Oracle Corporation

Well, good day, everyone, and welcome to the Oracle Corporation fourth quarter fiscal year 2026 earnings call. Just a reminder, this call is being recorded. If you have a question today, please press star one on your telephone keypad. Please limit your questions to one. I would now like to hand the conference over to Mr. Ken Bond. Please go ahead, sir.

Thank you, Lisa, and good afternoon, everyone. Welcome to Oracle's fourth quarter and fiscal year 2026 earnings conference call. On the call today are Chief Executive Officer Mike Cecilia, Chief Executive Officer Clay McGurk, and Chief Financial Officer Hilary Maxson. A copy of the press release, including financial results tables, supplemental financial metrics, and guidance are now available from the Investor Relations website. Also is a slide deck being introduced this quarter, which you'll see momentarily, a gap to non-gap reconciliation, other supplemental financial information, and list of many customers who purchased Oracle Cloud Services or went live on Oracle Cloud recently. These items will be available after today's call. As a reminder, today's discussion will include forward-looking statements and we will make some important comments around factors relating to our business. 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 10-Q and any applicable amendments. And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events. Before taking any questions, we'll begin with a few prepared remarks. And with that, I'll turn the call to Hilary.

Thanks, Ken. Hi, everyone. Great to be here with you today. And as new CFO, I thought I'd start with a few thoughts on why I'm so excited to join Oracle at this time. my career all around the world at companies that use technology and data to drive transformation, both internally and for customers. And I believe that the most valuable transformational change sits at the juxtaposition of the physical and virtual worlds across business models, from infrastructure to enterprise software. Oracle understands that intersection and is now uniquely positioned for one of the most significant technology transitions we've seen in decades. Very few companies can help customers across the entire technology stack, from the cloud infrastructure that powers AI workloads to the mission-critical applications that run their businesses. Oracle can do both. Plus, this is a company with deep technical expertise, differentiated technology, and a long history of helping customers turn technology innovation into tangible business value. And now I've only been here for two months, everything I've seen has reinforced my confidence in the company's strategy, execution, and opportunity ahead. I'm excited to be part of the team and look forward to helping Oracle capitalize on the opportunities in front of us to drive return on investment and shareholder value. And as we pursue these opportunities, we'll remain focused on discipline capital allocation, maintaining a strong balance sheet, and preserving our investment-grade credit rating. With that, let me turn to our Q4 and fiscal year 26 results. And like Ken said, we've introduced a short presentation to accompany our earnings call, so you can follow along with the numbers and key comments we'll make today. In terms of Q4, it was a record quarter. driven by strengths in both our cloud infrastructure and cloud apps business. Revenue was $19.2 billion, up 21% in U.S. dollars. Cloud infrastructure revenue grew 93%, reflecting strong demand for both AI workloads and our database services, and cloud apps was up double-digit at plus 10%. And Michael Clay will give more detail on these businesses in just a moment. Our non-GAAP operating income increased 22% in U.S. dollars to $8.6 billion, driven by our strong revenue progression. Our operating margin increased slightly, with our gross margin declining, driven by impacts from ramping up our data centers and the acceleration in our infrastructure revenue. This was more than offset in the quarter by a reduction in operating costs, and for us, that's the lines in our P&L, starting with sales and marketing. due to efficiency actions in our cost structure. Our non-GAAP EPS reached $2.11, an increase of 24% in U.S. dollars for the quarter, partly due to a one-time net gain on investment. Excluding this, our non-GAAP EPS increased by 20%. Turning to the full year, we surpassed revenues of $67 million for the first time. which translated into strong non-GAAP operating income of $29 billion, up 16% in U.S. dollars for the year. Our non-GAAP EPS was up 27% in U.S. dollars to $7.63, including one-time gains on investment. Excluding these gains, our non-GAAP EPS was $6.83. For the full year, our gross margin stepped down around five points As expected, as we start to see the impacts from the build-out of our infrastructure business, it's the acceleration in its revenues, primarily offset by lower operating costs as a percentage of revenue driven by operating efficiencies. All of this translated into strong cash flow from operations of $32 billion, up 54%. We did continue with our program of capital investments tied to unlocking the strong growth opportunities in front of us. Our net cash outlay for capital expenditures for the full year was $48 billion, taking into account prepayments and timing impacts of around $8 billion. You can see the table showing the details of net cash outlay for CapEx in our press release. We think this measure is important to better understand our funding needs. And our remaining performance obligations, or RPO, finished at $638 billion of 363%. This unprecedented level of RPO provides exceptional visibility into our future revenue growth, all supported by long-term contractual customer commitments and reflects the strong customer demand we see across both AI infrastructure and cloud services. To give a bit more detail on our RPO, we expect 12% to be recognized in the next 12 months and another 34% between 13 and 36 months. And these percentages are both expected to accelerate over the coming quarters based on our current long-term outlook. Mike and Clay will now get into a bit more detail on our cloud businesses, And then I'll be back with our outlook for fiscal year 27 and Q1.