$ORCL Oracle Corporation Q4 2025 Earnings Conference Call

Thanks, Ken. And good afternoon, everyone. As you can see, we had an excellent fourth quarter to finish out an amazing year with Q4 total revenue and EPS both exceeding my guidance. We are reporting our fiscal year-end results just 11 days after the last day of the quarter. Using Oracle Fusion, we continue to announce our quarterly and annual financial results faster than any other company in the S&P 500. Now, a few years ago, I told you that we'd reached a tipping point in our cloud transition and expected revenue growth to accelerate. And it has. In Q4, we hit double-digit revenue growth and it's only going up from here. Even as the company gets bigger, our remaining performance obligations now stand at 138 billion, up 8 billion from last quarter and up 41% from last year. And yet the best is still to come. Our applications business was the first area we moved to the cloud more than a decade ago and we are now the leader in enterprise back office with SaaS solutions for ERP, financials, EPM, HCM, supply chain, and manufacturing with the addition of over 100 AI agents along with strong bookings and higher renewal rates for our strategic SaaS products. I expect the cloud applications growth rate will accelerate this coming year. Our infrastructure business was the next area to move to the cloud. We made engineering decisions that were much different from the other hyperscalers and that were better suited to the needs of enterprise customers resulting in lower costs to them and giving them deployment flexibility. OCI has seen exceptional demand for infrastructure services and those contracted non-cancellable bookings in RPO give us confidence that OCI revenue will grow over 70% this current year. Included in that is the Oracle autonomous database and the AI data platform. Enterprises know that their AI needs demand the most capable database to manage a company's full data set. Further, with our AI and autonomous features, our customers can bring all their data together, make it available for LLMs, and yet have the best security built in. In addition, our customers have the flexibility to run their Oracle databases in OCI, in private clouds, or in partner clouds with our multicloud offering. But what is clear is that more customers will use the Oracle database to leverage AI. So as a result of the strength in our cloud applications and infrastructure including database services, we are raising our revenue guidance for fiscal year 26 to over 67 billion up 16% for the year. Now for the results and as usual I'll be discussing our financials using constant currency growth rates as it is how we manage the business. Total cloud revenue SaaS plus IaaS was up 27% at 6.7 billion and total cloud services and license support revenue for the quarter was 11.7 billion up 14%. IaaS revenue was 3 billion up 52% on top of the 42% growth reported last year. OCI consumption revenue was up 62% and demand continues to dramatically outstrip supply. Our infrastructure cloud services now have an annualized revenue of nearly 12 billion. Cloud database services which were up 31% now have annualized revenue of 2.6 billion. Autonomous database consumption revenue was up 47% on top of the 27% growth reported last year. As on-premise databases migrate to the cloud either on OCI directly or through our database at cloud services with Azure, Google, or AWS, we expect that cloud database revenues collectively will be the third driver of revenue growth alongside OCI and strategic SaaS. We are currently live in 23 cloud regions with database at cloud services and have another 47 planned. Database subscription revenues which include database license support were up 7%. Infrastructure subscription revenues in the quarter which includes license support were 6.7 billion up 19%. SaaS revenue was 3.7 billion up 11%. Application subscription revenues which includes support were 5 billion up 8%. Our strategic back office SaaS applications now have annualized revenues of 9.3 billion and they were up 20%. Software license revenues were up 8% to 2 billion. So all in total revenues for the quarter were 15.9 billion up 11% from last year. Operating income grew 7%. Non-GAAP EPS was $1.70 in US dollars while GAAP EPS was $1.19 in US dollars. The non-GAAP tax rate for the quarter was 19.7% which was higher than my 19% guidance for the full fiscal year. Total company revenue was 57.4 billion up 9%. Total cloud services and licensed support revenue which is entirely subscription-based and accounts for 77% of total revenue was 44 billion up 12%. Total application subscription revenue grew 7% and infrastructure subscription revenues grew 17%. Total cloud services were up 24% to 24.5 billion. IaaS or cloud infrastructure revenue was up 51% to 10.2 billion for the quarter with consumption revenue up 59% from last year. SaaS revenue was up 10% to 14.3 billion for the year. Non-GAAP EPS for the full year was $6 in USD, up 9% and the full-year operating income grew 9%. As mentioned, remaining performance obligation at the end of Q4 is now 138 billion, up 41% in USD. Further, our cloud RPO grew 56% on top of the 80% growth last year and now represents nearly 80% of total RPO and approximately 33% of total RPO is expected to be recognized as revenue over the next 12 months for the year. Operating cash flow was up 12% at 20.8 billion and free cash flow was a negative 400 million with 21.2 billion of capex. Operating cash flow for Q4 was 6.2 billion while free cash flow was a negative 2.9 billion with capex of 9.1. The vast majority of our capex investments are for revenue generating equipment that is going into data centers and not for land or buildings. I expect that FY26 capex will be higher at over 25 billion as we work to meet demand from our backlog as we bring more capacity online. Our revenue and profit growth will further accelerate. At quarter end, we had 11.2 billion in cash and marketable securities. The short-term deferred revenue balance was 9.4 billion. We are committed to returning value to our shareholders through technical innovations, strategic acquisitions, stock repurchases, prudent use of debt, and a dividend. This quarter we repurchased a little over a million shares for a total of 150 million. And over the last 10 years, we've reduced shares outstanding by more than a third at an average share price of just over $54. In addition, we have paid out dividends of 4.7 billion over the last 12 months, and the board of directors again declared a quarterly dividend of 50 cents per share. Since it's the beginning of FY26, I'd like to comment on the financial acceleration we expect to see in the coming years. Between our 138 billion RPO and even larger pipeline, we have a clear line of sight to future revenue growth. So for fiscal year 2026, I expect that total cloud revenue will grow over 40% in constant currency, up from 24% in FY25. I expect that cloud infrastructure revenue will grow over 70% up from 51% in FY25. I expect total revenue will be at least 67 billion up 16% in constant currency and up more than a billion from our prior guidance. RPO is likely to grow more than 100% in fiscal 26. And lastly, I expect we will exceed the revenue growth target we previously provided for FY27. Beyond FY27, I am even more confident in our ability to meet and likely exceed our previously provided FY29 targets. We will provide a more wholesome update on our long range financial targets at the financial analyst meeting at Oracle CloudWorld in Las Vegas in October. Now, let me turn to my guidance for Q1, which I'll review on a non-GAAP basis. Now assuming currency exchange rates remain the same as they are now, currency should have a 2% positive effect on EPS and a flat to 1% positive effect on revenue depending on rounding. However, of course, the actual currency impact may be different. Total revenues are expected to grow from 11 to 13% in constant currency or expected to grow from 12 to 14% in US dollars. Total cloud revenue is expected to grow from 26 to 30% in constant currency and US dollars. Non-GAAP EPS is expected to grow between 4 to 6% and be between $1.44 and $1.48 in constant currency. Non-GAAP EPS is expected to grow between 5 to 7% and be between $1.46 and $1.50 in USD. Lastly, my EPS guidance assumes a base tax rate of 19%. However, one-time tax events could cause actual tax rates to vary. We had a great year, and this year, the one we're in now, will be better. Oracle is well on its way to being not only the world's largest cloud application company, but also one of the world's largest cloud infrastructure companies. And with that, I'll turn it over to Larry for his comments.

Thank you, Larry. Before we go to the Q&A, just to repeat one number. FY25 cloud infrastructure revenue was up 51% to 10.2 billion for the year with consumption revenue up 59% from last year. Sarah, if you could please pull the audience for questions. Thank you.

Thanks, John. And yeah, we have known each other a very long time, longer than I care to admit. So the reality is that Stargate is still in formation. The work, there are a lot of partnerships we are in the middle of right now that are all part of this enormous growth rate. We are the destination for everyone who wants AI workloads, who want database workloads, and want applications. We are really, and all of that together comes into our RPO. We have so much in pipeline right now and of course we have so much in RPO meaning those are non-cancellable contracts and we see the demand. I am still in a position where our supply is not meeting our demands. We actually currently are still waving off customers or scheduling them out into the future so that we have enough supply to meet demand. This is a situation that we have not seen in our history and the numbers themselves are so enormous and the reason is because our technology is different. As Larry has said on previous calls, the cloud we built runs faster and has more capabilities than our competitors and that are built for enormous amounts of data. And so we are very much the destination of choice. As Stargate forms that will contribute into all of this. But some of our partners, many of our partners, some of them will be in Stargate, some are outside of Stargate. We really are working with many companies right now and have enormous pipeline as a result.

Well, I mean Stargate is not formed yet, but some of our business with OpenAI, which is one of our partners in Stargate, is part of our future very much so.

Correct.

Okay. So, let me start and let Larry make it perfect. The reality is that as I mentioned on the call, our capex is usually about equipment. We're not, we have building partners who charge us rent once they've finished constructing things. And when we all of a sudden have higher capex, it means we are filling out data centers and we are buying components to build our computers which are different than other people's and we are putting them on the floor. We had an opportunity to buy up for deployment and so we did and we are putting out as much capacity as we possibly can as quickly as we can. I do believe that the 25 billion next year may turn out to be understated. So, it is all to meet demand. We don't order, we don't build unless we've got orders for our capacity to be built out. And we have so much in orders right now that I actually expect, I believe I said on the call over 25 billion this next quarter. And that is again to match demand.

Thanks a lot, Larry. People are calling up and asking us, 'Please, can you find us more capacity? We'll take it wherever.' Oh, wait, it's in Malaysia. We'll take it there. Fine. We'll take it there. You got some wherever.

No. Not right now. No.

Okay, let me just start. So first of all, the database business is really healthy, really growing. In fact, you even see it in the number that I think folks didn't think was possible, which is in license. You should understand that when our customers are buying more licenses, that actually means often that they want to use the bring your own license pricing to go to the cloud. So database support is solid. License is up. All the cloud metrics, autonomous consumption, Oracle cloud, all of multicloud is basically using up all capacity that gets put out there. So the Oracle database is on fire and it is only the beginning. I want to remind you what a significant and large business it is and the bulk of it is still on premise. As Larry said, now that you can have it in any of the clouds you like, with the database at Oracle, in all the other clouds also beyond just OCI or you can deploy it at clouded customer. Another place where the numbers are enormous in growth rates. So consumption going way up, more licensing, more bookings and a lot of demand. And the database side of the world for all the reasons Larry said is a superb business and extremely compelling especially to the extent you want to leverage artificial intelligence.

Yeah. Thanks. Thanks, Larry and Siti.

Sure. Tariffs have no impact really at all to play in this. What it does allow our customers to do is do what I do when I announce on day 11 is to be much better run and have a better idea of where their business is and how it's doing and to do more and spend a lot less. What you're seeing now and it hasn't been obvious in the numbers because as you know we have our strategic SaaS products and we break that down for you in the release to some extent and those are going gangbusters. And we've had other things in the numbers that have made you not be able to really see, we have some non-strategic products and in addition we've also had an advertising business which we are now lapping. I've stopped even mentioning it because what's the difference, a few hundred million. But the reality is what you're starting to see is our strategic SaaS products as they roll out in our customer sites and as they ramp up they're very, very popular. They're obviously compelling because only if you're in the cloud can you use the AI capabilities. See many customers are still on on-premise ERP products. Those can't really use the advanced agentic and AI capabilities. So if you want to use that and many do for automation and to do more spend less, you've got to move to Fusion or NetSuite and those are just very, very compelling and it's just now starting to show through the noise.

Who's closest?

Thank you, Larry, Ben, and Brad. A telephonic replay of this conference call will be available for 24 hours on our investor relations website. Thank you for joining us today. And with that, I'll turn the call back to Sarah for closing.