Market Cap
$371,139,840,500
Enterprise Value
$449,592,840,500
Average Volume
$12,648,300
Software Companies
ORACLE CORP - ORCL
$132.35
-1.00
(-0.75%)
Valuation & Solvency
P/Tangible Book
22.77
P/E
31.33
P/S
6.65
EV/EBITDA
18.95
EV/Sales
8.06
EV/FCF
77.36
Dividend Yield
1.28%
Payout Ratio
36.53%
Total Debt
$96,276,000,000
Cash & Marketable Securities
$17,823,000,000
Quick Ratio
1.02
Debt/Equity
5.75
Net Debt/EBITDA
3.31
Interest Coverage Ratio
6.75
About
Industry
Software - Infrastructure
Exchange
NYSE
Country
US
Beta
1.22
Company Description
▶
Oracle Corporation offers products and services that address enterprise information technology environments worldwide. Its Oracle cloud software as a service offering include various cloud software applications, including Oracle Fusion cloud enterprise resource planning (ERP), Oracle Fusion cloud enterprise performance management, Oracle Fusion cloud supply chain and manufacturing management, Oracle Fusion cloud human capital management, Oracle Advertising, and NetSuite applications suite, as well as Oracle Fusion Sales, Service, and Marketing. The company also offers cloud-based industry solutions for various industries; Oracle application licenses; and Oracle license support services. In addition, it provides cloud and license business' infrastructure technologies, such as the Oracle Database, an enterprise database; Java, a software development language; and middleware, including development tools and others. The company's cloud and license business' infrastructure technologies also comprise cloud-based compute, storage, and networking capabilities; and Oracle autonomous database, MySQL HeatWave, Internet-of-Things, digital assistant, and blockchain. Further, it provides hardware products and other hardware-related software offerings, including Oracle engineered systems, enterprise servers, storage solutions, industry-specific hardware, virtualization software, operating systems, management software, and related hardware services; and consulting and customer services. The company markets and sells its cloud, license, hardware, support, and services offerings directly to businesses in various industries, government agencies, and educational institutions, as well as through indirect channels. Oracle Corporation was founded in 1977 and is headquartered in Austin, Texas.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ____________ to ____________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
The number of shares of registrant’s common stock outstanding as of March 7, 2025 was:
ORACLE CORPORATION
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
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PART I. |
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3 |
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Item 1. |
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3 |
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Condensed Consolidated Balance Sheets as of February 28, 2025 and May 31, 2024 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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40 |
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Item 4. |
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PART II. |
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Item 1. |
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41 |
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Item 1A. |
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Item 2. |
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Item 5. |
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Item 6. |
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45 |
Cautionary Note on Forward-Looking Statements
For purposes of this Quarterly Report on Form 10-Q (this Quarterly Report), the terms “Oracle,” “we,” “us” and “our” refer to Oracle Corporation and its consolidated subsidiaries. This Quarterly Report contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the Securities Act of 1933, as amended (the Securities Act). These include, among other things, statements regarding:
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our expectation that we may acquire, and realize the anticipated benefits of acquiring, companies, products, services and technologies to further our corporate strategy as compelling opportunities become available;
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our expectation that, on a constant currency basis, our total cloud and license revenues generally will continue to increase due to expected growth in our cloud services and continued demand for our cloud license and on-premise license and license support offerings;
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our expectation that substantially all of our customers will renew their license support contracts upon expiration;
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our expectation that current and expected customer demand will require continued growth in our cloud services and license support expenses in order to increase our existing data center capacity and establish additional data centers in new geographic locations;
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our expectation that our hardware business will have lower operating margins as a percentage of revenues than our cloud and license business;
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our expectation that we will continue to make significant investments in research and development to maintain and improve our current products and service offerings, and our belief that research and development efforts are essential to maintaining our competitive position;
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our expectations regarding the financial performance and long-term potential of one of our investment companies;
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our expectation that our international operations will continue to provide a significant portion of our total revenues and expenses;
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our expectation that the proportion of our cloud services revenues relative to our total revenues will continue to increase;
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the sufficiency of our sources of funding for working capital, capital expenditures, contractual obligations, acquisitions, dividends, stock repurchases, debt repayments and other matters;
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our belief that we have adequately provided under United States (U.S.) generally accepted accounting principles for outcomes related to our tax audits, that the final outcome of our tax-related examinations, agreements or judicial proceedings will not have a material effect on our results of operations, and that our net deferred tax assets will likely be realized in the foreseeable future;
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our belief that the outcome of certain legal proceedings and claims to which we are a party will not, individually or in the aggregate, result in losses that are materially in excess of amounts already recognized, if any;
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the possibility that certain legal proceedings to which we are a party could have a material impact on our financial position or results of operations;
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the timing and amount of expenses we expect to incur;
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the cost savings we expect to realize pursuant to the Fiscal 2024 Oracle Restructuring Plan;
1
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declarations and amounts of future cash dividend payments and the timing and amount of future stock repurchases, including our expectation that the levels of our future stock repurchase activity may be modified in comparison to past periods in order to use available cash for other purposes;
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our ability to predict revenues, particularly certain cloud license and on-premise license revenues and hardware revenues;
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the percentages of remaining performance obligations that we expect to recognize as revenues over respective future periods;
as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may be preceded by, followed by or include the words “anticipates,” “believes,” “commits,” “continues,” “could,” “endeavors,” “estimates,” “expects,” “future,” “goal,” “intends,” “is designed to,” “likely,” “maintains,” “may,” “plans,” “potential,” “seeks,” “shall,” “should,” “strives,” “will” and similar expressions. We claim the protection of the safe harbor for forward-looking statements contained in the Exchange Act and the Securities Act for all forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about our business that could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included in documents we file from time to time with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 and our other Quarterly Reports on Form 10-Q filed by us in our fiscal year 2025, which runs from June 1, 2024 to May 31, 2025.
We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. New information, future events or risks could cause the forward-looking events we discuss in this Quarterly Report not to occur. You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this Quarterly Report.
2
PART I. FINANCI AL INFORMATION
Item 1. Financial St atements (Unaudited)
ORACLE CORPORATION
CONDENSED CONSOLIDA TED BALANCE SHEETS
As of February 28, 2025 and May 31, 2024
(Unaudited)
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(in millions, except per share data) |
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February 28,
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May 31,
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Trade receivables, net of allowances for credit losses of $
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Prepaid expenses and other current assets |
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Total current assets |
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Non-current assets: |
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Property, plant and equipment, net |
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Intangible assets, net |
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Goodwill, net |
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Deferred tax assets |
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Other non-current assets |
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Total non-current assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Notes payable and other borrowings, current |
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$ |
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$ |
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Accounts payable |
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Accrued compensation and related benefits |
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Deferred revenues |
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Other current liabilities |
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Total current liabilities |
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Non-current liabilities: |
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Notes payable and other borrowings, non-current |
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Income taxes payable |
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Deferred tax liabilities |
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Other non-current liabilities |
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Total non-current liabilities |
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Oracle Corporation stockholders’ equity: |
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Preferred stock, $
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Common stock, $
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Accumulated deficit |
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(
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(
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Accumulated other comprehensive loss |
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(
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(
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Total Oracle Corporation stockholders’ equity |
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Noncontrolling interests |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
3
ORACLE CORPORATION
CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS
For the Three and Nine Months Ended February 28, 2025 and February 29, 2024
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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(in millions, except per share data) |
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February 28,
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February 29,
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February 28,
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February 29,
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Revenues: |
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Cloud services and license support |
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$ |
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$ |
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$ |
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$ |
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Cloud license and on-premise license |
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Hardware |
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Services |
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Total revenues |
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Operating expenses: |
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Cloud services and license support (1) |
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Hardware (1) |
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Services (1) |
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Sales and marketing (1) |
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Research and development |
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General and administrative |
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Amortization of intangible assets |
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Acquisition related and other |
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Restructuring |
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Total operating expenses |
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Operating income |
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Interest expense |
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(
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(
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(
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(
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Non-operating (expenses) income, net |
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(
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(
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(
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Income before income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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(1)
Exclusive of amortization of intangible assets, which is shown separately.
See notes to condensed consolidated financial statements.
4
ORACLE CORPORATION
CONDENSED CONSOLIDATED STATEM ENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended February 28, 2025 and February 29, 2024
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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(in millions) |
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February 28,
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February 29,
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February 28,
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February 29,
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive (loss) income, net of tax: |
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Net foreign currency translation (losses) gains |
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(
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(
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(
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Net unrealized (losses) gains on cash flow hedges |
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(
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(
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(
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Other, net |
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(
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) |
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(
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(
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(
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Total other comprehensive (loss) income, net |
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(
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(
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(
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
5
ORACLE CORPORATION
CONDENSED CONSOLIDATED STATEMEN TS OF STOCKHOLDERS’ EQUITY
For the Three and Nine Months Ended February 28, 2025 and February 29, 2024
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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(in millions, except per share data) |
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February 28,
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February 29,
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February 28,
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February 29,
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Common stock and additional paid in capital |
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Balance, beginning of period |
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$ |
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$ |
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$ |
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$ |
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Common stock issued |
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Stock-based compensation |
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Repurchases of common stock |
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(
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) |
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(
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) |
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(
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) |
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(
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) |
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Shares repurchased for tax withholdings upon vesting of restricted stock-based awards |
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(
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) |
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(
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) |
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(
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) |
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(
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) |
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Other, net |
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(
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) |
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(
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) |
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(
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) |
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Balance, end of period |
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$ |
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$ |
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$ |
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$ |
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Accumulated deficit |
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Balance, beginning of period |
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$ |
(
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) |
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$ |
(
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) |
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$ |
(
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) |
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$ |
(
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) |
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Repurchases of common stock |
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(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Cash dividends declared |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Other stockholders’ equity, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Balance, beginning of period |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Other comprehensive (loss) income, net |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
Other, net |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Balance, end of period |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
Total stockholders’ equity |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Cash dividends declared per common share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
See notes to condensed consolidated financial statements.
6
ORACLE CORPORATION
CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS
For the Nine Months Ended February 28, 2025 and February 29, 2024
(Unaudited)
|
|
|
Nine Months Ended |
|
|||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
|
Depreciation |
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
(
|
) |
|
|
(
|
) |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
Other, net |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
|
Increase in trade receivables, net |
|
|
(
|
) |
|
|
(
|
) |
|
Decrease in prepaid expenses and other assets |
|
|
|
|
|
|
|
|
|
Decrease in accounts payable and other liabilities |
|
|
(
|
) |
|
|
(
|
) |
|
Decrease in income taxes payable |
|
|
(
|
) |
|
|
(
|
) |
|
Increase in deferred revenues |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
|
Purchases of marketable securities and other investments |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from sales and maturities of marketable securities and other investments |
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash acquired |
|
|
|
|
|
|
(
|
) |
|
Capital expenditures |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash used for investing activities |
|
|
(
|
) |
|
|
(
|
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
|
Payments for repurchases of common stock |
|
|
(
|
) |
|
|
(
|
) |
|
Proceeds from issuances of common stock |
|
|
|
|
|
|
|
|
|
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards |
|
|
(
|
) |
|
|
(
|
) |
|
Payments of dividends to stockholders |
|
|
(
|
) |
|
|
(
|
) |
|
(Repayments of) proceeds from issuances of commercial paper, net |
|
|
(
|
) |
|
|
|
|
|
Proceeds from issuances of senior notes and term loan credit agreements, net of issuance costs |
|
|
|
|
|
|
|
|
|
Repayments of senior notes and term loan credit agreements |
|
|
(
|
) |
|
|
(
|
) |
|
Other, net |
|
|
(
|
) |
|
|
|
|
|
Net cash provided by (used for) financing activities |
|
|
|
|
|
|
(
|
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(
|
) |
|
|
(
|
) |
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
(
|
) |
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
|
Non-cash investing activities: |
|
|
|
|
|
|
||
|
Unpaid capital expenditures |
|
$ |
|
|
|
$ |
|
|
See notes to condensed consolidated financial statements.
7
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS
February 28, 2025
(Unaudited)
1.
BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS
AND OTHER
Basis of Presentation
We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures herein are adequate to ensure the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.
We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year ending May 31, 2025.
There have been no changes to our significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 that had a significant impact on our condensed consolidated financial statements or notes thereto as of and for the nine months ended February 28, 2025 .
Use of Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC), and we consider various staff accounting bulletins and other applicable guidance issued by the SEC. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent that there are differences between these estimates, judgments or assumptions and actual results, our consolidated financial statements will be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.
During the first quarter of fiscal 2025, we completed an assessment of the useful lives of our servers and networking equipment and increased the estimate of the useful lives from
Cash, Cash Equivalents and Restricted Cash
Restricted cash that was included within cash and cash equivalents as presented within our condensed consolidated balance sheets as of February 28, 2025 and May 31, 2024 and our condensed consolidated statements of cash flows for the nine months ended February 28, 2025 and February 29, 2024 was immaterial.
8
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
Remaining Performance Obligations from Contracts with Customers
Trade receivables, net of allowance for credit losses, and deferred revenues are reported net of related uncollected deferred revenues in our condensed consolidated balance sheets as of February 28, 2025 and May 31, 2024. The revenues recognized during the nine months ended February 28, 2025 and February 29, 2024 that were included in the opening deferred revenues balances as of May 31, 2024 and 2023
were approximately $
Remaining performance obligations, as defined in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024
, were $
Sales of Financing Receivables
We offer certain of our customers the option to acquire certain of our cloud and license, hardware and services offerings through separate long-term payment contracts. We generally sell these contracts that we have financed for our customers on a non-recourse basis to financial institutions within 90 days of the contracts’ dates of execution. We record the transfers of amounts due from customers to financial institutions as sales of financing receivables because we are considered to have surrendered control of these financing receivables. Financing receivables sold to financial institutions were $
Non-Marketable Investments
As of each of February 28, 2025 and May 31, 2024
, our non-marketable debt investments and equity securities and related instruments totaled $
Leases
We have operating and finance leases that primarily relate to certain of our data centers and facilities. Right-of-Use (ROU) assets related to our operating leases, which are included in other non-current assets in our condensed
9
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
consolidated
balance sheets, were
$
Total operating and finance lease expenses were $
Operating lease payments and interest payments on finance leases were $
As of February 28, 2025, we had $
Acquisition Related and Other Expenses
Acquisition related and other expenses primarily consist of personnel related costs for transitional and certain other employees, certain business combination adjustments, including adjustments after the measurement period has ended, and certain other operating items, net.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Transitional and other employee related costs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Business combination adjustments, net |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total acquisition related and other expenses |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Non-Operating (Expenses) Income, net
Non-operating (expenses) income, net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan), net losses related to marketable and non-marketable investments, including losses attributable to equity method investments (primarily Ampere) and net other income and expenses, including net unrealized gains and losses from our investment portfolio related to our deferred compensation plan and non-service net periodic pension income and losses.
10
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Interest income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Foreign currency losses, net |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Noncontrolling interests in income |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Losses from marketable and non-marketable investments, net |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Other (expenses) income, net |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating (expenses) income, net |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
Recent Accounting Pronouncements
Segment Reporting : In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which enhances the disclosures required for operating segments in our annual and interim consolidated financial statements. ASU 2023-07 is effective for us for our annual reporting for fiscal 2025 and for interim period reporting beginning in fiscal 2026 on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2023-07 on our consolidated financial statements.
Income Taxes : In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which enhances the disclosures required for income taxes in our annual consolidated financial statements. ASU 2023-09 is effective for us for our annual reporting for fiscal 2026 on a prospective basis. Both early adoption and retrospective application are permitted. We are currently evaluating the impact of our pending adoption of ASU 2023-09 on our consolidated financial statements.
Income Statement : In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03) and also issued subsequent guidance clarifying the effective date of the initial guidance (collectively Subtopic 220-40), which enhances the disclosures required for expense disaggregation in our annual and interim consolidated financial statements. This guidance is effective for us for our annual reporting for fiscal 2028 and for interim period reporting beginning in fiscal 2029 on a prospective basis. Both early adoption and retrospective application are permitted. We are currently evaluating the impact of our pending adoption of Subtopic 220-40 on our consolidated financial statements.
2.
FAIR VALUE MEASUREMENTS
We perform fair value measurements in accordance with FASB ASC 820, Fair Value Measurement (ASC 820). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance.
11
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:
•
Level 1: quoted prices in active markets for identical assets or liabilities;
•
Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or
•
Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Our assets and liabilities measured at fair value on a recurring basis consisted of the following (Level 1 and Level 2 inputs are defined above):
|
|
|
February 28, 2025 |
|
|
May 31, 2024 |
|
||||||||||||||||||
|
|
|
Fair Value Measurements
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
|
||||||||||||
|
(in millions) |
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Total |
|
||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Money market funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Time deposits and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Derivative financial instruments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Our cash equivalents and marketable securities investments consist of money market funds, time deposits and marketable equity securities. Marketable securities as presented per our condensed consolidated balance sheets included debt securities with original maturities at the time of purchase greater than three months and the remainder of the debt securities were included in cash and cash equivalents. We classify our marketable debt securities as available-for-sale debt securities at the time of purchase and reevaluate such classification as of each balance sheet date. As of February 28, 2025 and May 31, 2024, all of our marketable debt securities investments mature within one year. Our valuation techniques used to measure the fair values of our instruments that were classified as Level 1 in the table above were derived from quoted market prices and active markets for these instruments that exist. Our valuation techniques used to measure the fair values of Level 2 instruments listed in the table above were derived from the following: non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data including reference rate yield curves, among others.
Based on the trading prices of the $
12
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
3.
NOTES PAYABLE AND OTHER BORROWINGS
Senior Notes
In the first nine months of fiscal 2025, we issued $
|
|
|
|
|
February 28, 2025 |
||||
|
(Dollars in millions) |
|
Date of
|
|
Amount |
|
|
Effective
|
|
|
Fixed-rate senior notes: |
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$ |
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
Floating-rate senior notes: |
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
Total senior notes |
|
|
|
$ |
|
|
|
|
|
Unamortized discount/issuance costs |
|
|
|
|
(
|
) |
|
|
|
Total senior notes, net |
|
|
|
$ |
|
|
|
|
We issued the senior notes to repay all or a portion of senior notes due between November 2024 and July 2026, and to pay accrued interest and any related premiums, fees and expenses in connection therewith; to make scheduled payments of principal and interest on borrowings under a term loan credit agreement executed in June 2024; to repay all or a portion of commercial paper notes outstanding; and to use any remaining net proceeds from the borrowing for general corporate purposes, which may include stock repurchases, payment of cash dividends on our common stock, repayment of other indebtedness and future acquisitions. The interest is payable semi-annually for the fixed-rate senior notes and quarterly for the floating-rate senior notes. We may redeem some or all of the fixed-rate senior notes of each series prior to their maturity, subject to certain restrictions, and the payment of an applicable make-whole premium in certain instances.
The senior notes rank pari passu with any other existing and future unsecured and unsubordinated indebtedness of Oracle. All existing and future indebtedness and liabilities of the subsidiaries of Oracle are or will be effectively senior to the senior notes. We were in compliance with all senior notes-related covenants as of February 28, 2025. The material terms and conditions of the senior notes are set forth in, and the foregoing description of the senior notes is qualified in its entirety by reference to, the Officers’ Certificates filed as Exhibit 4.1 to Oracle’s Current Report on Form 8-K filed on September 27, 2024 and filed herewith as Exhibit 4.01 and incorporated by reference herein.
There have been no other significant changes in our notes payable or other borrowing arrangements that were disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.
13
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
4.
RESTRUCTURING ACTIVITIES
Fiscal 2024 Oracle Restructuring Plan
During fiscal 2024, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our operations due to our acquisitions and certain other operational activities (2024 Restructuring Plan). In the first nine months of fiscal 2025, our management supplemented the 2024 Restructuring Plan to reflect additional actions that we expect to take.
The total estimated restructuring costs associated with the 2024 Restructuring Plan are up to $
Summary of All Plans
|
|
|
Accrued |
|
|
Nine Months Ended February 28, 2025 |
|
|
Accrued |
|
|
Total
|
|
|
Total
|
|
|||||||||||||||||
|
(in millions) |
|
May 31,
|
|
|
Initial
|
|
|
Adj. to
|
|
|
Cash
|
|
|
Others (5) |
|
|
February 28,
|
|
|
Accrued
|
|
|
Program
|
|
||||||||
|
2024 Restructuring Plan (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Cloud and license |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Hardware |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2024 Restructuring Plan |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total other restructuring plans (6) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
||
|
Total restructuring plans |
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
|
|
|
|
|
||
(1)
Restructuring costs recorded to each of the operating segments presented primarily related to employee severance costs. Other restructuring costs represented employee severance costs not related to our operating segments and certain other restructuring plan costs.
(2)
As of
February 28, 2025 and May 31, 2024
, substantially all restructuring liabilities have been recorded in other current liabilities within our condensed consolidated balance sheets.
(3)
Costs recorded for the respective restructuring plans during the period presented.
(4)
All plan adjustments were changes in estimates whereby increases and decreases in costs were generally recorded to operating expenses in the period of adjustments.
(5)
Represents foreign currency translation and certain other non-cash adjustments.
(6)
Other restructuring plans presented in the tables above included condensed information for other Oracle based plans and other plans associated with certain of our acquisitions whereby we continued to make cash outlays to settle obligations under these plans during the periods presented but for which the periodic impact to our condensed consolidated statements of operations was not significant.
14
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
5.
DEFERRED REVENUES
Deferred revenues consisted of the following:
|
(in millions) |
|
February 28,
|
|
|
May 31,
|
|
||
|
Cloud services and license support |
|
$ |
|
|
|
$ |
|
|
|
Hardware |
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
Cloud license and on-premise license |
|
|
|
|
|
|
|
|
|
Deferred revenues, current |
|
|
|
|
|
|
|
|
|
Deferred revenues, non-current (in other non-current liabilities) |
|
|
|
|
|
|
|
|
|
Total deferred revenues |
|
$ |
|
|
|
$ |
|
|
Deferred cloud services and license support revenues and deferred hardware revenues substantially represent customer payments made in advance for cloud or support contracts that are typically billed in advance with corresponding revenues generally being recognized ratably or based upon customer usage over the respective contractual periods. Deferred services revenues include prepayments for our services business and revenues for these services are generally recognized as the services are performed. Deferred cloud license and on-premise license revenues typically resulted from customer payments that related to undelivered products and services or specified enhancements.
6.
STOCKHOLDERS’ EQUITY
Common Stock Repurchases
Our Board of Directors has approved a program for us to repurchase shares of our common stock. As of February 28, 2025
, approximately $
Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchases of our debt, our stock price and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 trading plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.
Dividends on Common Stock
In March 2025
, our Board of Directors declared a quarterly cash dividend of $
Fiscal 2025 Stock‑Based Awards Activity and Compensation Expense
During the first nine months of fiscal 2025
, we issued
15
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
These
fiscal 2025 stock-based award issuances were partially offset by stock-based award forfeitures and cancellations of
The RSUs that were granted during the nine months ended February 28, 2025 have substantially similar vesting restrictions and contractual lives and were valued using methodologies of a similar nature as those described in Note 12 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.
Stock-based compensation expense is included in the following operating expense line items in our condensed consolidated statements of operations:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Cloud services and license support |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Hardware |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
7.
INCOME TAXES
Our effective tax rates for each of the periods presented are the result of the mix of income earned and losses incurred in various tax jurisdictions that apply a broad range of income tax rates. Our provision for income taxes varied from the tax computed at the U.S. federal statutory income tax rate for the periods presented primarily due to earnings in foreign operations, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation, the Foreign Derived Intangible Income deduction and the tax effect of Global Intangible Low-Taxed Income. Our effective tax rates were
Our net deferred tax assets were $
Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2022. Our U.S. federal income tax returns have been examined for all years prior to fiscal 2013 and, with some exceptions, we are no longer subject to audit for those periods. Our U.S. state income tax returns, with some exceptions, have been examined for all years prior to fiscal 2010, and we are no longer subject to audit for those periods.
Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining or have examined returns of Oracle and various acquired entities for years through fiscal 2024. Many of the relevant tax years are at an advanced stage in examination or subsequent controversy resolution processes. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal 2001.
16
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
We are under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, Australia, Brazil, Canada, Egypt, India, Indonesia, Israel, Italy, Pakistan, Saudi Arabia, South Korea and Spain, where the amounts under controversy are significant. In some, although not all, cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by, or any negotiated agreements with, these tax authorities or final outcomes in judicial proceedings and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense.
We believe that we have adequately provided under GAAP for outcomes related to our tax audits. However, there can be no assurances as to the possible outcomes or any related financial statement effect thereof.
8.
SEGMENT INFORMATION
We have three businesses—cloud and license, hardware and services—each of which is comprised of a single operating segment. All three of our businesses market and sell our offerings globally to businesses of many sizes, government agencies, educational institutions and resellers with a worldwide sales force positioned to offer the combinations that best meet customer needs.
Our cloud and license business engages in the sale, marketing and delivery of our enterprise applications and infrastructure technologies through cloud and on-premise deployment models including our cloud services and license support offerings; and our cloud license and on-premise license offerings. Cloud services and license support revenues are generated from offerings that are typically contracted with customers directly, billed to customers in advance, delivered to customers over time with our revenue recognition occurring over the contractual terms and renewed by customers upon completion of the contractual terms. Cloud services and license support contracts provide customers with access to the latest updates to the applications and infrastructure technologies as they become available and for which the customer contracted and also include related technical support services over the contractual term. Cloud license and on-premise license revenues represent fees earned from granting customers licenses, generally on a perpetual basis, to use our database and middleware and our applications software products within cloud and on-premise information technology (IT) environments. We generally recognize revenues at the point in time the software is made available to the customer to download and use, which typically is immediate upon signature of the license contract. In each fiscal year, our cloud and license business’ contractual activities are typically highest in our fourth fiscal quarter and the related cash flows are typically highest in the following quarter (i.e., in the first fiscal quarter of the next fiscal year) as we receive payments from these contracts.
Our hardware business provides infrastructure technologies including Oracle Engineered Systems, servers, storage, industry-specific hardware, operating systems, virtualization, management and other hardware-related software to support diverse IT environments. Our hardware business also offers hardware support, which provides customers
17
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
with software updates for the software components that are essential to the functionality of their hardware products and can also include product repairs, maintenance services and technical support services that are typically delivered and recognized ratably over the contractual term.
Our services business provides services to customers and partners to help maximize the performance of their investments in Oracle applications and infrastructure technologies.
We do not track our assets for each business. Consequently, it is not practical to show assets by operating segment.
The following table presents summary results for each of our three businesses:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Cloud and license: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Cloud services and license support expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Hardware: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Hardware products and support expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Services: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Services expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Totals: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1)
The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of research and development, general and administrative and certain other allocable expenses, net. Additionally, the margins reported above do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other non-operating (expenses) income, net. Refer to the table below for a reconciliation of our total margin for operating segments to our income before income taxes as reported per our condensed consolidated statements of operations.
18
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
The following table reconciles total margin for operating segments to income before income taxes:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Total margin for operating segments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Research and development |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
General and administrative |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Amortization of intangible assets |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Acquisition related and other |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Restructuring |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Stock-based compensation for operating segments |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Expense allocations and other, net |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Interest expense |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Non-operating (expenses) income, net |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Income before income taxes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Disaggregation of Revenues
We have considered information that is regularly reviewed by our CODMs in evaluating financial performance and disclosures presented outside of our financial statements in our earnings releases and used in investor presentations to disaggregate revenues to depict how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. The principal category we use to disaggregate revenues is the nature of our products and services as presented in our condensed consolidated statements of operations.
The following table is a summary of our total revenues by geographic region:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Americas |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
EMEA (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1)
Comprised of Europe, the Middle East and Africa
The following table presents our cloud services and license support revenues by offerings:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Cloud services |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
License support |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cloud services and license support revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
19
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Applications cloud services and license support |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Infrastructure cloud services and license support |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cloud services and license support revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
9.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income for the period by the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding restricted stock-based awards, stock options and shares issuable under the employee stock purchase plan as applicable pursuant to the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions, except per share data) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of employee stock plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Diluted earnings per share |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Anti-dilutive stock awards excluded from calculation (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
These stock awards primarily relate to contingently issuable shares pursuant to performance stock option arrangements. Such shares could be dilutive in the future.
10.
LEGAL PROCEEDINGS
Derivative Litigation Concerning Oracle’s NetSuite Acquisition
On May 3 and July 18, 2017, two alleged stockholders filed separate derivative lawsuits in the Court of Chancery of the State of Delaware, purportedly on Oracle’s behalf. Thereafter, the court consolidated the two derivative cases and designated the July 18, 2017 complaint as the operative complaint. The consolidated lawsuit was brought against all the then-current members and one former member of our Board of Directors, and Oracle as a nominal defendant. Plaintiffs alleged that the defendants breached their fiduciary duties by causing Oracle to agree to purchase NetSuite Inc. at an excessive price. The complaint, which was amended several times, sought declaratory relief, unspecified monetary damages (including interest) and attorneys’ fees and costs.
After various proceedings, the case proceeded to trial on July 18, 2022, and on May 12, 2023, the court issued its trial ruling, rejecting plaintiffs’ claims and finding for the two remaining defendants: our Chief Executive Officer and our Chief Technology Officer. Plaintiffs appealed, and on January 21, 2025, the Supreme Court of Delaware, sitting en banc, affirmed the trial court’s opinion in favor of defendants. This matter is now concluded.
20
ORACLE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
February 28, 2025
(Unaudited)
Netherlands Privacy Class Action
On August 14, 2020, The Privacy Collective (TPC), a foundation having its registered office in Amsterdam, filed a purported class action lawsuit against Oracle Nederland B.V, Oracle Corporation and Oracle America, Inc. (the Oracle Defendants), Salesforce.com, Inc. and SFDC Netherlands B.V. in the District Court of Amsterdam. TPC alleges that the Oracle Defendants’ Data Management Platform product violates certain articles of the EU Charter of Fundamental Rights, the General Data Protection Regulation (GDPR) and the Dutch Telecommunications Act (Telecommunicatiewet). TPC claims damages under a number of categories, including: “immaterial damages” (at a fixed amount of €
We filed our defense on March 3, 2021, and on December 29, 2021, the District Court issued a judgment, holding that all of TPC’s claims were deemed inadmissible because of fundamental procedural flaws. TPC filed an appeal with the Court of Appeal in Amsterdam challenging the District Court’s judgment, except for the claims regarding the alleged data breach, which were dropped. On June 18, 2024, the Court of Appeal overturned the District Court’s decision regarding admissibility, thus permitting the case to proceed. We requested that the Court of Appeal permit an interim appeal to the Dutch Supreme Court and/or the European Court of Justice. On September 24, 2024, the Court of Appeal issued a judgment confirming that TPC’s claims are admissible and referred the matter back to the District Court of Amsterdam for a decision on the merits of TPC’s claims, including TPC’s claims for damages under article 82 of the GDPR. The Court of Appeal also granted Oracle’s request for an interim appeal to the Supreme Court, appealing the June 18 and the September 24, 2024, judgments.
Oracle filed its statement of appeal with the Dutch Supreme Court on December 20, 2024, and TPC appeared in the proceedings on January 31, 2025. The filing of the Supreme Court appeal effectively suspended proceedings before the District Court pursuant to applicable procedural rules. TPC filed its statement of defense in response to our Supreme Court appeal and a counter appeal on February 27, 2025. The appeal has been stayed until March 28, 2025 to allow Oracle to submit a statement of defense to the counter appeal.
We believe that we have meritorious defenses against this action, including defenses to the quantum of damages claimed, and we will continue to vigorously defend it.
While the final outcome of this matter cannot be predicted with certainty and we cannot estimate a range of loss at this time, we do not believe that it will have a material impact on our financial position or results of operations.
Other Litigation
We are party to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to acquisitions we have completed or to companies we have acquired or are attempting to acquire. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any.
21
Item 2. Management’s Discussion and Analysis o f Financial Condition and Results of Operations
We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our businesses and significant trends. This overview is followed by a summary of our critical accounting estimates that we believe are important to understanding significant assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.
Business Overview
Oracle provides products and services that address enterprise information technology (IT) needs. Our products and services include enterprise applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models. These models include on-premise, cloud-based and hybrid deployments (an approach that combines both on-premise and cloud-based deployments). Accordingly, we offer choice and flexibility to our customers and facilitate the product, service and deployment combinations that best suit our customers’ needs. Through our worldwide sales force and Oracle Partner Network, we sell to customers all over the world including businesses of many sizes, government agencies, educational institutions and resellers.
We have three businesses: cloud and license; hardware; and services; each of which comprises a single operating segment. The descriptions set forth below as a part of this Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations and the information contained within Note 8 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report provide additional information related to our businesses and operating segments and align to how our chief operating decision makers (CODMs), which are our Chief Executive Officer and Chief Technology Officer, view our operating results and allocate resources.
Cloud and License Business
Our cloud and license business, which represented 85% of our total revenues on a trailing 4-quarter basis, markets, sells and delivers a broad spectrum of enterprise applications and infrastructure technologies through our cloud and license offerings. Revenue streams included in our cloud and license business are:
•
Cloud services and license support revenues, which include:
o
cloud services revenues, which are earned by providing customers access to Oracle Cloud applications and infrastructure technologies via cloud-based deployment models that Oracle develops, provides unspecified updates and enhancements for, deploys, hosts, manages and supports and that customers access by entering into a subscription agreement with us for a stated period. Oracle Cloud Applications and Oracle Cloud Infrastructure (collectively Oracle Cloud Services) arrangements generally: are billed in advance of the cloud services being delivered; have durations of one to four years; are renewed at the customer’s option; and are recognized as revenues ratably over the contractual period of the cloud contract or, in the case of usage model contracts, as the cloud services are consumed over time; and
o
license support revenues, which are earned by providing Oracle license support services to customers that have elected to purchase support services in connection with the purchase of Oracle applications and infrastructure software licenses for use in cloud, on-premise and other IT environments. Substantially all license support customers renew their support contracts with us upon expiration in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements, which current license support customers are entitled to receive. License support contracts are generally: priced as a percentage of the net fees paid by the customer to purchase a cloud license and/or on-premise license; billed in advance of the support services being performed; renewed at the customer’s option; and recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year.
•
Cloud license and on-premise license revenues, which include revenues from the licensing of our software products including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, which our customers deploy within cloud-based, on-premise or other IT environments. Our cloud license and on-premise license transactions are generally perpetual in nature and are generally recognized as revenues up front at the point in time when the software is made available to the customer to download and use. Revenues from usage-based royalty arrangements for distinct cloud licenses and on-premise licenses are
22
recognized at the point in time when the software end user usage occurs. The timing of a few large license transactions can substantially affect our quarterly license revenues due to the point-in-time nature of revenue recognition for license transactions, which is different than the typical revenue recognition pattern for our cloud services and license support revenues in which revenues are recognized over time. Cloud license and on-premise license customers have the option to purchase and renew license support contracts, as further described above.
Providing choice and flexibility to our customers as to when and how they deploy Oracle applications and infrastructure technologies are important elements of our corporate strategy. In recent periods, customer demand for our applications and infrastructure technologies delivered through our Oracle Cloud Services has increased. To address customer demand and enable customer choice, we have certain programs for customers to pivot their applications and infrastructure software licenses and the related license support to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads. The proportion of our cloud services revenues relative to our total revenues has increased and we expect this trend to continue. Cloud services revenues represented 44% and 43% of our total revenues for the three- and nine-month periods ended February 28, 2025, respectively, and 38% and 37% of our total revenues for the three- and nine-month periods ended February 29, 2024, respectively.
Our cloud and license business’ revenue growth is affected by many factors, including the strength of general economic and business conditions; governmental budgetary constraints; the strategy for and competitive position of our offerings; customer satisfaction with our offerings; the continued renewal of our cloud services and license support customer contracts by the customer contract base; substantially all customers continuing to purchase license support contracts in connection with their license purchases; the pricing of license support contracts sold in connection with the sales of licenses; the pricing, amounts and volumes of licenses and cloud services sold; our ability to manage Oracle Cloud capacity requirements to meet existing and prospective customer demand; and foreign currency rate fluctuations.
On a constant currency basis, we expect that our total cloud and license revenues generally will continue to increase due to:
•
expected growth in our cloud services offerings; and
•
continued demand for our cloud license and on-premise license and license support offerings.
We believe these factors should contribute to future growth in our cloud and license business’ total revenues, which should enable us to continue to make investments in research and development and our cloud operations to develop, improve, increase the capacity of and expand the geographic footprint of our cloud and license products and services.
Our cloud and license business’ margin has historically trended upward over the course of the four quarters within a particular fiscal year due to the historical upward trend of our cloud and license business’ revenues over those quarterly periods and because the majority of our costs for this business are generally fixed in the short term. The historical upward trend of our cloud and license business’ revenues over the course of the four quarters within a particular fiscal year is primarily due to the addition of new cloud services and license support contracts to the customer contract base, which we generally recognize as revenues ratably or based upon customer usage over the respective contractual terms and the renewal of existing customers’ cloud services and license support contracts over the course of each fiscal year, which we generally recognize as revenues in a similar manner; and the historical upward trend of our cloud license and on-premise license revenues, which we generally recognize at a point in time upon delivery; in each case over those four fiscal quarterly periods.
Hardware Business
Our hardware business, which represented 5% of our total revenues on a trailing 4-quarter basis, provides a broad selection of enterprise hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, industry-specific hardware offerings, operating systems, virtualization, management and other hardware-related software and related hardware support. Each hardware product and its related software, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a combined performance obligation. The revenues for this combined performance obligation are generally recognized
23
at the point in time that the hardware product and its related software are delivered to the customer and ownership is transferred to the customer. We expect to continue to make investments in research and development to improve existing hardware products and services and to develop new hardware products and services. The majority of our hardware products are sold through indirect channels, including independent distributors and value-added resellers. Our hardware support offerings provide customers with unspecified software updates for software components that are essential to the functionality of our hardware products and associated software products. Our hardware support offerings can also include product repairs, maintenance services and technical support services. Hardware support contracts are entered into and renewed at the option of the customer, are generally priced as a percentage of the net hardware products fees and are generally recognized as revenues ratably as the hardware support services are delivered over the contractual terms.
We generally expect our hardware business to have lower operating margins as a percentage of revenues than our cloud and license business due to the incremental costs we incur to produce and distribute these products and to provide support services, including direct materials and labor costs.
Our quarterly hardware revenues are difficult to predict. Our hardware revenues, cost of hardware and hardware operating margins that we report are affected by many factors, including our manufacturing partners’ abilities to timely manufacture or deliver a few large hardware transactions; our strategy for and the position of our hardware products relative to competitor offerings; customer demand for competing offerings, including cloud infrastructure offerings; the strength of general economic and business conditions; governmental budgetary constraints; whether customers decide to purchase hardware support contracts at or in close proximity to the time of hardware product sale; the percentage of our hardware support contract customer base that renews its support contracts; the close association between hardware products, which have a finite life, and customer demand for related hardware support as hardware products age; customer decisions to either maintain or upgrade their existing hardware infrastructure to newly developed technologies that are available; and foreign currency rate fluctuations.
Services Business
Our services business, which represented 10% of our total revenues on a trailing 4-quarter basis, helps customers and partners maximize the performance of their investments in Oracle applications and infrastructure technologies. We believe that our services are differentiated based on our focus on Oracle technologies, extensive experience, broad sets of intellectual property and best practices. Our services offerings include consulting services and advanced customer services. Our services business has lower margins than our cloud and license and hardware businesses. Our services revenues are affected by many factors including our strategy for, and the competitive position of, our services; customer demand for our cloud and license and hardware offerings and the related services that we may market and sell in connection with these offerings; general economic conditions; governmental budgetary constraints; personnel reductions in our customers’ IT departments; tighter controls over customer discretionary spending; and foreign currency rate fluctuations.
Acquisitions
Our selective and active acquisition program is another important element of our corporate strategy. Historically, we have invested billions of dollars to acquire a number of complementary companies, products, services and technologies. As compelling opportunities become available, we may acquire companies, products, services and technologies in furtherance of our corporate strategy.
We believe that we can fund our future acquisitions with our internally available cash, cash equivalents and marketable securities balances, cash generated from operations, additional borrowings or from the issuance of additional securities. We estimate the financial impact of any potential acquisition with regard to earnings, operating margin, cash flows and return on invested capital targets, among others, before deciding to move forward with an acquisition.
24
Investment in Ampere Computing Holdings LLC
From time to time since 2017, we have made investments in Ampere Computing Holdings LLC (Ampere), a related party entity, in the form of equity and convertible debt instruments. The total carrying value of our investments in Ampere, after accounting for losses under the equity method of accounting, was $1.5 billion as of February 28, 2025. We currently expect Ampere to continue to generate net losses in future periods, but we remain confident in the long-term potential of Ampere’s server chips.
Our equity investments in Ampere represent an ownership interest of approximately 29% as of February 28, 2025. We also own convertible debt investments in Ampere which, under the terms of an agreement with Ampere and other co-investors, will mature in June 2026 and are convertible into equity securities at the holder’s option under certain circumstances. During the nine months ended February 28, 2025, we invested an aggregate of $225 million in convertible debt instruments issued by Ampere. In accordance with the terms of an agreement with other co-investors, we are also a counterparty to certain put (exercisable by a co-investor) and call (exercisable by Oracle) options at prices of approximately $450 million to $1.5 billion, respectively, to acquire additional equity interests in Ampere from our co-investors through January 2027. If either of such options is exercised by us or our co-investors, we would obtain control of Ampere and consolidate its results with our results of operations.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP), which requires us to make certain estimates, judgments and assumptions that can affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. To the extent that there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. We have critical accounting estimates in the areas of business combinations, income taxes and non-marketable investments.
During the first quarter of fiscal 2025, we completed an assessment of the useful lives of our servers and increased the estimated useful lives from five years to six years, effective at the beginning of fiscal 2025. Refer to Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for more information. There were no other significant changes to our critical accounting estimates. Refer to “Critical Accounting Estimates” under Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for a more complete discussion of our critical accounting estimates.
Results of Operations
Presentation of Operating Segment Results and Other Financial Information
In our results of operations discussion below, we provide an overview of our total consolidated revenues, total consolidated operating expenses and total consolidated operating margin, all of which are presented on a GAAP basis. We also present a GAAP-based discussion below for substantially all of the other expense items as presented in our condensed consolidated statements of operations that are not directly attributable to our three businesses.
In addition, we discuss below the results of each of our three businesses—cloud and license, hardware and services—which are our operating segments as defined pursuant to ASC 280, Segment Reporting . The financial reporting for our three businesses that is presented below is presented in a manner that is consistent with that used by our CODMs. Our operating segment presentation below reflects revenues, direct costs and sales and marketing expenses that correspond to and are directly attributable to each of our three businesses. We also utilize these inputs to calculate and present a segment margin for each of our three businesses in the discussion below.
Consistent with our internal management reporting processes, research and development expenses, general and administrative expenses, stock-based compensation expenses, amortization of intangible assets, certain other expense allocations, acquisition related and other expenses, restructuring expenses, interest expense,
25
non-operating (expenses) income, net and provision for income taxes are not attributed to our three operating segments because our management does not view the performance of our three businesses including such items and/or it is impracticable to do so. Refer to “Supplemental Disclosure Related to Certain Charges” below for additional discussion of certain of these items and Note 8 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a reconciliation of the summations of total segment margin as presented in the discussion below to total income before income taxes as presented per our condensed consolidated statements of operations for all periods presented.
Constant Currency Presentation
Our international operations have provided, and are expected to continue to provide, a significant portion of each of our businesses’ revenues and expenses. As a result, each of our businesses’ revenues and expenses and our total revenues and expenses will continue to be affected by changes in the U.S. Dollar against major international currencies. In order to provide a framework for assessing how our underlying businesses performed, excluding the effects of foreign currency rate fluctuations, we compare the percent change in the results from one period to another period in this Quarterly Report using constant currency. To present this information, current and comparative prior period results for entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at constant exchange rates (i.e., the rates in effect on May 31, 2024, which was the last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods. For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on February 28, 2025 and February 29, 2024, our financial statements would reflect reported revenues of $1.05 million in the first nine months of fiscal 2025 (using 1.05 as the applicable average exchange rate for the period) and $1.08 million in the first nine months of fiscal 2024 (using 1.08 as the applicable average exchange rate for the period). The constant currency presentation, however, would translate the results for each of the first nine months of fiscal 2025 and 2024 using the May 31, 2024 exchange rate and indicate, in this example, no change in revenues between the periods compared. In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency.
Total Revenues and Operating Expenses
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Total Revenues by Geography : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Americas |
|
$ |
9,000 |
|
|
9% |
|
10% |
|
$ |
8,270 |
|
|
$ |
26,305 |
|
|
9% |
|
10% |
|
$ |
24,177 |
|
|
EMEA (1) |
|
|
3,421 |
|
|
3% |
|
6% |
|
|
3,316 |
|
|
|
10,029 |
|
|
6% |
|
6% |
|
|
9,491 |
|
|
Asia Pacific |
|
|
1,709 |
|
|
1% |
|
5% |
|
|
1,694 |
|
|
|
5,162 |
|
|
3% |
|
5% |
|
|
5,006 |
|
|
Total revenues |
|
|
14,130 |
|
|
6% |
|
8% |
|
|
13,280 |
|
|
|
41,496 |
|
|
7% |
|
8% |
|
|
38,674 |
|
|
Total Operating Expenses |
|
|
9,772 |
|
|
3% |
|
4% |
|
|
9,530 |
|
|
|
28,927 |
|
|
3% |
|
4% |
|
|
28,007 |
|
|
Total Operating Margin |
|
$ |
4,358 |
|
|
16% |
|
20% |
|
$ |
3,750 |
|
|
$ |
12,569 |
|
|
18% |
|
19% |
|
$ |
10,667 |
|
|
Total Operating Margin % |
|
31% |
|
|
|
|
|
|
28% |
|
|
30% |
|
|
|
|
|
|
28% |
|
||||
|
% Revenues by Geography : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Americas |
|
64% |
|
|
|
|
|
|
62% |
|
|
63% |
|
|
|
|
|
|
62% |
|
||||
|
EMEA |
|
24% |
|
|
|
|
|
|
25% |
|
|
24% |
|
|
|
|
|
|
25% |
|
||||
|
Asia Pacific |
|
12% |
|
|
|
|
|
|
13% |
|
|
13% |
|
|
|
|
|
|
13% |
|
||||
|
Total Revenues by Business : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cloud and license |
|
$ |
12,136 |
|
|
8% |
|
10% |
|
$ |
11,219 |
|
|
$ |
35,525 |
|
|
10% |
|
11% |
|
$ |
32,392 |
|
|
Hardware |
|
|
703 |
|
|
-7% |
|
-5% |
|
|
754 |
|
|
|
2,086 |
|
|
-6% |
|
-5% |
|
|
2,224 |
|
|
Services |
|
|
1,291 |
|
|
-1% |
|
1% |
|
|
1,307 |
|
|
|
3,885 |
|
|
-4% |
|
-3% |
|
|
4,058 |
|
|
Total revenues |
|
$ |
14,130 |
|
|
6% |
|
8% |
|
$ |
13,280 |
|
|
$ |
41,496 |
|
|
7% |
|
8% |
|
$ |
38,674 |
|
|
% Revenues by Business : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cloud and license |
|
86% |
|
|
|
|
|
|
84% |
|
|
86% |
|
|
|
|
|
|
83% |
|
||||
|
Hardware |
|
5% |
|
|
|
|
|
|
6% |
|
|
5% |
|
|
|
|
|
|
6% |
|
||||
|
Services |
|
9% |
|
|
|
|
|
|
10% |
|
|
9% |
|
|
|
|
|
|
11% |
|
||||
(1)
Comprised of Europe, the Middle East and Africa
26
Total revenues increased by $850 million and $2.8 billion in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods, due to a $917 million and a $3.1 billion increase in cloud and license revenues, partially offset by a $51 million and a $138 million decrease in hardware revenues and a $16 million and a $173 million decrease in services revenues, in each case during the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods. Excluding the unfavorable effects of foreign currency rate fluctuations of 2% in the third quarter of fiscal 2025 and 1% in the first nine months of fiscal 2025, the increase in our cloud and license business revenues was primarily due to growth in our cloud services revenues as customers purchased our applications and infrastructure technologies and also renewed their related cloud contracts to continue to gain access to the latest versions of our technologies. In constant currency, applications cloud services and license support contributed 23% and 26% and infrastructure cloud services and license support contributed 77% and 74% of the growth in cloud services and license support revenues, in each case in the third quarter and the first nine months of fiscal 2025, respectively. In our hardware business, the constant currency decrease in revenues in the fiscal 2025 periods presented was due to the emphasis we placed on the marketing and sale of our growing cloud-based infrastructure technologies. In our services business, the constant currency increase in revenues in the third quarter of fiscal 2025 was attributable to an increase in our consulting services revenues, partially offset by a decrease in our advanced customer services revenues, while the constant currency decrease in services business revenues in the first nine months of fiscal 2025 was attributable to a decrease in revenues from each of our primary services offerings. The Americas region contributed 75% and 74% and the Asia Pacific region contributed 7% and 8% to the constant currency total revenue growth during the third quarter and the first nine months of fiscal 2025, respectively, and the EMEA region contributed 18% to the constant currency total revenue growth during each of the fiscal 2025 periods presented.
Total GAAP operating expenses increased by $242 million and $920 million in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods. The increase in GAAP operating expenses in reported currency was primarily due to a $430 million and a $1.3 billion increase in cloud services and license support expenses primarily due to higher infrastructure expenses and higher employee related expenses, including higher expenses relating to stock-based compensation, that were incurred to support the growth in our cloud services revenues; a $181 million and a $517 million increase in research and development expenses primarily due to higher employee related expenses, including higher stock-based compensation expenses; and a $77 million and a $184 million increase in sales and marketing expenses, in each case during the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods. These increases in GAAP operating expenses in reported currency were partially offset by a $201 million and a $504 million decrease in expenses for the amortization of intangible assets as certain of our assets were fully amortized; a $127 million and a $142 million decrease in acquisition related and other expenses primarily due to lower impairment charges on certain assets; an $84 million and a $235 million decrease in services expenses primarily due to decreases in external contractor and employee related expenses; a $20 million and a $119 million decrease in hardware expenses due to lower hardware product and support costs; and a $27 million and a $91 million decrease in restructuring expenses, in each case during the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods.
In constant currency, our total operating margin and total operating margin as a percentage of revenues increased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to higher revenues.
Supplemental Disclosure Related to Certain Charges
To supplement our condensed consolidated financial information, we believe that the following information is helpful to an overall understanding of our past financial performance and prospects for the future.
27
Our operating results reported pursuant to GAAP included the following business combination accounting adjustments and expenses related to acquisitions and certain other expenses, including stock-based compensation, that affected our GAAP net income:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(in millions) |
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
Amortization of intangible assets (1) |
|
$ |
548 |
|
|
$ |
749 |
|
|
$ |
1,763 |
|
|
$ |
2,267 |
|
|
Acquisition related and other (2) |
|
|
28 |
|
|
|
155 |
|
|
|
72 |
|
|
|
214 |
|
|
Restructuring (3) |
|
|
63 |
|
|
|
90 |
|
|
|
220 |
|
|
|
311 |
|
|
Stock-based compensation, operating segments (4) |
|
|
422 |
|
|
|
368 |
|
|
|
1,186 |
|
|
|
1,014 |
|
|
Stock-based compensation, R&D and G&A (4) |
|
|
776 |
|
|
|
680 |
|
|
|
2,188 |
|
|
|
1,913 |
|
|
Income tax effects (5) |
|
|
(542 |
) |
|
|
(461 |
) |
|
|
(2,042 |
) |
|
|
(1,939 |
) |
|
|
|
$ |
1,295 |
|
|
$ |
1,581 |
|
|
$ |
3,387 |
|
|
$ |
3,780 |
|
(1)
Represents the amortization of intangible assets, all of which were acquired in connection with our acquisitions. As of February 28, 2025, estimated future amortization related to intangible assets was as follows (in millions):
|
|
Remainder of fiscal 2025 |
|
$ |
544 |
|
|
|
Fiscal 2026 |
|
|
1,639 |
|
|
|
Fiscal 2027 |
|
|
672 |
|
|
|
Fiscal 2028 |
|
|
635 |
|
|
|
Fiscal 2029 |
|
|
561 |
|
|
|
Fiscal 2030 |
|
|
522 |
|
|
|
Thereafter |
|
|
558 |
|
|
|
Total intangible assets, net |
|
$ |
5,131 |
|
(2)
Acquisition related and other expenses consist of personnel related costs for transitional and certain other employees, certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net.
(3)
Restructuring expenses in each of the fiscal 2025 and 2024 periods presented primarily related to employee severance in connection with the Fiscal 2024 Oracle Restructuring Plan (2024 Restructuring Plan). Additional information regarding certain of our restructuring plans is provided in management’s discussion below under “Restructuring Expenses,” in Note 4 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and in Note 8 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.
(4)
Stock-based compensation was included in the following operating expense line items of our condensed consolidated statements of operations (in millions):
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
|
February 28,
|
|
|
February 29,
|
|
|
February 28,
|
|
|
February 29,
|
|
||||
|
|
Cloud services and license support |
|
$ |
160 |
|
|
$ |
138 |
|
|
$ |
459 |
|
|
$ |
386 |
|
|
|
Hardware |
|
|
8 |
|
|
|
6 |
|
|
|
21 |
|
|
|
17 |
|
|
|
Services |
|
|
54 |
|
|
|
45 |
|
|
|
150 |
|
|
|
123 |
|
|
|
Sales and marketing |
|
|
200 |
|
|
|
179 |
|
|
|
556 |
|
|
|
488 |
|
|
|
Stock-based compensation, operating segments |
|
|
422 |
|
|
|
368 |
|
|
|
1,186 |
|
|
|
1,014 |
|
|
|
Research and development |
|
|
675 |
|
|
|
584 |
|
|
|
1,902 |
|
|
|
1,642 |
|
|
|
General and administrative |
|
|
101 |
|
|
|
96 |
|
|
|
286 |
|
|
|
271 |
|
|
|
Total stock-based compensation |
|
$ |
1,198 |
|
|
$ |
1,048 |
|
|
$ |
3,374 |
|
|
$ |
2,927 |
|
(5)
For all periods presented, the applicable jurisdictional tax rates applied to our income before income taxes after excluding the tax effects of items within the table above such as for stock-based compensation, amortization of intangible assets, restructuring, and certain acquisition related and other items, and after excluding the net deferred tax effects associated with a previously recorded income tax benefit that resulted from a partial realignment of our legal entity structure. These adjustments resulted in effective tax rates of 19.9% and 19.7%, instead of 14.9% and 9.9%, respectively, for the third quarter and the first nine months of fiscal 2025 and 18.9% and 18.8%, instead of 16.2% and 8.0%, respectively, for the third quarter and the first nine months of fiscal 2024, which in each case represented our effective tax rates as derived per our condensed consolidated statements of operations.
28
Cloud and License Business
Our cloud and license business engages in the sale and marketing of our applications and infrastructure technologies that are delivered through various deployment models and include: Oracle Cloud Services offerings; Oracle cloud license and on-premise license offerings; and Oracle license support offerings. Our cloud services deliver applications and infrastructure technologies on a subscription basis via cloud-based deployment models that we develop, provide unspecified updates and enhancements for, deploy, host, manage and support. Revenues for our cloud services are generally recognized ratably over the contractual term, which is generally one to four years, or in the case of usage model contracts, as the cloud services are consumed. Cloud license and on-premise license revenues represent fees earned from granting customers licenses, generally on a perpetual basis, to use our database and middleware and our applications software products within cloud and on-premise IT environments and are generally recognized up front at the point in time when the software is made available to the customer to download and use. License support revenues are typically generated through the sale of applications and infrastructure software license support contracts related to cloud licenses and on-premise licenses; are purchased by our customers at their option; and are generally recognized as revenues ratably over the contractual term, which is generally one year. We continue to place significant emphasis, both domestically and internationally, on direct sales through our own sales force. We also continue to market certain of our offerings through indirect channels. Costs associated with our cloud and license business are included in cloud services and license support expenses and sales and marketing expenses. These costs are largely personnel and infrastructure related and include the cost of providing our cloud services and license support offerings, salaries and commissions earned by our sales force for the sale of our cloud and license offerings and marketing program costs.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Cloud and License Revenues : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Americas |
|
$ |
7,862 |
|
|
11% |
|
12% |
|
$ |
7,102 |
|
|
$ |
22,951 |
|
|
12% |
|
13% |
|
$ |
20,537 |
|
|
EMEA |
|
|
2,877 |
|
|
5% |
|
8% |
|
|
2,738 |
|
|
|
8,378 |
|
|
7% |
|
8% |
|
|
7,815 |
|
|
Asia Pacific |
|
|
1,397 |
|
|
1% |
|
5% |
|
|
1,379 |
|
|
|
4,196 |
|
|
4% |
|
6% |
|
|
4,040 |
|
|
Total revenues |
|
|
12,136 |
|
|
8% |
|
10% |
|
|
11,219 |
|
|
|
35,525 |
|
|
10% |
|
11% |
|
|
32,392 |
|
|
Expenses : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cloud services and license support (1) |
|
|
2,690 |
|
|
18% |
|
19% |
|
|
2,288 |
|
|
|
7,667 |
|
|
19% |
|
20% |
|
|
6,433 |
|
|
Sales and marketing (1) |
|
|
1,817 |
|
|
3% |
|
5% |
|
|
1,758 |
|
|
|
5,477 |
|
|
3% |
|
4% |
|
|
5,339 |
|
|
Total expenses (1) |
|
|
4,507 |
|
|
11% |
|
13% |
|
|
4,046 |
|
|
|
13,144 |
|
|
12% |
|
12% |
|
|
11,772 |
|
|
Total Margin |
|
$ |
7,629 |
|
|
6% |
|
8% |
|
$ |
7,173 |
|
|
$ |
22,381 |
|
|
9% |
|
9% |
|
$ |
20,620 |
|
|
Total Margin % |
|
63% |
|
|
|
|
|
|
64% |
|
|
63% |
|
|
|
|
|
|
64% |
|
||||
|
% Revenues by Geography : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Americas |
|
65% |
|
|
|
|
|
|
63% |
|
|
65% |
|
|
|
|
|
|
63% |
|
||||
|
EMEA |
|
24% |
|
|
|
|
|
|
25% |
|
|
23% |
|
|
|
|
|
|
24% |
|
||||
|
Asia Pacific |
|
11% |
|
|
|
|
|
|
12% |
|
|
12% |
|
|
|
|
|
|
13% |
|
||||
|
Revenues by Offerings : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cloud services |
|
$ |
6,210 |
|
|
23% |
|
25% |
|
$ |
5,054 |
|
|
$ |
17,769 |
|
|
23% |
|
24% |
|
$ |
14,464 |
|
|
License support |
|
|
4,797 |
|
|
-2% |
|
0% |
|
|
4,909 |
|
|
|
14,562 |
|
|
-1% |
|
0% |
|
|
14,685 |
|
|
Cloud license and on-premise license |
|
|
1,129 |
|
|
-10% |
|
-8% |
|
|
1,256 |
|
|
|
3,194 |
|
|
-2% |
|
0% |
|
|
3,243 |
|
|
Total revenues |
|
$ |
12,136 |
|
|
8% |
|
10% |
|
$ |
11,219 |
|
|
$ |
35,525 |
|
|
10% |
|
11% |
|
$ |
32,392 |
|
|
Cloud Services and License Support Revenues by Ecosystem : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Applications cloud services and license support |
|
$ |
4,811 |
|
|
5% |
|
6% |
|
$ |
4,584 |
|
|
$ |
14,363 |
|
|
6% |
|
7% |
|
$ |
13,529 |
|
|
Infrastructure cloud services and license support |
|
|
6,196 |
|
|
15% |
|
18% |
|
|
5,379 |
|
|
|
17,968 |
|
|
15% |
|
16% |
|
|
15,620 |
|
|
Total cloud services and license support revenues |
|
$ |
11,007 |
|
|
10% |
|
12% |
|
$ |
9,963 |
|
|
$ |
32,331 |
|
|
11% |
|
12% |
|
$ |
29,149 |
|
(1)
Excludes stock-based compensation and certain expense allocations. Also excludes amortization of intangible assets and certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.
29
Our cloud and license business’ total revenues increased by $917 million and $3.1 billion in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods, primarily due to a $1.2 billion and a $3.3 billion increase in cloud services revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts to continue to gain access to the latest versions of our technologies for which we delivered such cloud services during the periods presented. The increase in cloud services revenues in the third quarter and the first nine months of fiscal 2025 was partially offset by a $239 million and a $172 million total decrease, respectively, in cloud license and on-premise license and license support revenues, relative to the corresponding prior year periods. In constant currency, applications cloud services and license support contributed 23% and 26% and infrastructure cloud services and license support contributed 77% and 74% of the growth in cloud services and license support revenues in the third quarter and the first nine months of fiscal 2025, respectively. The Americas region contributed 74% and 76%, the EMEA region contributed 20% and 17% and the Asia Pacific region contributed 6% and 7% to the constant currency revenue growth for this business during the third quarter and the first nine months of fiscal 2025, respectively.
Total cloud and license business’ expenses increased by $461 million and $1.4 billion in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods. Excluding the favorable effects of currency rate fluctuations of 2% in the third quarter of fiscal 2025 and less than 1% in the first nine months of fiscal 2025, the constant currency increase in expenses was primarily due to a $399 million and a $961 million increase in infrastructure expenses, an $81 million and a $265 million increase in employee related expenses for employees engaged in cloud services delivery and a $96 million and a $187 million increase in sales and marketing expenses, in each case in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods, to support the increase in our cloud services revenues. Our cloud services and license support expenses have grown in recent periods, and we expect this trend to continue during fiscal 2025 as we increase our existing data center capacity and establish data centers in new geographic locations in order to meet current and expected customer demand.
Excluding the effects of currency rate fluctuations, our cloud and license business’ total margin increased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to increases in total revenues for this business. Total margin as a percentage of revenues in constant currency decreased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to an increase in total expenses for this business.
Hardware Business
Our hardware business’ revenues are generated from the sales of our Oracle Engineered Systems, server, storage and industry-specific hardware offerings. The hardware product and related software, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a combined performance obligation. The revenues for this combined performance obligation are generally recognized at the point in time that the hardware product is delivered to the customer and ownership is transferred to the customer. Our hardware business also earns revenues from the sale of hardware support contracts purchased by our customers at their option and that are generally recognized as revenues ratably as the hardware support services are delivered over the contractual term, which is generally one year. The majority of our hardware products are sold through indirect channels such as independent distributors and value-added resellers and we also market and sell our hardware products through our direct sales force. Operating expenses associated with our hardware business include the cost of hardware products, which consists of expenses for materials and labor used to produce these products by our internal manufacturing operations or by third-party manufacturers, warranty and related expenses and the impact of periodic changes in inventory valuation, including the impact of inventory determined to be excess and obsolete; the cost of materials used to repair customer products with eligible support contracts; the cost of labor and infrastructure to provide support services; and sales and marketing expenses, which are largely personnel related and include variable compensation earned by our sales force for the sales of our hardware offerings.
30
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Hardware Revenues : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Americas |
|
$ |
348 |
|
|
-3% |
|
-2% |
|
$ |
360 |
|
|
$ |
987 |
|
|
-8% |
|
-7% |
|
$ |
1,074 |
|
|
EMEA |
|
|
211 |
|
|
-13% |
|
-11% |
|
|
242 |
|
|
|
646 |
|
|
-4% |
|
-4% |
|
|
676 |
|
|
Asia Pacific |
|
|
144 |
|
|
-6% |
|
-3% |
|
|
152 |
|
|
|
453 |
|
|
-5% |
|
-3% |
|
|
474 |
|
|
Total revenues |
|
|
703 |
|
|
-7% |
|
-5% |
|
|
754 |
|
|
|
2,086 |
|
|
-6% |
|
-5% |
|
|
2,224 |
|
|
Expenses : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Hardware products and support (1) |
|
|
187 |
|
|
-10% |
|
-8% |
|
|
208 |
|
|
|
499 |
|
|
-20% |
|
-19% |
|
|
623 |
|
|
Sales and marketing (1) |
|
|
66 |
|
|
-8% |
|
-6% |
|
|
72 |
|
|
|
201 |
|
|
-8% |
|
-8% |
|
|
220 |
|
|
Total expenses (1) |
|
|
253 |
|
|
-10% |
|
-8% |
|
|
280 |
|
|
|
700 |
|
|
-17% |
|
-16% |
|
|
843 |
|
|
Total Margin |
|
$ |
450 |
|
|
-5% |
|
-3% |
|
$ |
474 |
|
|
$ |
1,386 |
|
|
0% |
|
1% |
|
$ |
1,381 |
|
|
Total Margin % |
|
64% |
|
|
|
|
|
|
63% |
|
|
66% |
|
|
|
|
|
|
62% |
|
||||
|
% Revenues by Geography : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Americas |
|
50% |
|
|
|
|
|
|
48% |
|
|
47% |
|
|
|
|
|
|
48% |
|
||||
|
EMEA |
|
30% |
|
|
|
|
|
|
32% |
|
|
31% |
|
|
|
|
|
|
31% |
|
||||
|
Asia Pacific |
|
20% |
|
|
|
|
|
|
20% |
|
|
22% |
|
|
|
|
|
|
21% |
|
||||
(1)
Excludes stock-based compensation and certain expense allocations. Also excludes amortization of intangible assets and certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.
Total hardware revenues decreased by $51 million and $138 million in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods. Excluding the unfavorable impact of currency rate fluctuations of 2% in the third quarter of fiscal 2025 and 1% in the first nine months of fiscal 2025, the decrease in hardware revenues was primarily due to our continued emphasis on the marketing and sale of our cloud-based infrastructure technologies, which resulted in reduced sales volumes of certain of our hardware product lines and also impacted the volume of hardware support contracts sold in recent periods. Geographically, we experienced constant currency hardware revenue declines in all regions in the fiscal 2025 periods presented.
Total hardware expenses decreased by $27 million and $143 million in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods. The decrease in hardware expenses aligned with lower hardware revenues. Excluding the favorable currency rate fluctuations effect of 2% in the third quarter of fiscal 2025 and 1% in the first nine months of fiscal 2025, the constant currency decrease in hardware expenses was due to a $17 million and a $116 million decrease in hardware product and support costs and a $4 million and a $17 million decrease in sales and marketing expenses, in each case during the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods.
In constant currency, our hardware business’ total margin decreased in the third quarter of fiscal 2025 due to lower total revenues for this business, while our hardware business’ total margin in the first nine months of fiscal 2025 increased due to lower total expenses for this business, in each case relative to the corresponding prior year period. In constant currency, our hardware business’ total margin as a percentage of revenues increased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to lower total expenses for this business.
Services Business
Our services offerings are designed to help maximize the performance of customer investments in Oracle applications and infrastructure technologies and include our consulting services and advanced customer services offerings. Services revenues are generally recognized over time as the services are performed. The cost of providing our services consists primarily of personnel related expenses, technology infrastructure expenditures, facilities expenses and external contractor expenses.
31
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Services Revenues : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Americas |
|
$ |
790 |
|
|
-2% |
|
-1% |
|
$ |
808 |
|
|
$ |
2,367 |
|
|
-8% |
|
-7% |
|
$ |
2,566 |
|
|
EMEA |
|
|
333 |
|
|
-1% |
|
2% |
|
|
336 |
|
|
|
1,005 |
|
|
0% |
|
1% |
|
|
1,000 |
|
|
Asia Pacific |
|
|
168 |
|
|
3% |
|
7% |
|
|
163 |
|
|
|
513 |
|
|
5% |
|
6% |
|
|
492 |
|
|
Total revenues |
|
|
1,291 |
|
|
-1% |
|
1% |
|
|
1,307 |
|
|
|
3,885 |
|
|
-4% |
|
-3% |
|
|
4,058 |
|
|
Total Expenses (1) |
|
|
1,029 |
|
|
-8% |
|
-6% |
|
|
1,120 |
|
|
|
3,174 |
|
|
-7% |
|
-7% |
|
|
3,431 |
|
|
Total Margin |
|
$ |
262 |
|
|
40% |
|
42% |
|
$ |
187 |
|
|
$ |
711 |
|
|
13% |
|
14% |
|
$ |
627 |
|
|
Total Margin % |
|
20% |
|
|
|
|
|
|
14% |
|
|
18% |
|
|
|
|
|
|
15% |
|
||||
|
% Revenues by Geography : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Americas |
|
61% |
|
|
|
|
|
|
62% |
|
|
61% |
|
|
|
|
|
|
63% |
|
||||
|
EMEA |
|
26% |
|
|
|
|
|
|
26% |
|
|
26% |
|
|
|
|
|
|
25% |
|
||||
|
Asia Pacific |
|
13% |
|
|
|
|
|
|
12% |
|
|
13% |
|
|
|
|
|
|
12% |
|
||||
(1)
Excludes stock-based compensation and certain allocations. Also excludes certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.
Total services revenues decreased by $16 million and $173 million in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods. Excluding the effects of unfavorable currency rate fluctuation of 2% in the third quarter of fiscal 2025, the increase in total services revenues was due to growth in our consulting services revenues, partially offset by a decrease in our advanced customer services revenues, relative to the corresponding prior year period. Excluding the effects of unfavorable currency rate fluctuation of 1% in the first nine months of fiscal 2025, the decrease in total services revenues was due to a decrease in revenues in each of our primary services offerings, relative to the corresponding prior year period. The constant currency increase in services revenues in the EMEA and the Asia Pacific regions was partially offset by a constant currency decrease in services revenues in the Americas region in the third quarter of fiscal 2025, while a constant currency decrease in services revenues in the Americas region was partially offset by a constant currency increase in services revenues in the EMEA and the Asia Pacific regions in the first nine months of fiscal 2025.
Total services expenses decreased by $91 million and $257 million in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods. Excluding the favorable effects of currency rate fluctuations of 2% in the third quarter of fiscal 2025 and less than 1% in the first nine months of fiscal 2025, the constant currency decrease in services expenses was due to a decrease in external contractor expenses of $25 million and $130 million and a decrease in employee related expenses of $32 million and $73 million, in each case in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods.
In constant currency, our services business’ total margin and total margin as a percentage of revenues increased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to lower total expenses for this business.
32
Research and Development Expenses : Research and development expenses consist primarily of personnel related expenditures. We intend to continue to invest significantly in our research and development efforts because, in our judgment, they are essential to maintaining our competitive position.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Research and development (1) |
|
$ |
1,754 |
|
|
5% |
|
7% |
|
$ |
1,664 |
|
|
$ |
5,304 |
|
|
5% |
|
6% |
|
$ |
5,047 |
|
|
Stock-based compensation |
|
|
675 |
|
|
15% |
|
15% |
|
|
584 |
|
|
|
1,902 |
|
|
16% |
|
16% |
|
|
1,642 |
|
|
Total expenses |
|
$ |
2,429 |
|
|
8% |
|
9% |
|
$ |
2,248 |
|
|
$ |
7,206 |
|
|
8% |
|
8% |
|
$ |
6,689 |
|
|
% of Total Revenues |
|
17% |
|
|
|
|
|
|
17% |
|
|
18% |
|
|
|
|
|
|
17% |
|
||||
(1)
Excluding stock-based compensation
Total research and development expenses increased by $181 million and $517 million in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods, primarily due to higher employee related expenses, including higher stock-based compensation expenses.
General and Administrative Expenses : General and administrative expenses primarily consist of personnel related expenditures for IT, finance, legal and human resources support functions.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
General and administrative (1) |
|
$ |
289 |
|
|
3% |
|
5% |
|
$ |
281 |
|
|
$ |
849 |
|
|
-3% |
|
-2% |
|
$ |
875 |
|
|
Stock-based compensation |
|
|
101 |
|
|
5% |
|
5% |
|
|
96 |
|
|
|
286 |
|
|
5% |
|
5% |
|
|
271 |
|
|
Total expenses |
|
$ |
390 |
|
|
3% |
|
5% |
|
$ |
377 |
|
|
$ |
1,135 |
|
|
-1% |
|
0% |
|
$ |
1,146 |
|
|
% of Total Revenues |
|
3% |
|
|
|
|
|
|
3% |
|
|
3% |
|
|
|
|
|
|
3% |
|
||||
(1)
Excluding stock-based compensation
Fiscal Third Quarter 2025 Compared to Fiscal Third Quarter 2024 : Total general and administrative expenses increased by $13 million in reported currency in the third quarter of fiscal 2025, relative to the corresponding prior year period. Excluding the favorable effects of currency rate fluctuations of 2% in the third quarter of fiscal 2025, the increase in general and administrative expenses was primarily due to a $13 million increase in professional fees and a $10 million increase in employee related expenses, including higher stock-based compensation expenses.
First Nine Months Fiscal 2025 Compared to First Nine Months Fiscal 2024 : Total general and administrative expenses decreased by $11 million in reported currency in the first nine months of fiscal 2025, relative to the corresponding prior year period. Excluding the favorable effects of currency rate fluctuations of 1% in the first nine months of fiscal 2025, the decrease in general and administrative expenses was primarily due to a $35 million decrease in facilities and related expenses, partially offset by a $15 million increase in stock-based compensation expenses.
Amortization of Intangible Assets : Substantially all of our intangible assets were acquired through our business combinations. We amortize our intangible assets over, and monitor the appropriateness of, the estimated useful lives of these assets. We also periodically review these intangible assets for potential impairment based upon relevant facts and circumstances. Refer to Note 6 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for additional information regarding our intangible assets and related amortization.
33
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Developed technology |
|
$ |
158 |
|
|
-7% |
|
-7% |
|
$ |
170 |
|
|
$ |
487 |
|
|
-4% |
|
-4% |
|
$ |
507 |
|
|
Cloud services and license support agreements and related relationships |
|
|
156 |
|
|
-39% |
|
-39% |
|
|
253 |
|
|
|
558 |
|
|
-29% |
|
-29% |
|
|
781 |
|
|
Cloud license and on-premise license agreements and related relationships |
|
|
116 |
|
|
-1% |
|
-1% |
|
|
117 |
|
|
|
346 |
|
|
-1% |
|
-1% |
|
|
350 |
|
|
Other |
|
|
118 |
|
|
-44% |
|
-44% |
|
|
209 |
|
|
|
372 |
|
|
-41% |
|
-41% |
|
|
629 |
|
|
Total amortization of intangible assets |
|
$ |
548 |
|
|
-27% |
|
-27% |
|
$ |
749 |
|
|
$ |
1,763 |
|
|
-22% |
|
-22% |
|
$ |
2,267 |
|
Amortization of intangible assets decreased by $201 million and $504 million in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods, due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.
Acquisition Related and Other Expenses : Acquisition related and other expenses consist of personnel related costs for transitional and certain other employees, certain business combination adjustments, including adjustments after the measurement period has ended, and certain other operating items, net.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Transitional and other employee related costs |
|
$ |
— |
|
|
-100% |
|
-100% |
|
$ |
5 |
|
|
$ |
3 |
|
|
-80% |
|
-80% |
|
$ |
17 |
|
|
Business combination adjustments, net |
|
|
1 |
|
|
-77% |
|
-78% |
|
|
4 |
|
|
|
(4 |
) |
|
* |
|
* |
|
|
17 |
|
|
Other, net |
|
|
27 |
|
|
-82% |
|
-82% |
|
|
146 |
|
|
|
73 |
|
|
-60% |
|
-60% |
|
|
180 |
|
|
Total acquisition related and other expenses |
|
$ |
28 |
|
|
-82% |
|
-82% |
|
$ |
155 |
|
|
$ |
72 |
|
|
-66% |
|
-66% |
|
$ |
214 |
|
|
* |
Not meaningful |
Acquisition related and other expenses decreased by $127 million and $142 million in reported currency in the third quarter and the first nine months of fiscal 2025, respectively, relative to the corresponding prior year periods, primarily due to a $119 million and a $107 million decrease, respectively, in other expenses primarily related to asset impairment charges. The decrease in the first nine months of fiscal 2025 was also due to a $21 million decrease in business combination adjustments, net, relative to the corresponding prior year period.
Restructuring Expenses : Restructuring expenses resulted from the execution of management-approved restructuring plans that were generally developed to improve our cost structure and/or operations, often in conjunction with our acquisition integration strategies and/or other strategic initiatives. Restructuring expenses consist of employee severance costs, contract termination costs and certain other exit costs to improve our cost structure prospectively. For additional information regarding our restructuring plans, see Note 4 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and Note 8 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Restructuring expenses |
|
$ |
63 |
|
|
-30% |
|
-28% |
|
$ |
90 |
|
|
$ |
220 |
|
|
-29% |
|
-29% |
|
$ |
311 |
|
34
Restructuring expenses in each of the fiscal 2025 and 2024 periods presented primarily related to the 2024 Restructuring Plan. Our management approved, committed to and initiated the 2024 Restructuring Plan in order to restructure and further improve efficiencies in our operations. We may incur additional restructuring expenses in future periods due to the initiation of new restructuring plans or from changes in estimated costs associated with existing restructuring plans.
The majority of the initiatives undertaken by the 2024 Restructuring Plan were effected to implement our continued emphasis in developing, marketing, selling and delivering our cloud-based offerings. Certain of the cost savings realized pursuant to the 2024 Restructuring Plan initiatives were offset by investments in resources and geographies that we believe better address the development, marketing, sale and delivery of our cloud-based offerings, including investments in the development and delivery of our second-generation cloud infrastructure.
Interest Expense :
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Interest expense |
|
$ |
892 |
|
|
2% |
|
2% |
|
$ |
876 |
|
|
$ |
2,600 |
|
|
-1% |
|
-1% |
|
$ |
2,636 |
|
Fiscal Third Quarter 2025 Compared to Fiscal Third Quarter 2024 : Interest expense increased in the third quarter of fiscal 2025, relative to the corresponding prior year period, primarily due to the issuance of $14.0 billion of senior notes in the first nine months of fiscal 2025, partially offset by lower interest expense due to scheduled repayments of borrowings made during the first nine months of fiscal 2025 and full year of fiscal 2024.
First Nine Months Fiscal 2025 Compared to First Nine Months Fiscal 2024 : Interest expense decreased in the first nine months of fiscal 2025, relative to the corresponding prior year period, primarily due to scheduled repayments of borrowings made during the first nine months of fiscal 2025 and full year of fiscal 2024, respectively, partially offset by higher interest expense that resulted from the issuance of senior notes mentioned above. Refer to Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information on the senior notes issued in the first nine months of fiscal 2025.
Non-Operating (Expenses) Income, net : Non-operating (expenses) income, net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan), net losses related to marketable and non-marketable investments, including losses attributable to equity method investments (primarily Ampere) and net other income and expenses, including net unrealized gains and losses from our investment portfolio related to our deferred compensation plan and non-service net periodic pension income and losses.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Interest income |
|
$ |
135 |
|
|
22% |
|
23% |
|
$ |
111 |
|
|
$ |
418 |
|
|
10% |
|
10% |
|
$ |
380 |
|
|
Foreign currency losses, net |
|
|
(37 |
) |
|
-38% |
|
-38% |
|
|
(59 |
) |
|
|
(96 |
) |
|
-44% |
|
-46% |
|
|
(172 |
) |
|
Noncontrolling interests in income |
|
|
(48 |
) |
|
-7% |
|
-7% |
|
|
(51 |
) |
|
|
(138 |
) |
|
7% |
|
7% |
|
|
(130 |
) |
|
Losses from marketable and non-marketable investments, net |
|
|
(59 |
) |
|
-36% |
|
-36% |
|
|
(94 |
) |
|
|
(236 |
) |
|
-19% |
|
-19% |
|
|
(290 |
) |
|
Other (expenses) income, net |
|
|
(9 |
) |
|
* |
|
* |
|
|
84 |
|
|
|
91 |
|
|
-35% |
|
-35% |
|
|
140 |
|
|
Total non-operating (expenses) income, net |
|
$ |
(18 |
) |
|
101% |
|
91% |
|
$ |
(9 |
) |
|
$ |
39 |
|
|
* |
|
* |
|
$ |
(72 |
) |
|
* |
Not meaningful |
Fiscal Third Quarter 2025 Compared to Fiscal Third Quarter 2024 : Our non-operating expenses, net increased by $9 million in reported currency in the third quarter of fiscal 2025, relative to the corresponding prior year period, primarily due to an increase in other expenses, net. The increase in other expenses was primarily attributable to
35
losses in the third quarter of fiscal 2025, compared to gains in the third quarter of fiscal 2024, associated with an investment portfolio that we held for our employee deferred compensation plan, and for which an equal and offsetting amount was recorded to our operating expenses during the same period. This increase was partially offset by a $35 million decrease in losses from marketable and non-marketable investments, a $24 million increase in interest income and a $22 million decrease in foreign currency losses.
First Nine Months Fiscal 2025 Compared to First Nine Months Fiscal 2024 : Our non-operating income, net increased by $111 million in reported currency in the first nine months of fiscal 2025, relative to the corresponding prior year period, primarily due to a $76 million decrease in foreign currency losses, a $54 million decrease in losses from marketable and non-marketable investments and a $38 million increase in interest income. These increases were partially offset by a $49 million decrease in other income, net, which was primarily attributable to lower gains associated with an investment portfolio that we held for our employee deferred compensation plan as discussed above.
Provision for Income Taxes : Our effective income tax rates for each of the periods presented were the result of the mix of income earned and losses incurred in various tax jurisdictions that apply a broad range of income tax rates. Refer to Note 7 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a discussion regarding the differences between the effective income tax rates as presented for the periods below and the U.S. federal statutory income tax rates that were in effect during these periods. Future effective tax rates could be adversely affected by an unfavorable shift of earnings weighted to jurisdictions with higher tax rates, by unfavorable changes in tax laws and regulations, by adverse rulings in tax related litigation, or by shortfalls in stock-based compensation realized by employees relative to stock-based compensation that was recorded for book purposes, among others.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||
|
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
|
February 28, |
|
|
Percent Change |
|
February 29, |
|
||||||||
|
(Dollars in millions) |
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
|
2025 |
|
|
Actual |
|
Constant |
|
2024 |
|
||||
|
Provision for income taxes |
|
$ |
512 |
|
|
10% |
|
15% |
|
$ |
464 |
|
|
$ |
992 |
|
|
56% |
|
59% |
|
$ |
636 |
|
|
Effective tax rate |
|
14.9% |
|
|
|
|
|
|
16.2% |
|
|
9.9% |
|
|
|
|
|
|
8.0% |
|
||||
Fiscal Third Quarter 2025 Compared to Fiscal Third Quarter 2024 : Provision for income taxes increased during the third quarter of fiscal 2025, relative to the corresponding prior year period, primarily due to the absence of the realization of a one-time tax attribute of $197 million, higher income before provision for income taxes of $95 million and an unfavorable jurisdictional mix of $51 million, partially offset by the absence of changes in unrecognized tax benefits of $154 million and an increase in tax benefits related to stock-based compensation of $143 million.
First Nine Months Fiscal 2025 Compared to First Nine Months Fiscal 2024 : Provision for income taxes increased during the first nine months of fiscal 2025, relative to the corresponding prior year period, primarily due to an unfavorable jurisdictional mix of earnings of $365 million, the absence of the realization of a one-time tax attribute of $247 million, higher income before provision for income taxes of $133 million and the absence of the revaluation benefit of net deferred tax assets due to a change in tax rate of $105 million, partially offset by an increase in tax benefits related to stock-based compensation of $311 million and the absence of changes in unrecognized tax benefits of $207 million.
Liquidity and Capital Resources
|
(Dollars in millions) |
|
February 28,
|
|
|
Change |
|
May 31,
|
|
||
|
Working capital |
|
$ |
493 |
|
|
* |
|
$ |
(8,990 |
) |
|
Cash, cash equivalents and marketable securities |
|
$ |
17,823 |
|
|
67% |
|
$ |
10,661 |
|
|
* |
Not meaningful |
36
Working capital : The increase in working capital as of February 28, 2025 in comparison to May 31, 2024 was primarily due to favorable impacts to our net current assets resulting from net income and proceeds from the issuance of senior notes, net of issuance costs, of $13.9 billion (refer to Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information) during the first nine months of fiscal 2025, partially offset by $12.1 billion of cash used for capital expenditures, $3.3 billion of cash used to pay dividends to our stockholders, €750 million and $1.0 billion of long-term senior notes that were reclassified to current liabilities, $450 million of cash used for repurchases of our common stock, $380 million of net cash used for our employee stock programs and $178 million of cash used for purchases, net of sales and maturities of non-current investments during the first nine months of fiscal 2025. Our working capital may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.
Cash, cash equivalents and marketable securities : Cash and cash equivalents primarily consist of deposits held at major banks, money market funds and other securities with original maturities of 90 days or less. Marketable securities consist primarily of time deposits with original maturities at the time of purchase greater than 90 days. The increase in cash, cash equivalents and marketable securities as of February 28, 2025 in comparison to May 31, 2024 was primarily due to cash inflows from our operations and proceeds from the issuance of senior notes, net of issuance costs, of $13.9 billion during the first nine months of fiscal 2025. This increase was partially offset by $12.1 billion of cash used for capital expenditures, $4.5 billion of cash used for scheduled repayments of borrowings and commercial paper notes, $3.3 billion of cash used to pay dividends to our stockholders, $450 million of cash used for repurchases of our common stock, $380 million of net cash used for our employee stock programs and $169 million of cash used for purchases, net of sales and maturities of non-marketable investments during the first nine months of fiscal 2025. Our cash and cash equivalents may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.
|
|
|
Nine Months Ended |
|
|||||||
|
(Dollars in millions) |
|
February 28,
|
|
|
Change |
|
February 29,
|
|
||
|
Net cash provided by operating activities |
|
$ |
14,664 |
|
|
16% |
|
$ |
12,592 |
|
|
Net cash used for investing activities |
|
$ |
(12,529 |
) |
|
173% |
|
$ |
(4,594 |
) |
|
Net cash provided by (used for) financing activities |
|
$ |
4,912 |
|
|
* |
|
$ |
(8,280 |
) |
|
* |
Not meaningful |
Cash flows from operating activities : Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their cloud services and license support agreements. Customers for these cloud services and license support agreements are generally billed in advance of services being provided. Over the course of a fiscal year, we also generate cash from the sales of new licenses, hardware offerings and other services. Our primary uses of cash from operating activities are typically for employee related expenditures, material and manufacturing costs related to the production of our hardware products, taxes, interest payments and leased facilities.
Net cash provided by operating activities increased by $2.1 billion in the first nine months of fiscal 2025, relative to the first nine months of fiscal 2024, primarily due to higher net income adjusted for certain non-cash charges, partially offset by certain cash unfavorable working capital changes, net.
Cash flows from investing activities : The changes in cash flows from investing activities primarily relate to our investments in capital assets primarily to support the growth in our cloud and license business and acquisitions, purchases, maturities and sales of our investments in marketable securities and other instruments.
Net cash used for investing activities increased by $7.9 billion in the first nine months of fiscal 2025, relative to the first nine months of fiscal 2024, primarily due to the increase in capital expenditures.
Cash flows from financing activities : The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments, stock repurchases, dividend payments and net proceeds related to employee stock programs.
Net cash provided by financing activities was $4.9 billion in the first nine months of fiscal 2025 compared to the net cash used for financing activities of $8.3 billion in the first nine months of fiscal 2024. The increase in net cash provided by financing activities was primarily due to proceeds from the issuance of senior notes, net of issuance
37
costs, of $13.9 billion, lower net cash used for our employee stock programs of $1.0 billion and lower net cash used for repurchases of common stock of $600 million, partially offset by higher repayments of commercial paper notes of $1.3 billion, net of issuances, higher scheduled repayments of borrowings of $641 million and higher net cash used for other activities of $384 million, in each case in the first nine months of fiscal 2025 relative to the first nine months of fiscal 2024. Further, during the first nine months of fiscal 2025, we refinanced our Term Loan Credit Agreement (defined below), which resulted in no net impact on financing cash flows for the periods reported.
Free cash flow : To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter basis to analyze cash flows generated from our operations. We believe that free cash flow is also useful as one of the bases for comparing our performance with that of our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity. We calculate free cash flow as follows:
|
|
|
Trailing 4-Quarters Ended |
|
|||||||
|
(Dollars in millions) |
|
February 28,
|
|
|
Change |
|
February 29,
|
|
||
|
Net cash provided by operating activities |
|
$ |
20,745 |
|
|
14% |
|
$ |
18,239 |
|
|
Capital expenditures |
|
|
(14,933 |
) |
|
150% |
|
|
(5,981 |
) |
|
Free cash flow |
|
$ |
5,812 |
|
|
-53% |
|
$ |
12,258 |
|
|
Net income |
|
$ |
12,160 |
|
|
|
|
$ |
10,642 |
|
|
Net cash provided by operating activities as a percent of net income |
|
171% |
|
|
|
|
171% |
|
||
|
Free cash flow as percent of net income |
|
48% |
|
|
|
|
115% |
|
||
Recent Financing Activities :
Cash Dividends : In March 2025, our Board of Directors declared a quarterly cash dividend of $0.50 per share of our outstanding common stock, an increase of $0.10 per share over the dividend declared in December 2024. The dividend is payable on April 23, 2025 to stockholders of record as of the close of business on April 10, 2025. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.
Term Loan Credit Agreements : On June 10, 2024, we terminated our term loan credit agreement that we entered into in fiscal 2023 and repaid the principal amount outstanding together with interest accrued up to the date of repayment. Simultaneously, we borrowed up to the maximum commitment amount of $5.6 billion pursuant to a term loan credit agreement (Term Loan Credit Agreement) executed on the same date. Any remaining unpaid principal balance under the Term Loan Credit Agreement will become fully due and payable on August 16, 2027, unless the termination date of Term Loan Credit Agreement is extended. Refer to Note 7 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for additional details about our borrowings.
Senior Notes : During the first nine months of fiscal 2025, we issued $14.0 billion of senior notes comprised of the following:
•
$500 million of floating rate notes due August 2028;
•
$1.5 billion of 4.80% senior notes due August 2028;
•
$1.5 billion of 4.20% senior notes due September 2029;
•
$1.25 billion of 5.25% senior notes due February 2032;
•
$1.75 billion of 4.70% senior notes due September 2034;
•
$1.75 billion of 5.50% senior notes due August 2035;
•
$1.75 billion of 5.375% senior notes due September 2054;
•
$1.75 billion of 6.00% senior notes due August 2055;
•
$1.25 billion of 5.50% senior notes due September 2064; and
38
•
$1.0 billion of 6.125% senior notes due August 2065.
We issued the senior notes to repay all or a portion of senior notes due between November 2024 and July 2026, and to pay accrued interest and any related premiums, fees and expenses in connection therewith; to make scheduled payments of principal and interest on borrowings under our Term Loan Credit Agreement; to repay all or a portion of commercial paper notes outstanding; and to use any remaining net proceeds from the borrowing for general corporate purposes, which may include stock repurchases, payment of cash dividends on our common stock, repayment of other indebtedness and future acquisitions. Refer to Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information.
Contractual Obligations : During the first nine months of fiscal 2025, there were no significant changes to our estimates of future payments under our fixed contractual obligations and commitments as presented in Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, other than an increase in our lease commitments as of February 28, 2025. Refer to Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and Note 10 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for more information about our lease commitments. Additionally, as discussed above, we issued a total of $14.0 billion of senior notes in the first nine months of fiscal 2025 with various maturity dates.
We believe that our current cash, cash equivalents and marketable securities balances, cash generated from operations, and our borrowing arrangements will be sufficient to meet our working capital, capital expenditures and contractual obligations requirements. In addition, we believe that we could fund our future acquisitions, dividend payments and repurchases of common stock or debt with our internally available cash, cash equivalents and marketable securities, cash generated from operations, additional borrowings or from the issuance of additional securities.
Stock-Based Awards
Our stock-based compensation program is a key component of the compensation package we provide to attract and retain certain of our talented employees and align their interests with the interests of existing stockholders.
We recognize that stock-based awards dilute existing stockholders and have sought to control the number of stock-based awards granted while providing competitive compensation packages. Consistent with these dual goals, our cumulative potential dilution since June 1, 2021 has been an annualized rate of 1.7% per year. The potential dilution percentage is calculated as the average annualized new stock-based awards granted and assumed, net of stock-based awards forfeited by employees leaving the company, divided by the weighted-average outstanding shares during the calculation period. This maximum potential dilution will only result if all stock-based awards vest and, if applicable, are exercised. Of the outstanding stock options as of February 28, 2025, which generally have a ten-year exercise period, all have exercise prices lower than the market price of our common stock on such date. In recent years, our stock repurchase program has substantially offset the dilutive effect of our stock-based compensation program. However, we may modify the levels of our stock repurchases in the future depending on a number of factors, including the amount of cash we have available for acquisitions, to pay dividends, to repay or repurchase indebtedness or for other purposes. As of February 28, 2025, the maximum potential dilution from all outstanding stock-based awards, regardless of when granted and regardless of whether vested or unvested, was 5.8%.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements, and the impact of these pronouncements on our consolidated financial statements, see Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.
39
Item 3. Quantitative and Qualitat ive Disclosures About Market Risk
There were no significant changes to our quantitative and qualitative disclosures about market risk during the first nine months of fiscal 2025. Please refer to Part II, Item 7A Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for a more complete discussion of the market risks we encounter.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures: Based on our management’s evaluation (with the participation of our Principal Executive and Financial Officer), as of the end of the period covered by this Quarterly Report, our Principal Executive and Financial Officer has concluded that our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission (the SEC)’s rules and forms and is accumulated and communicated to our management (including our Principal Executive and Financial Officer) as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting: There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls: Our management, including our Principal Executive and Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
40
PART II. OTHE R INFORMATION
Item 1. Legal Proceedings
The material set forth in Note 7 (pertaining to information regarding contingencies related to our income taxes) and Note 10 (pertaining to information regarding legal contingencies) of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report is incorporated herein by reference.
Item 1A. Ri sk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024. The risks discussed in our Annual Report on Form 10-K could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially and adversely affect our business, financial condition or operating results in the future.
Item 2. Unregistered Sales of Equ ity Securities and Use of Proceeds
Our Board of Directors has approved a program for us to repurchase shares of our common stock. As of February 28, 2025, approximately $6.5 billion remained available for stock repurchases pursuant to our stock repurchase program.
Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchases of our debt, our stock price, and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 trading plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.
The following table summarizes the stock repurchase activity for the three months ended February 28, 2025 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:
|
(in millions, except per share amounts) |
|
Total Number of
|
|
|
Average Price
|
|
|
Total Number of
|
|
|
Approximate Dollar
|
|
||||
|
December 1, 2024—December 31, 2024 |
|
|
0.3 |
|
|
$ |
175.32 |
|
|
|
0.3 |
|
|
$ |
6,610.6 |
|
|
January 1, 2025—January 31, 2025 |
|
|
0.2 |
|
|
$ |
164.41 |
|
|
|
0.2 |
|
|
$ |
6,571.9 |
|
|
February 1, 2025—February 28, 2025 |
|
|
0.4 |
|
|
$ |
172.55 |
|
|
|
0.4 |
|
|
$ |
6,512.3 |
|
|
Total |
|
|
0.9 |
|
|
$ |
171.29 |
|
|
|
0.9 |
|
|
|
|
|
41
Item 5. Other Information
Rule 10b5-1 Trading Plans
Our Section 16 officers and directors (as defined in Rule 16a-1 under the Exchange Act) may from time to time enter into plans for the purchase or sale of Oracle stock that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. During the quarter ended February 28, 2025, the following Section 16 officer adopted, modified or terminated “Rule 10b5-1 trading arrangements” (as defined in Item 408 under Regulation S-K of the Exchange Act):
•
Jeffrey O. Henley
, our
Vice Chairman of the Board of Directors
,
adopted
a new trading plan on
December 31, 2024
. Mr. Henley’s plan is
, subject to early termination for certain specified events set forth therein. The trading plan is intended to permit Mr. Henley to exercise and sell
400,000
stock options expiring on
July 2, 2025
.
The Rule 10b5-1 trading arrangement described above was adopted and precleared in accordance with Oracle’s Insider Trading Policy and actual sale transactions made pursuant to such trading arrangements will be disclosed publicly in future Section 16 filings with the SEC.
42
Item 6. Exhibits
|
Exhibit No. |
|
|
|
Incorporated by Reference |
|||||||||||||||||
|
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed By |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
3.01 |
|
|
8-K 12G3 |
|
000-51788 |
|
3.1 |
|
2/6/06 |
|
Oracle Corporation |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
3.02 |
|
|
8-K |
|
001-35992 |
|
3.02 |
|
11/17/23 |
|
Oracle Corporation |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
4.01 |
|
|
8-K |
|
001-35992 |
|
4.1 |
|
2/3/25 |
|
Oracle Corporation |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
31.01‡ |
|
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive and Financial Officer |
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
32.01† |
|
Section 1350 Certification of Principal Executive and Financial Officer |
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
101‡ |
|
Interactive Data Files Pursuant to Rule 405 of Regulation S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of February 28, 2025 and May 31, 2024, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended February 28, 2025 and February 29, 2024, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended February 28, 2025 and February 29, 2024, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended February 28, 2025 and February 29, 2024, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended February 28, 2025 and February 29, 2024 and (vi) Notes to Condensed Consolidated Financial Statements |
|
|
|
|
|
|
|
|
|
|
|||||||||
43
|
Exhibit No. |
|
|
|
Incorporated by Reference |
||||||||
|
|
Exhibit Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed By |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104‡ |
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2025, formatted in Inline XBRL and included in Exhibit 101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
‡ |
Filed herewith. |
|
† |
Furnished herewith. |
44
SIGNAT URES
Pursuant to the requirements of the Securities Exchange Act of 1934, Oracle Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
ORACLE CORPORATION |
||
|
|
|
|
||
|
Date: March 11, 2025 |
|
By: |
|
/s/ Safra A. Catz |
|
|
|
|
|
Safra A. Catz Chief Executive Officer and Director (Principal Executive and Financial Officer) |
|
|
|
|
|
|
|
Date: March 11, 2025 |
|
By: |
|
/s/ Maria Smith |
|
|
|
|
|
Maria Smith |
|
|
|
|
|
Executive Vice President, Chief Accounting Officer (Principal Accounting Officer) |
45