much faster and -- by the way, also there are security and reliability advantages to go along with that. So, our network configured. We actually have -- all of our computers actually have two networks. I’m not going to go into all the details. But our computers are fundamentally different than any other cloud company. We have two networks, one of which is on the Internet -- I’d say, one of which interconnects all of our customers’ computers. And the other, which is our -- if you will, our control network where our -- and computers that run our cloud control software, which is isolated from the customer software. So, the customer can’t tamper with our cloud control software. They can’t get control of it. And we can’t see the customers’ data. That is unique to Oracle. But the -- because we have the two networks and because one of the networks is RDMA, we just run much, much faster, much more reliably than they do. And it’s a fundamental advantage that they can’t compete with unless they rebuild their cloud from scratch. Operator: We’ll take that question now from Phil Winslow of Credit Suisse. Phil Winslow: Congrats on another strong quarter. And really two metrics jumped out to me this quarter. First was IaaS revenue accelerated at 59% from 58% and 39% in the prior two quarters. And organic ERP growth also accelerated to 28%, which is pretty phenomenal this quarter from 22% and 17% in the prior two quarters. Can you just give us sort of a breakdown of what’s driving this continued strength compared to some of your cloud competitors in the past in IaaS world that have experienced decelerating growth in recent months? Are there any workloads in particular that are driving the relative strength of OCI? Safra Catz: I don’t know, Larry, if you want to take it or I take it Larry Ellison: You can take it. I mean the workloads, I’ll just say on the workloads. AI and machine learning is a huge -- is exploding NVIDIA. NVIDIA, the people who provide the GPUs for most AI workloads are -- they’re moving a huge amount of stuff to the Oracle Cloud and a bunch of other companies that are doing that. But that’s one new one. I mean, obviously, database, but I’ll let that question really go onto Safra. Safra Catz: Well, it’s really across the board, to be fair. We’ve got high-performance computing. We’ve got most of the auto companies doing their simulations on us. And then, we have Oracle workloads, autonomous database and other workloads. We have extremely broad, just extremely broad moves. I think I told you in previous quarters that, of course, our growth rates are higher because we’re smaller, but yet as we grow, we’re actually accelerating because of exactly the features that Larry covered in the last question, customers are coming to us, often not expecting the phenomenal results. And remember, time is money on the cloud. So, if you’re more performant, it is much less expensive, whether it’s Oracle workloads or straight compute or storage or other workloads. The other thing is you have to understand that our cloud of customers, our national security regions, all of those are being contracted, and we are clearly the choice for governments to maintain their sovereignty over their data. We can land a center very quickly, and they have -- and they fill up very quickly. So, we really have it coming from all areas. And then, of course, our applications business, Larry basically said it. I mean, we’re in it. And we’re winning consistently deal after deal, both as our e-business suite and PeopleSoft and JD Edwards customers moved to us but also SAP installations choosing us over what they had before. So, it’s just on all fronts, frankly. Phil Winslow: Great. Well, it’s awesome to see everything that you’ve been talking about the past couple of years playing out. So keep up a great work. Operator: We go next now to John DeFucci of Guggenheim. John DiFucci: Larry, to the answer to the first question, that’s actually something we’ve been thinking about. That’s going to help as we dig in to better understand the benefits of OCI. But it’s amazing to hear the core differentiation of RAC continues to drive differentiation even 20 years later. My question is actually for Safra. Safra, you mentioned your flexible business model in your prepared remarks and which is unique. BYOL, you were a pioneer in doing that. And license was surprisingly strong again. Can you talk in a little more detail about what’s really driving that license strength? Safra Catz: So contrary to, I think, the fears the people always have, the Oracle database is still the biggest part of license by far. So most important part, the database remains strong because customers understand that they can BYOL, bring your own license, and they can have coverage whether they’re on-premise in the cloud or moving in between the two, so again, really always the big number. But we’ve got growth rates that are very strong in analytics. We have growth rates that are super strong in Java, we have growth rates that are strong in the industry’s areas, some of our industry’s applications. And then -- so I want to make sure I gave you the numbers both ways. With Cerner, we have a growth rate of 23% because, of course, you add the Cerner license. Without Cerner, it’s 9% growth. So, even without Cerner, we have license growth after a very strong growth rate a full year ago in license. So, again, big dog is, of course, technology. That’s the bulk of it. But we’ve got a few industry apps and a little bit of Cerner. And it just remains just super strong. John DiFucci: Okay. That makes sense. It sounds like a lot of things are working together here. Thank you. Thank you very much. Safra Catz: Absolutely. Operator: And we’ll go next now to Mark Moerdler at Sanford Bernstein. Mark Moerdler: Thank you very much for taking question. I really appreciate the ability to ask the question, and congratulations on the quarter. Two related questions on Cerner. Safra, where are we on the Cerna integration process as well as taking out the cost? And where do you think you can drive those long-term costs over time. And Larry, we heard a lot of great features at Oracle World about Cerner and what you going to do in healthcare. It’d be interesting to hear what progress you’ve made recently. Thanks. Safra Catz: Sure. So Mark, we’ve owned Cerner for about five months. And I will tell you that they continue to do better than we had projected internally. So, we’re very, very happy. But we are still at the beginning. We don’t want to do anything that will damage the business. And of course, we’re very, very focused on those customers. But we are already having some level of savings. But ultimately, just so that you understand, our expectation is we will run them at typical Oracle margins. So, we’ve got quite a way to go. And I think over the next couple of quarters, you’ll see continued improvement as we’ve done some of our operational integration. And simultaneously, I think they continue to over perform for us. So, we are doing this in a very careful way. So, it’s not to put any issues for our customers and making sure they’re successful. On the technical side, Larry, that’s for you. Larry Ellison: Yes. Well, actually, on the technical side, of course, what we’re trying to do is build -- not just provider systems. In other words, what Cerner did primarily in competition with EPIC is the automated hospitals. And yes, we want to automate hospitals and clinics and doctors’ offices and do that. We certainly want to automate providers. But we’re layering on top of that is we want to do national public health. We are doing national public health systems. I mentioned Oxford Nanopore that’s an early warning system to detect the next pathogen that could lead to a pandemic. These global public health systems need to be built. And we are in discussions. We are in discussions with not companies, but countries about building and deploying a global early warning system so we can detect the next pathogen that threatens to turn into a pandemic, we can catch it early enough that we can prevent it from being a pandemic. God forbid, if there is another pandemic that we have up to the minute, up to the second data about how that country’s infrastructure is managing the hospitalization rates and vaccination rates and all of those things, so we can better deploy and manage our resources during a pandemic. So, we don’t have a repeat of the things that went on during COVID-19. So, I expect -- Safra just gone back from visiting some prospective customers that are countries that we will be signing contracts with a number of countries to build these national systems. And these contracts are enormous, I mean, absolutely enormous. And there will be several of them. So, as I said in my note in the press release, the scale of this healthcare opportunity is unprecedented but so are the responsibilities that go along with it. We have to -- we, as humanity has to do a better job of delivering healthcare to people than we have done historically. And we can never have a repeat of the COVID-19 pandemic. And I think there is this worldwide sense of urgency and national consciousness about getting a new generation of systems out there that help us at first prevent and then manage our healthcare -- prevent a pandemic and better manager healthcare systems. As far as I know, Oracle is the only company in the world that’s trying to address this issue. And we’re about to sign up a number of countries that will work with us on doing just that. Operator: And we’ll take our final question this afternoon from Raimo Lenschow at Barclays. Raimo Lenschow: Hey. Thanks for squeezing me in. One quick question. If you think about the global environment, usually, it’s not the time to look at or in the olden days, I remember when I was at PwC, it wasn’t the time to kind of look at your back office systems, but you’re kind of growing really nicely. NetSuite is actually kind of outgoing now Fusion a little bit. Can you talk a little bit about the drivers and what you’re seeing out there? Thank you. Safra Catz: Yes. Let me start that, and Larry can add if you want. So I want to remind you that we are global, right, which includes whether we’re in Europe and in the United States, but we’re also in the Gulf states and really in Asia, different parts, Latin America. And there are always companies that get to the point where their business, they cannot afford to keep using their older systems. They spend too much using them. They spend too much running them. And they are actually holding them back, and they know that. And I think one of the things many companies learned during COVID was those companies that did not get on some sort of a track to get a digital connection with their customers, employees and suppliers that were at a huge disadvantage. And so that momentum continues. And it is possible that any individual country or location there could be some little slowdown here or there. And yet there are other countries and industries that are doing incredibly well and they view this as critical. When customers move to SaaS they end up spending less but also have much better capabilities to sell more to work with their employees and their suppliers, and of course, as I said, their customers. So that momentum has started, has started, and it just continues very, very strongly. And again, we are global. So, even when there are some issues in some regions, we’re in other regions that are doing phenomenally well right now. Ken Bond: Thank you, Safra. A telephonic replay of this conference call will be available for 24 hours on our Investor Relations website. Thank you for joining us today. And with that, I’ll turn it back to Bo to close the call. Operator: Thank you very much, Mr. Bond. Ladies and gentlemen, that will conclude Oracle’s Q2 2023 earnings conference call. Again, we’d like to thank you so much for joining us and wish you all a great remainder of your day. Goodbye.
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Oracle Surges 13% After Raising 2026 Revenue Forecast on Strong AI Cloud Demand

Shares of Oracle (NYSE:ORCL) jumped more than 13% intra-day today after the company raised its full-year revenue growth outlook and underscored strong demand for its AI-driven cloud offerings. CEO Safra Catz announced during the post-earnings call that Oracle now expects total revenue for fiscal 2026 to reach at least $67 billion, representing a 16.7% increase year-over-year, up from its prior forecast of 15% growth.

For the fiscal fourth quarter, Oracle reported adjusted earnings per share of $1.70 on revenue of $15.9 billion, surpassing analyst expectations of $1.64 in EPS and $15.58 billion in revenue. The standout performance came from Oracle Cloud Infrastructure, which saw revenue surge 62% year-over-year. Additionally, the company's remaining performance obligations—a forward-looking measure of contracted revenue—rose 41% to $138 billion, signaling continued momentum in demand for its services.

Oracle Corporation's Impressive Earnings Report and Future Outlook

  • Oracle Corporation (NYSE:ORCL) reported earnings per share (EPS) of $1.70 and revenue of $15.9 billion, surpassing estimates.
  • The company's stock surged by 8% following the release of its fourth-quarter earnings report, driven by robust cloud revenue and growing demand for artificial intelligence solutions.
  • Oracle's CEO, Safra Catz, projected a significant boost in cloud infrastructure revenue, anticipating an increase of over 70% in the 2026 fiscal year.

Oracle Corporation (NYSE:ORCL) is a leading technology company known for its comprehensive suite of software and hardware solutions. The company specializes in database management, cloud services, and enterprise software products. Oracle competes with other tech giants like Microsoft and Amazon in the cloud computing space. On June 11, 2025, Oracle reported earnings per share (EPS) of $1.70, surpassing the estimated $1.64, and revenue of $15.9 billion, exceeding the estimated $15.6 billion.

Following the release of its fourth-quarter earnings report, Oracle's stock surged by 8%, as highlighted by CNBC. This increase reflects the market's positive reaction to the company's strong performance, driven by robust cloud revenue and growing demand for artificial intelligence solutions. The impressive results underscore Oracle's strategic focus on cloud services and AI, positioning the company for continued growth in these high-demand sectors.

Oracle's CEO, Safra Catz, projected a significant boost in cloud infrastructure revenue, anticipating an increase of over 70% in the 2026 fiscal year, compared to a 50% growth in fiscal 2025. This optimistic outlook further contributed to the bullish sentiment surrounding Oracle's stock. The company's revenue increased by 11% year-over-year, reaching $15.9 billion, primarily fueled by rising demand for its cloud infrastructure and software services.

Oracle's financial metrics provide additional insights into its market valuation. The company's price-to-earnings (P/E) ratio is approximately 41.75, indicating the market's valuation of its earnings. Its price-to-sales ratio stands at about 8.87, reflecting the market's valuation relative to its revenue. Oracle's enterprise value to sales ratio is around 10.28, suggesting how the market values the company in relation to its sales, including debt and excluding cash.

The enterprise value to operating cash flow ratio is approximately 27.64, indicating how the market values the company in relation to its cash flow from operations. Oracle's earnings yield is about 2.40%, providing insight into the earnings generated per dollar invested. The debt-to-equity ratio is approximately 5.75, highlighting the company's financial leverage. Lastly, Oracle's current ratio is around 1.02, suggesting its ability to cover short-term liabilities with short-term assets.

Oracle Corporation's Market Outlook and Financial Performance

  • The consensus price target for Oracle Corporation (NYSE:ORCL) has been on a downward trend, indicating a cautious outlook from analysts.
  • Market conditions, including the May Consumer Price Index (CPI) data and U.S.-China trade relations, are significant factors influencing analysts' expectations.
  • Oracle's financial performance, strategic initiatives, and technological advancements are key to its market position and future revenue growth.

Oracle Corporation (NYSE:ORCL) is a prominent player in the enterprise information technology sector, providing a diverse array of products and services. These include cloud software applications, industry-specific solutions, and infrastructure technologies. Founded in 1977 and headquartered in Austin, Texas, Oracle serves a wide range of industries, government agencies, and educational institutions. Its offerings, such as Oracle Fusion cloud applications and Oracle Database, are integral to its market presence.

The consensus price target for Oracle's stock has been on a downward trend over the past year. A year ago, the target was $166.14, which decreased to $158.86 last quarter and further to $155 last month. This trend suggests a cautious outlook from analysts, possibly influenced by broader market conditions and Oracle's financial performance. As highlighted by Yahoo Finance, the market is closely watching Oracle's upcoming earnings report, which could impact future price targets.

Market conditions, such as the anticipated release of the May Consumer Price Index (CPI) data, play a significant role in shaping analysts' expectations. The CPI data is expected to influence market sentiment, as noted by Yahoo Finance. Additionally, updates on U.S.-China trade relations are being monitored, which could further impact Oracle's stock valuation. These factors contribute to the cautious outlook reflected in the consensus price target.

Oracle's financial performance and strategic initiatives are also key factors influencing the target price. The company is set to release its fourth-quarter earnings results, drawing attention from investors. As highlighted by Benzinga, analysts have been revising their forecasts ahead of this earnings call. Goldman Sachs analyst Kash Rangan has set a price target of $120 for Oracle, indicating a positive outlook despite the recent downward trend in the consensus price target.

Technological advancements and the competitive landscape are crucial in determining Oracle's market position. The company's ongoing cloud migration and leadership in AI infrastructure are expected to support continued revenue growth, as noted by Seeking Alpha. However, potential risks associated with projects like Project Stargate and Agentic AI could impact future performance. Despite these challenges, Oracle's core business and growth in remaining performance obligations (RPO) are anticipated to remain robust.

Oracle Corporation (NYSE:ORCL) Stock Analysis and Insights

Oracle Corporation (NYSE:ORCL) is a major player in the software industry, known for its comprehensive suite of cloud applications and platform services. On June 10, 2025, Mark Murphy from Loop Capital Markets set a price target of $135 for Oracle. At that time, Oracle's stock was trading at $177.48, indicating a significant price difference of approximately -23.94% from the target.

Oracle is preparing to release its upcoming earnings, and the market is closely watching trends in the software sector. Rishi Jaluria from RBC Capital Markets discusses these trends, which could impact Oracle's performance. The stock has seen a slight increase of 0.33, or 0.19%, with a current price of $177.48. This reflects a trading range today between $174.37 and $177.84.

Jared Blikre from Yahoo Finance highlights key themes driving market momentum, such as global equity outperformance and cryptocurrency price action. These factors could influence Oracle's stock movement. Oracle's market capitalization stands at approximately $497.7 billion, showcasing its significant presence in the industry.

Julie Hyman from Market Domination analyzes volatility trends, noting that a decrease in the VIX could imply positive long-term returns. Oracle's stock has fluctuated over the past year, with a high of $198.31 and a low of $118.86. Today's trading volume for Oracle is 8,923,694 shares, indicating active investor interest.

Oracle Corporation's Upcoming Earnings: A Look into Cloud and AI Sectors

  • Oracle Corporation (NYSE:ORCL) is expected to report an earnings per share (EPS) of $1.64 and revenue of $15.58 billion for the quarter, indicating growth from the previous year.
  • The company's stock has seen a 25% increase since April, attributed to the demand for Oracle Cloud Infrastructure (OCI) and advancements in AI.
  • Financial metrics reveal a price-to-earnings (P/E) ratio of 41.93 and a debt-to-equity ratio of 5.75, showcasing Oracle's market valuation and financial leverage.

Oracle Corporation (NYSE:ORCL) is a leading technology company known for its comprehensive suite of software and hardware products. It specializes in database management systems, cloud solutions, and enterprise software. As Oracle prepares to release its quarterly earnings on June 11, 2025, analysts are keenly observing its performance, particularly in the cloud and AI sectors. Competitors like Microsoft and Amazon also vie for dominance in these areas.

Analysts project Oracle's earnings per share (EPS) to be $1.64, with revenue expected to reach $15.58 billion. This marks an increase from the previous year's earnings of $1.63 per share and $14.29 billion in sales. Despite potential disruptions from the Musk-Trump fallout affecting Project Stargate, Oracle's core business remains strong. The company's growth in remaining performance obligations (RPO) is anticipated to be resilient.

Oracle's stock has gained approximately 25% since April, driven by the demand for Oracle Cloud Infrastructure (OCI) and AI advancements. Jefferies analysts, who rate Oracle as a "buy," have raised their price target to $200, citing a turning point in OCI and backlog as capacity constraints ease. Meanwhile, Citi analysts maintain a "neutral" rating with a price target of $185, noting increased interest in OCI database modernization.

Oracle's financial metrics reveal a price-to-earnings (P/E) ratio of 41.93 and a price-to-sales ratio of 8.91, indicating the market's valuation of its sales. The company's enterprise value to sales ratio is 10.32, while its enterprise value to operating cash flow ratio is 27.75. Oracle's debt-to-equity ratio of 5.75 reflects its financial leverage, and a current ratio of 1.02 suggests its ability to cover short-term liabilities.

Historically, Oracle's stock has experienced negative one-day returns following earnings announcements, with a median drop of 4.4% and a maximum decrease of 13.5%. Traders may consider pre-earnings and post-earnings positioning strategies to navigate these patterns. As Oracle continues its cloud migration and AI infrastructure leadership, it is well-positioned for sustained revenue growth.

Oracle Corporation (NYSE:ORCL) Maintains Positive Trend with Analysts' Confidence

  • Jefferies maintains a "Buy" grade for Oracle Corporation (NYSE:ORCL), with a stock price target of $200, indicating strong future performance.
  • Oracle's stock has seen a recent increase of 2.6%, trading at $178.47, driven by analyst price-target hikes.
  • The company's stock has experienced volatility, with a yearly high of $198.31 and a low of $118.86, showcasing its growth potential and associated risks.

Oracle Corporation (NYSE:ORCL) is a leading technology company known for its comprehensive suite of software and hardware products. It specializes in database management systems, cloud solutions, and enterprise software. Oracle competes with other tech giants like Microsoft and SAP in the enterprise software market. On June 9, 2025, Jefferies maintained its "Buy" grade for Oracle, with the stock priced at $178.40.

Oracle's stock has recently seen a positive trend, rising by 2.6% to a trading price of $178.47. This increase is largely due to recent price-target hikes by analysts, including Jefferies and BMO, both of which have set their targets at $200. This indicates strong confidence in Oracle's future performance.

Currently, Oracle's stock is priced at $178.42, reflecting a 2.53% increase, equivalent to a $4.40 rise. Throughout the trading day, the stock has fluctuated between $173.80 and $178.72. This volatility is typical in the stock market, where prices can change rapidly based on various factors.

Over the past year, Oracle's stock has reached a high of $198.31 and a low of $118.86. This range shows the stock's potential for growth and the risks involved. Oracle's market capitalization is approximately $500.33 billion, indicating its significant size and influence in the tech industry.

The trading volume for Oracle is 6,496,557 shares, reflecting active investor interest. A high trading volume often suggests that a stock is liquid, meaning it can be easily bought or sold without causing a significant price change. This liquidity is beneficial for investors looking to enter or exit positions in Oracle.

Oracle Corporation's (NYSE:ORCL) Focus on AI Technologies Bolsters Long-Term Prospects

  • Oracle Corporation (NYSE:ORCL) maintains a promising outlook with a focus on AI technologies despite recent fiscal challenges.
  • Citigroup maintains an "Overweight" rating with a price adjustment, reflecting confidence in Oracle's future driven by AI demand.
  • Oracle's stock experiences fluctuations, yet its strategic focus on cloud services and AI technologies supports its long-term growth.

Oracle Corporation (NYSE:ORCL) is a major player in the technology sector, known for its comprehensive suite of software solutions, including database management systems and cloud services. The company competes with other tech giants like Microsoft and Amazon in the cloud computing space. Despite recent challenges, Oracle's long-term prospects remain promising, particularly due to its focus on AI technologies.

On March 11, 2025, Citigroup maintained its "Overweight" rating for Oracle, with the stock priced at $144.06. This decision comes despite Oracle's fiscal third-quarter performance falling short of expectations. Analysts, however, remain optimistic about Oracle's future, driven by strong demand in the AI sector, as highlighted by Benzinga. The company's stock has seen a decrease of 3.10%, with a current price of $144.18.

Analyst Thomas Blakey has maintained an Overweight rating on Oracle, though he reduced the price target from $214 to $175. Blakey noted that while Oracle's revenues were slightly below expectations, adjusted earnings met projections. The revenue shortfall was mainly due to the Software as a Service (SaaS) segment, but Oracle Cloud Infrastructure (OCI) performed as expected. The company's bookings exceeded expectations, driven by large deals, leading to an optimistic forecast for fiscal years 2026 and 2027.

Similarly, Analyst Keith Bachman reiterated a Market Perform rating and adjusted the price target to $175 from $205. Bachman pointed out revenue misses in several areas, including cloud revenues. Despite these challenges, the demand for AI continues to support Oracle's long-term prospects. Oracle is accelerating its OCI business, benefiting from the growing demand for AI technologies.

Oracle's stock has fluctuated between a low of $137.70 and a high of $145.78 during the day, with a market capitalization of approximately $403.27 billion. The company's trading volume today is 24,098,451 shares. Over the past year, Oracle's stock has reached a high of $198.31 and a low of $112.78, reflecting the market's response to its evolving business strategies and performance.