ORCL (ORCL)

“We gave guidance in the past that we see gross margin in the 30% to 40% range on that. That continues to hold for us.”

“We will exit Q4 with 22 AWS regions live.”

“Greater than 90% of that capacity is fully funded through our partners, with the remainder planned to finish this month.”

“So when you combine those things together, we are extremely confident in both the capacity we delivered and the continuing increase in profitability of our AI business.”

“So when you combine all of these pieces together, the overall margin profile of OCI continues to strengthen and grows rapidly.”

“Underlying that is we remain committed to what we talked about last quarter, which is maintaining the investment-grade rating at Oracle Corporation as well as staying within the financing envelope that we talked about, of which we have announced that we are doing $50 billion this calendar year of that total.”

“We are overdelivering on FY26 revenue and earnings, and we are constantly raising our FY27 forecast.”

“Through our partners, we have secured more than 10 gigawatts of power and data capacity coming online over the next three years.”

“We plan, in our Fusion accounting system, for example, we will have a complex agent that does something called the close. So when you close your books with Fusion in the not-too-distant future, it will be an autonomous agent—no human beings involved.”

“Second, in February, we announced our intent to raise up to $50 billion in debt and equity financing along with the statement that we do not expect to issue any additional bonds beyond this amount in calendar year 2026.”

“Looking ahead, we're executing well on a big and growing pipeline and I expect revenue and earnings growth to accelerate off an even larger base.”

“The cloud application deferred revenue is up 14%. That is higher than the cloud apps revenue growth of 11% just to reinforce my earlier statements, that we expect continued apps growth acceleration.”

“This is very meaningful because we see this business as continuing to accelerate going forward.”

“In summary, the four segments of our business are growing at incredible rates. This will contribute to a continued acceleration in our infrastructure revenue in the coming quarters.”

“Our strategic back-office applications revenue was $2.4 billion and up 16%. We finished combining our industry-based cloud apps and our Fusion cloud apps under one selling organization in each region across the world, have been seeing increasing cross-selling synergies that are expected to drive higher cloud applications growth rates in the future.”

“We expect both our bookings and our revenue in Q3 to accelerate materially.”

“As it relates to specific guidance for Q3, total cloud revenue is expected to grow from 37% to 41% in constant currency, and is expected to grow from 40% to 44% in USD.”

“However, given the added RPO this quarter, can be monetized quickly starting next year, we now expect fiscal 2026 CapEx will be about $15 billion higher than we forecasted after Q1.”

“Our full-year FY 2026 revenue expectation of $67 billion remains unchanged.”

“For Q3, assuming currency exchange rates remain the same as they are now, currency should have a two to 3% positive effect on revenue and have a 6¢ positive effect on EPS depending on rounding.”

“That ends up very rapidly ensuring that we get to that 30 to 40% gross margin profile for all of the AI data centers.”

“As a foundational principle, we expect and are committed to maintaining our investment-grade debt rating.”

“The result is we now expect $4 billion of additional revenue in FY 2027.”

“And this is going to be one of the reasons that Oracle databases, which are still the bulk of the enterprise market by a lot, are going to finally move into the cloud.”

“For fiscal year 2026, we remain confident and committed to full-year total revenue growth of 16% in constant currency.”

“And lastly, my EPS guidance for Q2 assumes a base tax rate of 19%, however, one-time tax events could cause actual tax rates to vary as they did this quarter.”

“Non-GAAP EPS is expected to grow between 8% to 10% and be between $1.58 and $1.62 in constant currency.”

“We now expect Oracle Cloud Infrastructure will grow 77% to $18 billion this fiscal year and then increase to $32 billion, $73 billion, $114 billion, and $144 billion over the following four years.”

“Given our RPO growth, I now expect fiscal year 2026 CapEx will be around $35 billion.”

“I expect our operating income will grow mid-teens this year and higher still in FY2027.”

“But even if we do that CapEx is going to go up because the demand right now seems almost insatiable.”

“This is why our database business is going to grow dramatically.”

“As use of AI increases, so will Oracle's database market share.”

“As we bring more capacity online, our revenue and profit growth will further accelerate.”

“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 2026 to over $67 billion, up 16% for the year.”

“But what is clear is that more customers will use the Oracle database to leverage AI.”

“Total revenues are expected to grow from 11% to 13% constant currency, are expected to grow from 12% to 14% in U.S. Dollars.”

“Now assuming currency exchange rates remain the same as they are now, currency should have a $0.02 positive effect on EPS and a flat to 1% positive effect on revenues depending on rounding.”

“I expect total revenue will be at least $67 billion, up 16% in constant currency.”

“So for fiscal year 2026, I expect that total cloud revenue will grow over 40% in constant currency, up from 24% in FY 2025.”

“And approximately 33% of total RPO is expected to be recognized as revenue over the next twelve months.”

“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 driver of revenue growth alongside OCI and strategic SaaS.”

“I expect the cloud applications growth rate will accelerate this coming year.”

“Beyond FY '27, I am even more confident in our ability to meet and likely exceed our previously provided FY '29 target.”

“And lastly, I expect we will exceed the revenue growth target we previously provided for FY '27.”

“Our confidence in meeting our $66 billion revenue target for FY '26 is now stronger revenue than ever and represents around a 15% growth rate.”

“We remain very confident and committed to total cloud infrastructure revenue for fiscal year 2025 growing faster than the 50% reported last year and it will be even faster for fiscal year 2026, likely a lot faster.”

“As we bring more capacity online, our revenues will clearly accelerate.”

“But we expect this is growing extraordinarily fast, and we think we'll be able to meet most of the needs of customers that need for primary and back up around the world, certainly in the coming months.”

“But I expect that number to be extremely large. This is enormous, but I expect it actually to continue to be very large amazingly.”

“I think there are going to be lumpiness as you can see, but we actually expect some extremely significant numbers coming within the next few months also.”

“And we do expect Stargate of our first large Stargate contract fairly soon.”

“And we expect that will allow us to grow our RPO even higher in the coming quarters.”

“Let me now turn to my guidance for Q4, which I'll review on a non-GAAP basis and assuming exchange rates remain the same as they are now, currency should have a $0.01 to $0.02 negative effect on EPS and a 1% negative effect on revenue.”

“We continue to focus on operating expense discipline, which collectively continue to grow slower expense discipline. So expenses continue to grow slower than revenue, a trend that I expect will continue.”

“We expect the cloud database revenues collectively, will be the third driver of revenue growth alongside OCI and strategic SaaS.”

“Now we do expect that the component delays that have slowed cloud capacity expansion this year, should ease in Q1 FY '26. So pretty soon.”

“From a delivery standpoint, the growth of our power capacity under contract is even higher than the growth in the number of data centers and we expect that our available power capacity will double this calendar year and triple by the end of next fiscal year.”

“For fiscal year 2025, we remain very confident and committed to full year total revenue growth growing double-digit and full year total Cloud Infrastructure growing, faster than the 50% reported last year.”

“And today, we're telling you again that revenue growth will accelerate further in the coming quarters.”

“So, we expect both capacity to come online for our customers, which it is. And so it will burn down some of our RPO, but we also simultaneously expect to sign a number of very large contracts to -- that will make our RPO number go up, too.”

“So, the second half of this year is, and especially -- well, the second half, we're in it, is going to see a lot of capacity come online that we've been waiting for and that we've been working on. So, we expect that you're going to see that turning into revenues.”

“That also, though, has grown from zero to 100 million-plus run rate, already past 100 million and will be hundreds of millions probably as an exit.”

“We expect that those will continue ramp higher in the second half and be a key contributor to revenue growth acceleration this year and next.”

“Approximately 39% of the total RPO is expected to be recognized as revenue over the next 12 months, and we continue to see the growth of current RPO accelerate.”

“Given the demand that you see in our RPO numbers and the additional demand we see in our pipeline, I expect fiscal year 2025 CapEx will be double what it was in fiscal year FY '24.”

“We continue to display expense discipline, which, of course, we're known for, especially with R&D, sales and marketing, and G&A expenses, which collectively continue to grow slower than revenue, a trend that I expect to continue.”

“As on-premise databases migrate to the cloud on OCI, either directly or through our database-at-cloud services with Azure, Google, and AWS, we expect the cloud database revenues collectively will be the third leg of revenue growth alongside OCI and strategic SaaS.”

“We're going to have hundreds of those regions.”

“We think we'll be able -- the demand is really -- as the GPU clusters get bigger and faster, the critical thing is for us to be able to move the data faster. And we are investing heavily in that and we think we're going to maintain our advantage there.”

“So we think that obviously, moving with Oracle database available in AWS, Microsoft and Google is incredibly important. And Safra said it right, I mean it will absolutely accelerate database growth in the public cloud.”

“For fiscal 2025, we remain very confident and committed to full year total revenue growth growing double digits and full year total cloud infrastructure revenue growing faster than last year.”

“So we think our potential as we scale, our potential to deliver much better margins they're currently delivering are very real.”

“All these trends point to revenue growth going higher.”

“I expect the fiscal year 2025 CapEx will be double what it was in fiscal 2024.”

“We expect those cloud database revenues collectively will be the third leg of revenue growth alongside OCI and strategic SaaS.”

“Now it might be 40%, it might be 35%, but there will be huge cost savings from where we are now, and that's across the entire base of Fusion customers.”

“I believe so. And I believe, for example -- I mean I think you'd find different points of view from different engineers as we move Fusion to Autonomous Database. I think the cost savings -- our cost -- our cloud cost savings will be around 50%.”

“Beyond this fiscal year, I remain firmly committed to our fiscal year 2026 financial goals for revenue, operating margins and EPS growth.”

“Looking forward, as we continue to benefit from economies of scale in the cloud, we will not only continue to grow operating income, but we will also expand the operating margin percentages.”

“So even though we are selling quite a bit of ARR there, these are small and growing very, very fast. So the revenue in Q4 of, let's say, Azure was very small. Q1 will be 10 times as much. Q2 will be potentially 30 times as much.”

“We believe our momentum, our current momentum will continue as our pipeline is growing even faster than bookings and our win rates are going higher as well.”

“I also expect that each successive quarter should grow faster than the previous quarter as OCI capacity increases to meet demand.”

“Also, I will no longer breaking out the Cerner business in my results. And even though it will begin to grow modestly throughout the year in both revenue and operating margin, it's not necessary to break it out anymore and because it is now operating in a growth mode.”

“Gross margins will go higher as more of our cloud regions fill up.”

“Very importantly, as on-premise databases migrate to the cloud, either to OCI directly or using database at Azure or database at Google Cloud. We expect these cloud database services will be that third leg of revenue growth alongside OCI and strategic [SaaS] (ph).”

“And we are trading one-time non-recurring license revenue in return for much bigger strategic customer commitments for multi-year cloud revenue, from which we expect to further accelerate our revenue growth rates.”

“So demand is not slowing down, it's actually increasing quite a bit.”

“Looking forward, as we continue to benefit from economies of scale in the cloud and drive Cerner profitability to Oracle standards, we will not only continue to grow operating income but we will also expand the operating margin percentages.”

“And final - and I remain firmly committed to our FY '26 financial goals for revenue, operating margin, and EPS growth.”

“So, we're bringing on enormous amounts of capacity over the next 24 months because the demand is so high, we need to do that to satisfy our existing set of customers.”

“So, for fiscal year '25, looking at about $10 billion in CapEx because it's also involves not only some big centers, but it also involves expansions of existing centers.”

“While we continue to build data center capacity, overall gross margins will go higher as more of our cloud regions fill up.”

“In addition, Cerner, which is a significant headwind this year, we expect to return to growth next year.”

“I should also say that we continue to expect the FY '24 of which we are now in the fourth quarter, total revenue excluding Cerner will accelerate from last year as it has for the past three years and will likely be significantly higher in FY '25.”

“As our supply constraints ease revenue growth rates will accelerate higher as our capacity expands and we get into fiscal year '25.”

“As we grow, our gross margin percentage goes up.”

“Finally, I remain firmly committed to our fiscal ‘26 financial goals for revenue, operating margins, and EPS growth.”

“12 of these public cloud regions interconnect with Azure and starting next year, customers will be able to run Oracle Database at Azure on OCI inside Azure.”

“As we continue to benefit from economies of scale in the cloud and drive Cerner profitability to Oracle standards, we will not only continue to grow operating income, but we will also expand the operating margin.”

“This is exactly what we told you would happen, and it's happening. And as this continues, total revenue growth will accelerate every year.”

“And we are doing our best to give our customers what we can this quarter, and then dramatically increase our ability to give them more and more capacity each succeeding quarter.”

“And we think the impact on demand -- on database demand, we're seeing it already.”

“Yeah, so let me just tell you, I think for the year, for the full fiscal year, Cerner will be sort of negative 1 to 2 points. But that will be it. It'll end this fiscal year. And from then on, it will be a growth story.”

“So we expect Cerner to be a growth story. I guess that's what I'm getting at.”

“We are upgrading and modernizing Millennium a piece at a time, and different pieces will be available starting next year.”

“It is largely rewritten and available right now, something called our Health and Data Intelligence platform... we will finish next calendar year.”

“I believe about half the customers will be moved, half of the Millennium customers... about half of those customers will move to OCI by February.”

“And as you can see in my CapEx guidance, we expect OCI to just grow astronomically, frankly.”

“In the next few weeks, we expect to sign a couple more billion dollar Cloud Infrastructure contracts.”

“Approximately 48% of total RPO is expected to be recognized as revenue over the next 12 months.”

“While we continue to build data center capacity, gross margins go higher as these new cloud regions fill up.”

“Very importantly, as on-premise databases migrate to the cloud, we expect these cloud database services will be the third leg of revenue growth alongside strategic SaaS and Gen 2 OCI.”

“We don't see that going away anytime soon, and it applies to inferencing as well as well as training.”

“And as you will hear at our financial analyst meeting next week, we remain firmly committed to our fiscal '26 financial goals.”

“Again, excluding Cerner, I remain committed to accelerating our total revenue growth rate this fiscal year as well as maintaining our current high cloud growth rate for the year.”

“We are extremely confident about our revenue acceleration for the year, even though in any quarter there may be small fluctuations.”

“As we continue to benefit from economies of scale in the cloud and drive Cerner profitability to Oracle standards, we will not only continue to grow operating income, but we will also grow the operating margin percentage.”

“This momentum is turning into bookings and that gives me the confidence that our annual revenue growth will continue to accelerate moving forward.”

“Yes, okay. Let me start with yes. And as I want to remind you of course, I want to remind you 29% of bigger numbers is more. Okay. So, you know, last year we were smaller, and this year we continue to plan on doing the 29% may be better, all of it is dependent on us getting our data centers filled up and built out as fast as possible.”

“And on the expense side, we still have a ways to go, but I think it will become more obvious to you next quarter the changes we've made, as they play out through the income statement more clearly.”

“Also on the business side of things, we -- again, we think that Cerner business is going to get stronger and stronger again, Safra made the point.”

“In the current quarter we expect our Cerner Health business to be awarded two large new contracts with a total value of over $1 billion.”

“This transition is resulting in some near-term headwinds to the Cerner growth rate as customers move from license purchases, which are recognized upfront to cloud subscriptions, which are recognized ratably.”

“Given the demand we have and see in the pipeline, I expect that fiscal year 2024 CapEx will be similar to this past year's CapEx.”

“Operating cash flow for the first quarter was up 9% to $7 billion, while free cash flow was up 21% to $5.7 billion and I expect that we will see a very good result in our free cash flow for the rest of the year.”

“Very importantly, as on-premise databases migrate to the cloud, we expect these cloud of database services will be the third leg of revenue growth alongside strategic SaaS and Gen2 OCI cloud services.”

“Approximately 49% of total RPO is expected to be recognized as revenue over the next 12 months.”

“As we drive Cerner profitability to Oracle standards and continue to benefit from economies of scale in the cloud, we will not only continue to grow operating income, but we will also grow the operating margin percentages.”

“We remain committed to the fiscal year 2026 targets that we shared with you last fall at our financial analyst meeting.”

“And of course, we also expect to deliver a higher non-GAAP operating margin percentage this coming year as well.”

“As a result, I expect cloud revenue, excluding Cerner, will continue growing at at least similar rates to what we experienced in fiscal 2023, even though our base is much bigger and may be higher.”

“I also expect our Gen 2 OCI business will have another excellent year of revenue growth as existing centers fill up and new centers come online.”

“Additionally, I would note that IaaS gross margins improved substantially from last year, and I expect IaaS gross margins will continue to improve.”

“As on-premise databases migrate to the cloud and cloud at customer, we expect these cloud database services will be a third leg of revenue growth and revenue growth acceleration, alongside back office SaaS and Gen2 OCI cloud services.”

“And I think you'll see us -- and that's going to be a huge area of growth for us.”

“Anyway, as I've said before, Cerner will be accretive to earnings this year, including Q4.”

“As we drive Cerner profitability to Oracle standards and continue to benefit from economies of scale in the cloud, we will not only continue to grow operating income, but we will also grow the operating margin percentages.”

“As we move our Cerner patients from the Cerner data centers into the Oracle OCI Cloud, we expect to get much better security, much better reliability, much better performance and dramatically lower our costs of providing that cloud service.”

“While we are pleased with this early success of the Cerner business, we expect the signing of new health care contracts to accelerate over the next few quarters.”

“Total cloud growth, including Cerner, is expected to grow from 51% to 53% in constant currency, 49 to 51 in USD.”

“Now assuming the currency exchange rates remain the same as they are now, currency would have a 2% negative effect on total revenue and at least 3% plus negative effect on EPS in Q4.”

“With our continued migration to the cloud, we expect that we will continue to win big deals that are more subscription driven than license driven.”

“Given the demand you see reflected in the RPO as well as what we see in our pipeline, I expect that our CapEx investments will be about where it is right now for the foreseeable future.”

“And by the way, I actually expect this year, FY 2023, the one we are closing out in one more quarter, will be the trough year for operating margins and percentages as our margin improvement initiatives play out.”

“And as I’ve said before, Cerner will be accretive to earnings this year, including in Q3.”

“As we drive Cerner profitability to Oracle levels and continue to benefit from economies of scale in the cloud, we will not only continue to grow operating income, but we will also grow the operating margin percentage.”

“But ultimately, just so that you understand, our expectation is we will run them at typical Oracle margins.”

“So we’ve got quite a way to go. And I think over the next couple of quarters, you’ll see continued improvement as we’ve done some of our operational integration.”

“I expect the total cloud growth for the fiscal year, excluding Cerner will be above 30% in constant currency.”

“Total cloud growth, including Cerner, is expected to grow from 46% to 50% in constant currency and 43% to 47% in USD.”

“Using currency exchange rates as they are right now, currency should have a 4% negative effect on total revenue and at least a $0.06 negative effect on EPS in Q3.”

“With triple-digit IaaS bookings growth the last couple of quarters we now expect to spend about this amount per quarter for the next few quarters as we build capacity for our customers’ needs.”

“Further, I expect that this year, will be the trough year for operating margin percentages.”

“we expect organic growth for our fiscal year 2023 cloud revenues will be over 30% in constant currency.”

“As I've said before, Cerner will be accretive to earnings this year, including in Q2.”

“And given our increasing confidence, we will continue to prudently invest as their strong demand for our cloud services.”

“As we drive Cerner and its profitability to Oracle standards, and continue to benefit from economies of scale in the cloud, we will not only continue to grow margin dollars, but also grow margin percentages significantly.”

“And that means we're going to be -- we are going to be half to -- half to be adding a lot of data center capacity and opening a lot of new data centers and we're doing that.”

“We expect Oracle's total cloud business to exceed a $20 billion annual run rate next year.”

“I expect that total cloud growth for the fiscal year excluding Cerner will be above 30% in constant currency.”

“We continue to expect organic revenue growth and our cloud business will accelerate substantially in FY '23.”

“So I expect CapEx, which was where it was this year. I think it will be a little bit more than what it was this year, next year.”

“And we expect that you'll see that in the numbers, while our customers end up spending less than what they use to spend with on-premise.”

“My EPS guidance for Q1 assumes a base tax rate of 19%. However, onetime tax events could cause actual tax rates for any given quarter to vary.”

“And as I've said before, Cerner will be accretive to earnings this year, including Q1.”

“As such, I expect our CapEx spend will be higher in FY '23 to meet the demand.”

“Once the debt level has declined, we'll reexamine share repurchase levels.”

“We anticipate retaining our investment-grade credit rating, meaning that for the time being, we're going to focus on reducing our debt balance while continuing our share repurchases at current levels.”

“Though we will continue to invest in growth, we should benefit from economies of scale of running our cloud business as it gets larger.”

“The full year growth of this gross profit was 4% higher than the 2% we saw last year, and I expect it will be significantly higher in FY '23.”

“It's clearly going to be our largest business.”

“Cloud service and license support will also see growth acceleration and could well see double-digit organic growth.”

“And to the extent that we have some supply chain loosening where we are able to deliver all of our bookings, we just expect growth sort of all over the place.”

“As I always say, however, onetime tax events could cause actual rates for any given quarter to be higher or lower, but I expect that in normalizing for these onetime tax events, our non-GAAP tax rates will average around 19% or so.”

“And again, Cerner should be accretive in the first year.”

“Approximately 59% is expected to be recognized as revenue over the next 12 months.”

“And we're on track to invest $4 billion in CapEx this year.”

“I expect the cloud revenue will exit the fiscal year growing in the mid-20s.”

“We have a lot of demand worldwide where you're going to see us make these investments, as I've guided for the whole year.”

“and we are on schedule to deliver zero downtime upgrades. So it won't be long now when our customers move to the new version, there will be no downtime.”

“I'm going to start by reiterating our expectation that full-year 2022 revenue growth will accelerate from 2021 for all the reasons we've already seen so far this year.”

“But I expect that in normalizing for these one-time events, our non-GAAP tax rates will average around 19% or so.”

“assuming currency exchange rates remain the same as they are now, which we have no idea if they will or not, I expect we will see a currency headwind of 3% for revenue and $0.05 for EPS in Q3.”

“Cloud is fundamentally a more profitable business compared to on-premise, and I expect that our operating margins this year will be the same or better than pre-pandemic levels of 44%.”

“I expect the infrastructure revenue growth rate will continue to ramp higher through the fiscal year.”

“We expect all the remaining 6,500 to move to Fusion ERP, but it hasn't happened yet.”

“And I think the number would be approaching $20 billion in cloud ERP, where the majority of those customers are not people who are migrating, our customers that are migrating from Oracle's on-prem business, but they're migrating from other people's on-prem business.”

“We've now made the migration and that should just grow steadily as demand for those systems increases.”

“So I expect the infrastructure revenue growth will ramp higher through the fiscal year.”