Oracle Corporation

Hello and welcome to the Oracle Corporation Q1 fiscal year 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to turn the conference over to Ken Bond, head of investor relations. You may begin.

Thank you, Sarah. Good afternoon, everyone, and welcome to Oracle's first quarter fiscal year 2025 earnings conference call. A copy of the press release and financial tables, which includes a gap to non-gap reconciliation and other supplemental financial information, can be viewed and downloaded from our investor relations website. Additionally, a list of many customers who purchased Oracle Cloud Services or went live on Oracle Cloud recently will be available from the investor relations website. On the call today are Chairman and Chief Technology Officer Larry Ellison, and Chief Executive Officer Safra Katz. As a reminder, today's discussion will include forward-looking statements, including predictions, expectations, estimates, or other information that might be considered forward-looking. Throughout today's discussion, we will present some important factors relating to our business, which may potentially affect these forward-looking statements. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and our 10-Q, and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. And finally, we are not obligating ourselves to revise our results or these forward-looking in light of new information or future events. Before taking questions, we'll begin with a few prepared remarks, and with that, I'd like to turn the call over to Safra.

Thanks, Ken, and good afternoon, everyone. Before I go to our Q1 numbers, I thought I'd take only a moment to review some of the things that you'll be hearing about over the next couple of days from Oracle. We are at CloudWorld in Las Vegas. And CloudWorld is where we come together with our customers and partners to share experiences and showcase our latest products and services. Our customers are our best spokespeople when they share how our technologies transform their enterprises. The innovations from our labs and research centers in combination with feedback from our customers have helped us build superior products and services. You'll hear about new cutting edge features within OCI, database, analytics, Fusion, NetSuite, and our industry applications. We will also be showing new capabilities that we've been working on for a while, including embedded AI agents in Fusion. And those drive productivity and efficiencies for our customers when they're rolled out. And as an Oracle Fusion customer myself, I take great pride once again in my team's ability to have us announce earnings and give guidance nine days after the quarter ended. Many, many of our customers ask us how to replicate our results And at CloudWorld, we will be having a lot of Oracle playbook conversations this week. You've already seen today's announcement of our partnership with Amazon Web Services, which has now joined Microsoft Azure and Google Cloud in making OCI and Oracle available in their respective clouds. Needless to say, we think our multi-cloud strategy will the ubiquity and popularity of our differentiated technologies, especially the Oracle database. Larry will share more details in just a moment. But now to Q1, which was clearly another outstanding quarter with total revenue at the high end of my guidance and earnings per share four cents above the high end of guidance. Currency was essentially in line with my guidance, and as usual, I'll be discussing our financials using constant currency growth rates as this is how we manage the business. Total cloud revenue, that's SaaS and IaaS, was up 22% at $5.6 billion, with SaaS revenue of $3.5 billion, up 10%, and IaaS revenue of $2.2 billion, up 46% on top of the 64% growth reported last year. As a reminder, we exited the advertising business last quarter, which had the effect of lowering the total cloud applications revenue by 2% this quarter. Total cloud services and license support for the quarter was $10.5 billion, up 11%, driven again by our strategic cloud applications, autonomous database, and OCI. Application subscription revenues, which includes product support, were $4.8 billion and up 7%. Our strategic back office SaaS applications now have annualized revenues of $8.2 billion, and we're up 18%. Infrastructure subscription revenues which includes license support, were 5.8 billion and up 14%. Infrastructure cloud services revenue was up 46% and up 49% when you are excluding our legacy hosting services. Our infrastructure cloud services now have an annualized revenue of 8.6 billion. OCI consumption revenue was up 56%, and demand continued to outstrip supply. Cloud database services, which were up 23%, and now have annualized revenues of $2.1 billion. Very importantly, as on-premise databases migrate to the cloud on OCI directly, or through our database at cloud services with Azure, Google, and AWS, we expect those cloud database revenues collectively will be the third leg of revenue growth alongside OCI and strategic SaaS. Database subscription revenues, which includes database license support, were up 4%. Software license revenues were up 8% to $870 million, including Java, which saw excellent growth. So all in, total revenue for the quarter were $13.3 billion, up 8% from last year. Shifting to gross profit and operating income, the gross profit dollars of cloud services and license support grew 9% in Q1, As our cloud businesses continue to scale, the gross margins of both cloud applications and cloud infrastructure have each been climbing higher. We continue to display operating expense discipline, with Q1 operating income growing 14%, and the operating margin was 43%. The non-GAAP tax rate for the quarter was 18.9%, with non-GAAP EPS at $1.39 in U.S. dollars, up 17% in USD, up 18% in constant currency. The GAAP EPS was $1.03 in U.S. dollars, up 20% in USD, and up 22% in constant currency. including in my guidance at the beginning of the quarter was the expected completion of an assessment of the useful lives of our servers and networking equipment, including an increase of the estimated lives from five years to six years effective at the beginning of this fiscal year. This change in accounting estimate reduced Q1 operating expenses by about 197 million. At quarter end, We had nearly $11 billion in cash and marketable securities. The short-term deferred revenue balance was $11.5 billion, up 2%. Operating cash flow for Q1 was $7.4 billion, while free cash flow was $5.1 billion. On a trailing 12-month basis, operating cash flow was 19.1 billion and free cash flow was 11.3 billion. Our remaining performance obligations for RPO is now 99 billion, up 52% in constant currency. Now, while we typically see a seasonal decline of RPO in Q1, we signed several large deals this past quarter resulting in a sequential increase in RPO compared to the decline that we typically see based on our experience over the previous five years. Further, our cloud RPO grew more than 80% and now represents nearly three-fourths of total RPO. And approximately 38% of total RPO is expected to be recognized as revenue over the next 12 months, which reflects the growing trend of customers wanting larger and longer contracts as they see firsthand how Oracle Cloud Services are benefiting their businesses. We spent $2.3 billion on CapEx this quarter. Given the demand that you see in our RPO growth and the additional demand we have and see in our pipeline, I expect the fiscal Year 2025 CapEx will be double what it was in fiscal 2024. As always, we remain careful to pace our investments appropriately and in line with booking trends. We now have 85 cloud regions live, another 77 planned with more to follow. We have public cloud regions. We have dedicated cloud customer regions. We have national security regions. We have sovereign regions, we have Oracle Alloy regions with our partners, and we have multi-cloud regions with Azure and Google Cloud, and now shortly with AWS as well. This sizing flexibility and deployment optionality of our cloud regions continue to be significant advantages for us in the marketplace. As we've said before, we're committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases, prudent use of debt, and a dividend. This quarter, we repurchased 1.1 million shares for a total of 150 million. In addition, we paid out dividends of 4.4 billion over the last 12 months. And the board of directors, again, declared a quarterly dividend of 40 cents per share. Before I dive into specific Q2 guidance, I'd like to share some overarching thoughts and the benefits that I expect they will bring over the coming years. First, the Oracle database is thriving, and the multi-cloud agreements we now have with Microsoft, Google, and AWS make it easier for our customers to run their Oracle databases in the cloud. Second, we are rapidly expanding our OCI capacity to meet the demands that you see in our 52% RPO cloud growth. Third, while much attention is focused on our GPU-related businesses, our non-GPU infrastructure business continues to grow much faster than our competitors. And finally, our strategic SaaS app continue to grow while we are starting to see more and more of our industry-based cloud apps come online. All these trends point to revenue growth going higher. We will discuss the implications of these positive trends at our financial analyst meeting on Thursday. 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. Let me now turn to my guidance for Q2, which I'll review on a non-GAAP basis. If currency exchange rates remain the same as they are now, currency should have about a 1% positive effect on total revenue And as much as a 3 cent positive effect on EPS, hard to know for sure, however, the actual currency impact may be different. Total revenues are expected to grow from 7 to 9% in constant currency and are expected to grow between 8 and 10 in USD at today's exchange rate. Total cloud revenue is expected to grow from 23 to 25% in constant currency and 24 to 26 in USD. Non-GAAP EPS is expected to grow between 6 to 10 and be between $1.42 and $1.46 in constant currency. And non-GAAP EPS is expected to grow 8 to 12% and be between $1.45 and $1.49 in USD. My EPS guidance. 4Q2 assumes a base tax rate of 19%. However, one-time tax events could cause actual tax rates to vary. And with that, sorry, it was so long. And with that, I'll turn it over to Larry for his comments.