Oracle Corp Japan

Hello, everyone. I'm Nishio from Nihon Oracle IR. Nihon Oracle will hold the first quarter financial statement meeting on May 1, 2026. The disclaimer is as described in the mid-term report of the short-term financial report and the business report. Now I'd like to turn this call over to KK, Senior Vice President, Finance, JPAC, and Japan CFO.

Thank you, Nishio-san. Good afternoon, everyone, and welcome to Oracle Japan's first quarter fiscal year 2026 earnings conference call.

Good afternoon, everyone. Welcome to the first quarter fiscal year 2026 earnings conference call.

We had another excellent performance in this Q1 attributed to growth of cloud services, especially Oracle cloud infrastructure. The demand is substantial for our cloud business, which has led to acceleration in revenue growth.

Also, this is the first quarter of this year, but thanks to the growth of cloud services, especially Oracle Cloud Infrastructure, we have been able to produce wonderful results. The demand for our cloud business is high, and thanks to that, the sales have been steadily increasing.

In software license business, we changed our list price in Q2 25. Therefore, we anticipated that there would be a reactionary decrease due to rush demand in Q1 of last year.

In terms of the software license business, we are changing the price to the second quarter of 2025. Therefore, we expected that there would be a reaction to the demand for the first quarter last year.

We announced the opening of Japan Operations Center to accelerate innovation in AI adoption by Japanese companies and organizations and to accelerate the adoption of sovereign cloud.

Now, I would like to announce the announcement of the opening of the Sendate Japan Operation Center. This is aimed at encouraging innovation by Japanese companies and organizations to adopt AI. Furthermore, it is aimed at promoting the adoption of the Sovereign Cloud.

This center supports Oracle Alloy partner companies by providing operational expertise and technical assistance, enabling them to deliver a broad range of cloud and AI services and expand their business.

This center is a partner company of Oracle Alloy. We provide them with specialized knowledge and technical support. By doing so, they can provide a wide range of cloud and AI services and expand their business.

Regarding Oracle AI World in Las Vegas from October 13th to 16th, starting this year, it will be called Oracle AI World.

今年10月13日から16日にラスベガスにおいて Oracle AI Worldが開催されます。 今年から正式名称がOracle AI Worldになります。

The new name emphasizes our commitment to help customers and partners take advantage of latest AI innovations to move faster, reduce costs, make more informed decisions, and build smarter businesses. You can also participate online via streaming or live events.

It is a new name, but our commitment is to support customers and partners to use the latest AI innovations, act more quickly, reduce costs, make decisions based on more information, and build a smarter business. This is Oracle AI World. Participation online, participation in streaming,

We continue to add a lot of customers in various industries like public sector, manufacturing, financials and information technology. Let me give you a few examples.

Number one, Kubota provides products and solutions developed and produced in over

120 countries and regions worldwide across the fields of food, water, and environment.

First of all, Mr. Kubota, Kubota is a company that develops and produces products and solutions all over the world in 120 countries and regions. Especially in the field of food, water, and the environment.

When advancing water environment projects across three Southeast Asian countries, information was previously managed in a decentralized manner using spreadsheet software and paper, creating a risk of human error.

In the three Southeast Asian countries, information has been quite diversified in the past, as water quality and environmental education have been advanced. For example, the spread sheet software and paper-based information have been shared, and there have been many risks of human mistakes.

Additionally, there was a need to strengthen internal controls and streamline redundant tasks. It was difficult to grasp information on profit and loss project performance in real time, posing challenges for rapid management decision making.

To solve these issues, Kubota selected NetSuite.

A solution that could be implemented quickly and cost-effectively while offering high adaptability to change.

So, Kubota-sama has chosen NetSuite, a solution that can be implemented quickly and cost-effectively with high adaptability to change.

Number two, Yamato contact service which handles contact center and BPO operations for the Yamato group has streamlined its customer support operations by leveraging Oracle Cloud Infrastructure Generative AI service and Oracle Database 23 AI.

This is the second case. Yamato Contact Service. This is a contact center or BPO business for the entire Yamato Group. In the meantime, Oracle Cloud Infrastructure, Generative AI Service and Oracle Data Service

Specifically, in email support operations, they have successfully increased the match rate for proposing FAQs to self-resolvable inquiries to 85%, roughly double the previous rate.

For example, in e-mail support, we have succeeded in raising the ratio of FAQ to 85% by proposing FAQ to the questions that can be solved by ourselves. This has been improved by twice from the previous standard.

This has enabled Yamato to automatically process and reduce approximately 20% of email inquiries relating to宅急便 delivery operations using AI.

This has enabled Yamato to automatically process and reduce approximately 20% of email inquiries Number three, Toyo University.

Looking ahead to its 150th anniversary in 2037, Toyo University is formulating a vision for its future as a comprehensive academic institution.

The third one is from Toyo University. This university is celebrating its 150th anniversary in 2037. In response to this, a vision has been created to become a comprehensive academic institution in the future.

To achieve this, a financial accounting system enabling data-driven management decisions and financial operations was essential.

To achieve this, a financial accounting system enabling data-driven management decisions and financial operations was essential.

While previously using a custom developed system, the university adopted Oracle Cloud ERP to reduce operational and maintenance burdens and transition to a sustainable, highly flexible system.

In the past, we introduced a custom-developed system. This time, we adopted Oracle Cloud ERP from Toyo University, and we have succeeded in reducing the burden of operation maintenance to a large extent by moving to a sustainable and highly flexible system.

Oracle Cloud ERP is valued for its extensive implementation track record at universities, both domestically and internationally, and its ability to loosely integrate with university-specific peripheral systems via APIs and its flexibility to accommodate future expansion.

Oracle Cloud ERP is widely used in domestic and foreign universities. It can also be used in a university-specific周辺システム through API. In addition, it can be used flexibly for future expansion.

Number four, Aon Housing Loan Service. Aon faced challenges in its traditional on-premise environment, including end-of-life hardware maintenance, delays in applying security patches, difficulties in flexible resource allocation, and the need to strengthen its disaster recovery configuration.

The fourth one is from ION Housing Loan Service. In the case of ION, they have several challenges in terms of the traditional on-premise environment. For example, the repair of the hardware that has come to an end of life. It takes a lot of time to apply security patches, and it is difficult to distribute resources flexibly. In addition, there was also a need to strengthen the configuration of DR.

Against this backdrop, following a feasibility study and POC for cloud migration using Oracle Cloud Lift Services, they decided to proceed with a full-scale migration to Oracle Cloud Infrastructure.

From this background, we used Oracle Cloud Lift Service to carry out feasibility research and POC in the cloud. As a result, we have decided to move to Oracle Cloud Infrastructure.

With support from Oracle Consulting Services, they achieved full cloud migration in a short timeframe. This was made possible by high affinity between our on-premise Oracle Database environment and Oracle Autonomous Database on OCI, coupled with a highly reliable project structure.

There is also support for Oracle Consulting Services, and despite the fact that this is a front-end ecosystem, it is fully clouded in a very short period of time. This is because the Oracle Database Environment on-premises and Oracle Autonomous Database are operating on the OCI, and one of the myths between these is that

This is just to give you a sense of the broad outreach in the market that we have with our different products and services and to underline Oracle's presence in most mission-critical systems, applications, and industries.

Thank you very much. Thank you very much.

Let me move to the numbers. We have made some changes to the face of our income statement to better reflect how we manage the business so you understand our cloud business dynamics more directly.

Next, I would like to move on to the numbers. First of all, we have changed several items and names in the calculation sheet. This is to reflect our business management better, and we decided that we would be able to understand the dynamics of our cloud business more directly. Total revenue was 66,275,000,000 yen, growing at 3.7% compared to previous year, driven by strong growth in our cloud revenue.

Total cloud revenue was 19 billion and 97 million JPY, up 37.2%, now represent 29% of the total company revenue.

The total cloud revenue is 19.9 billion JPY, up 37.2%, now represent 29% of the total company revenue.

Infrastructure consumption revenues continue to have a strong momentum, which includes autonomous database.

Operating income was 21 billion yen.

21,128,000,000 Japanese JPY, decreasing 4.8%, and net income was 14,805,000,000 JPY, down 3.7%.

Total revenue again hit a record high for the first quarter.

The profit categories were down mainly due to decline in high-margin software license business.

On the other hand, in terms of profits, the main reason is that the high margin of the software license business has decreased, which is a major reason.

We will maintain our guidance for revenue and EPS communicated at the start of this fiscal year.

Thank you very much and back to Nishio-san.

Thank you. Please enter your name and three questions. Please note that questions without names will be skipped. I will read them one by one and answer from CFO Keikei. I will take advantage of the questions that will be repeated. Let's start the question and answer. Next is the first question. We have two questions from Kikuchi-sama from SMBC Nikko Shoken. Q1's cloud service income has increased by 37% year-on-year, 12% Q1Q, and the growth of Q1Q is particularly high and strong, but are there any temporary factors?

First question is from Kikuchi-san of SMBC Nikko. There are two questions, but we will go one by one. First question, this is about the revenue of cloud service in the first quarter. Year on year, it grew by 37%, and Q on Q, it grew by 12%. It appears to have grown significantly Q on Q basis, but is there any one-time factor?

As I mentioned in my opening comments, our infrastructure revenues, especially, you know, infrastructure.

Thank you. I'm sorry to interrupt, but could you please wait a moment?

Hello, I'm back. Sorry, I think I got disconnected.

Did you hear my answer to the question or should I start again? You were cut off. Please start over again.

So let me talk about the cloud revenue. So I think we will... We saw very strong momentum, as I said in my opening comments. This is across all product offerings, especially infrastructure, and even SaaS revenue growth was strong. So, and I think there is no one-off factor affecting this, so we should see strong momentum continuing into the fiscal year.

Thank you very much. As I mentioned at the beginning, the supply of cloud has increased rapidly. In fact, this applies to all of our products, and the infrastructure, structure, and SaaS have also grown steadily. I don't know if there are any specific factors, but it is expected that this year will be the second half of the year.

Next is the second question. The increase in labor costs is a big impression. The number of employees has not increased much, but what is the cause? Please tell us about the outlook after the curfew.

And second question from Kikuchi-san. This is about HR expense. The growth is quite significant. However, in terms of number of headcounts, it is not increasing. So what are the reasons behind it? And if you could share with me the outlook for second quarter and onwards, that would be helpful.

Yeah, regarding the people expense, there are few factors that is affecting the increase. You know, there was a salary increase last year that was provided. They're also constantly changing and churning our people. So new people come at higher costs with the right skill set. And that's the whole intention of the organization. And we also had some restructuring expense that got into the P&L and also a little bit of stock compensation expenses got affected because the stock price also climbed significantly. So these are some of the factors that are contributing to the personal expense. The second question on the outlook for Q2 and beyond, as I said for the full year, I am maintaining my guidance. We should see some bounce back in license. I would expect it to bounce back for the remainder of the year. And we will continue to see some good momentum on our cloud revenues. So the year looks very strong for us.

There are several factors. First, we have raised the level of wages last year. Also, since we always have new employees, there are people who quit, and there are people who have a new skill set that we need. These people have a higher salary, so there is a slight impact on the overall amount of money. There is also a part of the cost of the restorer, and it is a little bit, but there is also an impact of the stock option. There is also an increase in the stock price and the amount of the stock option. There are a number of complex elements, and the total number of human resources has increased. However, as I mentioned earlier, the number of external sources has not changed for the past year. Considering the overall situation, the license will probably come back in the future, and the cloud will continue to follow the current trend, so I think it will be a strong year throughout the year.

Are there any questions? If there are any questions, this is the end of the first quarter of May, the first quarter of May, the first quarter of May. Finally, there will be a survey about the Zoom event, so please refer to it next time. The content of this session will be explained in a one-month email from today. If you have any additional questions, please contact the IR department. Thank you for joining us today. We have a question from Noda-sama from CLSE Shoken. Is there any time to contribute to the cloud service by Oracle Alloy?

We have questions from Noda-san of CLSA Securities. This is about Oracle Alloy. When will it start to contribute to the revenue of cloud service?

Sorry, I was on mute. So all the alloys that we have booked and we have more alloys in our pipeline that we are working on. Some of it will start showing in our numbers towards the end of this fiscal FY26. But the consumption will really accelerate. The alloy consumption will really start accelerating. more in FY27.

Thank you very much. I was muted. I have a question for Aloy. Aloy has already been booked, or it was also included in the pipeline, but part of it will gradually appear in numbers around the end of the 26th year of the opening year. However, it seems that the actualization of the consumption itself It seems to be after entering the year of 2027.

This is the second question from Mr. Noda of CLS. US tech companies such as OpenAI and Meta The movement to use the inference theory as an infrastructure has accelerated in the US, but if a tech company like this in Japan contracts with OCI in Tokyo Region as a local resource to expand its AI services in Japan, do you think it will be an upside in Japan?

And question from Noda-san of CLSA Securities. OpenAI and Meta in the U.S. are starting to use OCI for their infrastructure to do inferencing. And if these tech companies wish to expand their AI service in Japan, and if they start to use OCI in Tokyo region in order to ensure secure their local resources, will this become a potential upside from Oracle Japan?

So this is kind of a little, I appreciate the question, but at this point in time, it's a little hypothetical for me. It all depends on, you know, how we contract it and, you know, what exactly the nature of work would be and whether it's a Oracle Japan contract or not. But having said that, What we have seen globally and if you have followed Oracle Corporation's earnings call, a lot of the biggest training large language models do their training by default on Oracle Cloud Infrastructure. We also have enabled OCI. to offer these large language models to our customers as a choice. For example, our customers can use our generative AI service and use any of these LLMs whether it's OpenAI or Grok or Llama to further their AI capabilities for their organizations. So there will be some linkages and of course it's going to be beneficial for Oracle Japan also. But I don't think I can answer your question. I have an answer to your question specifically on this one. Thank you.

Thank you for the question. At this stage, there are various hypothesis elements, so it is difficult to answer. For example, what kind of content will the contract be? Will the Japanese Oracle be the owner of the contract? There are various factors. I don't know if you heard about Oracle Propagation's final explanation, but in this large-scale language model, LLM, you can learn by default with OCI. OCI provides our generative AI services and allows customers to use LLM. On the other hand, OpenAI, Glock, RAMA, and other LLMs allow customers to use the LLMs they choose. Therefore, if such movements spread in Japan, I think it has something to do with it, but I think there is a merit to Japan and Raku-ryu in particular, but I can't say anything at this stage until I can say exactly how much it is.

That's all for my questions. Is everyone okay with it? Thank you very much.