Oracle Q4 FY26 Earnings Call | $ORCL | 🔴 WATCH LIVE

Thanks, Mike. Okay, you just heard from Mike about our applications and database businesses. Oracle has been in these businesses for decades, and they continue to impress us because of their ability to continually grow aggregate margin dollars through a combination of durable differentiation and increasing market size. I want to share how we see our infrastructure business in that same category and the evidence that enforces that belief. Okay. Differentiation comes in many forms. Technological innovation, supply chain execution, operational ability and more. We created OCI as the most highly secure, highest performance, most flexible, lowest cost infrastructure available anywhere. We deliver that through innovation across all layers from deploying the smallest and the largest clouds to inventing technologies like Acceleron that provide the highest performance and lowest cost networks. We combine the power of OCI and Fusion applications to implement an incredibly efficient and flexible supply chain. We architect across data center design, power distribution, data hall layout and networking to deliver the most efficient and the most flexible infrastructure available anywhere. Oracle has a long track record of durable differentiation. This is because we know the real differentiator is the organization, the people, the company itself that can adapt to new requirements, invent solutions, and deliver them to customers rapidly. OCI has been the fastest growing cloud provider for years. And now with AI infrastructure, we've shown to everyone the power of the organization we've built, the technology we've created, and the value we're delivering to customers. OCI is continually releasing new services, hardware, networks, and cloud regions to ensure we are always the best place for our customers infrastructure workloads. Cloud infrastructure has become a very large market because of the ever growing demand for server side computing. AI infrastructure makes the existing cloud infrastructure market look small. Everything we see shows this market size is trillions of dollars per year. Combined with our previously outlined 30 to 40% margin profile, OCI should grow into an extremely large and extremely profitable business. These beliefs are supported by compelling and multiplying amounts of evidence. We signed 67 billion in AI infrastructure contract this quarter, the majority of which was either bring your own hardware or prepaid. This increases our combination of bring your own hardware or prepaid customer contracts $75 billion with those contracts having no degradation in margin compared to our other contracts. Customers are showing that they chose OCI to deliver their infrastructure even when they are bringing the capital themselves. Design, delivery, and operation of this large-scale infrastructure is extremely demanding. Q4 finalizes an impressive FY26 where we delivered more than 1.2 gigawatt to customers. Our pace of delivery continues to accelerate with our FY27 Q1 delivery approaching 1 gigawatt, nearly the same capacity as we've delivered in the previous four quarters combined. There will be many winners in AI and our strategy is to have them all as customers. We continue to diversify across our largest customers with four customers contracting for more than 8 billion this quarter. Our infrastructure is fundamentally multi-tenant and we continually allocate capacity between customers. In Q4, 35,000 GPUs from 59 separate customers were up for renewing. 49% of those customers renewed for 92% of those GPUs. That doesn't mean though that 8% of those GPUs are idle. Most of those GPUs themselves were subsequently sold to other customers in the same quarter. Our global GPU utilization rate is 97.5%. It's also clear that AI is here to stay. AI is delivering value on multiple fronts, but the most clear and obvious is agentic coding. This is an area where we have a front row seat as both the provider and the consumer. Agent coding tools has completely changed how Oracle operates and we've seen no slowdown in our own demand for such capabilities. The same is true for all the customers and partners we work with. The demand for AI infrastructure in this domain alone is enormous ignoring the many many other growth areas. Okay. Now before I end, let's look at a summary of our five largest sites and the significant progress we're seeing across all of them. To begin, let's look at Abalene, Texas.

Sure. Yeah. Good question, John. Good to talk to you again as always. Look, I'll answer that in two parts. In terms of the capital expenditures, at least from what we're seeing in Q4, any increase in capex is not due to component prices from our perspective, that's largely around timing. Right, I mean, part of my job is to figure out ways to actually accelerate capex. You know, Hillary has a tough life. My job is to try to spend the money a little bit faster so I can get ramp revenue sometimes. So I don't see that as related to component prices. Now talking about component prices in general, look, I think everyone knows that memory prices have definitely gone up, SSD prices, hard drive prices, etc. So, one of the things that we do, John, is it's actually quite simple. When we're selling stuff at a time period where we have certainty, whether that be certainty because the capacity is already deployed, or we have certainty because we have locked prices across the spectrum, whether it be space and power costs, energy costs, people costs, component costs. When we know those costs, we will then do fixed price contracts. times that we don't know those costs because it's out too far in the future or we have too much supply chain risk whether that be due to just the way the world works or a lack of things being locked in. We then do not do fixed price contracts with our customers and we have a mechanism whereby those costs end up being floated. So you know, I don't like it when costs go up. Our customers don't like it when costs go up and honestly I don't think our suppliers do. I think they'd love to be able to deal with everything we want. But when the costs do go up, we have a very robust set of mechanisms that ensure that Oracle is not sitting there with reduced margins.

Yeah, thanks Mark. Look, I think that first I think it's very important that we stay focused on customers. So the nice thing is that I think whether you see it from existing RPO or increased contracts that we're getting. Yes, there's a lot of things happening in the market, but we have a large diverse set of customers, both very large and also smaller customers. And what I spend all of my time doing is I wake up every day and I go, how do I make sure those customers are as happy as possible with us? And that's, you know, when I shared the numbers, for example, in my prepared remarks about the extremely high utilization rate, even when things come back for renewal, they're instantly snapped up. Those are all indicators that we have great customer relationships. They're happy with the products and they're very satisfied with the prices that we're charging for them. Look, I think there's going to be a lot of people who enter the space. I think there's clearly...

Yeah. So I'll start and hand it to Hillary. Look, I would like to tell you that we know all about how things are going to change in the future. I can't say that today. The reality is that what's driving the mix change is an evolving business model. You have a lot of different types of accelerators, you have a lot of different customers, you have a lot of different business arrangements. And so ultimately one of the things that Oracle can provide to our customers is that we can go out and put upfront capital and then depreciate that over a period of time and help finance the customer's uses of that, but that's not the only thing we provide. And for a lot of customers, it's not even the most important thing that we provide. What they contract with us for is the ability to go out and get these data centers constructed, design them properly, secure them, design networks that go inside of them, install a cloud, give the complimentary set of services around the specific hardware because it turns out that a set of these accelerators on their own is not a functioning cloud. You need general purpose compute, you need general purpose storage, you need load balancers, you need security functions, you need identities, you need all of that to actually make this stuff usable and Oracle provides all of that. And then anyone that thinks that these things are easy to operate is very confused. You're not just buying a single rack and putting it into your data hall. These are extremely complex clusters that require constant care and feeding, constant maintenance across the network and the hardware itself. And so when you add all that together, I think that what you're seeing is that you've got different entrants in the market around accelerators that are helping customers find ways to procure their accelerators. And you've got different customers who have different ways of thinking about that. And so I can't tell you exactly the mixture of when we do bring your own hardware versus when we do prepaid versus when we bring the capital. But what I can say is that I think you'll continue to see innovation and evolution in this model given the rapid changes that are happening across this entire ecosystem.