Oracle Corp Japan

Now I'd like to turn this call over to KK, Senior Vice President, JPEG, and Japan CFO.

Thank you, Nishio-san. Good afternoon, everyone, and welcome to Oracle Japan's second quarter and fiscal year 2026 earnings conference call. We achieved excellent results this Q2 particularly in our cloud business reinforcing our position as a leading cloud vendor.

Hello, everyone. Welcome to Japan Oracle's May 2nd and 2nd quarter of 2026. The company has achieved excellent results in the second half of the year, especially in cloud business, and has further strengthened its position as a major cloud vendor.

While shifting our focus to cloud, we have also maintained steady order intake in our license business. We are pleased to share that two months ago we announced our fourth alloy partner in Japan, SoftBank.

We have initiated a collaboration to offer services with data sovereignty by operating data and systems in the cloud under our country's jurisdiction.

Based on this partnership, SoftBank will launch Cloud PF Type A, a cloud platform service tailored for the Japanese market starting from April 2026.

SoftBank is starting a business to provide data-based services by operating data and systems in a cloud-based cloud in Japan. Based on this proposal, SoftBank will provide a cloud platform service, CloudPF Type A, customized for the Japanese market from April next year.

In addition, AI services provided through Oracle Cloud Infrastructure will also be rolled out as they become available.

さらに、オラクルクラウドインフラストラクチャを通じて提供されるAIサービスも利用可能になり次第展開される予定となっています。

We had a lot of cloud customers in various industries like public sector, manufacturing and financial industries. So now let me give you some examples.

Number one, Itoki Corporation.

Ikoki has developed a predictive maintenance system that detects signs of malfunctions in automated logistics warehouses using Oracle's AI technology. Leveraging Oracle Autonomous AI Database and Oracle Cloud Infrastructure data science, the system collects and analyzes operational data from automated warehouses with AI to identify potential issues in advance.

First of all, it is a company called Itoki. Itoki used Oracle's AI technology to develop a preventive system that detects errors in automatic logistics warehouses. This system uses Oracle Autonomous AI Database and Oracle Cloud Infrastructure Data Science to collect and analyze automatic warehouse mobile data in AI to identify potential problems in advance.

In the logistics industry where automation and labor saving measures are rapidly advancing due to labor shortages, sudden equipment downtime poses significant risk to production and planning.

To address these challenges, Itoki has developed a predictive maintenance system, smart maintenance, that enables the visualization of operational status and analysis of operational data to detect signs of malfunction.

This system reduces downtime and supports planned maintenance. And now what I am saying is going to be very important. By combining Oracle AI vector search, LLMs, and customers' proprietary data, the system delivers highly accurate responses. Additionally, it enables rapid development and deployment of machine learning models within database even at large scale. This is an extremely important development especially for Japan and we are going to see more and more adoption across industries of these technologies.

And the next point is very important. By combining Oracle AI Vector Search, LLM, and customer-specific data, high-quality responses are realized. In addition, even if it is a large-scale database, it is possible to introduce rapid development and development of machine learning models. This point is particularly important for Japan, and we believe that various introductions will occur in this industry.

Customer number two, NIO First Life Insurance. NIO First Life Insurance, a member of Daiichi Life Group, has surpassed 1 million policies by providing optimal and comprehensive coverage at affordable premiums along with fast and simple online support.

The second example is NEO First Life Insurance. NEO First Life Insurance of the first life group provides optimal and comprehensive insurance with affordable insurance fees, and can provide quick and simple online support. This has exceeded the number of insurance contracts of 1 million.

The company has adopted Oracle Database at Azure as the database foundation for its insurance policy management. By implementing Oracle Database at Azure on Oracle Cloud infrastructure hosted within Microsoft Azure data centers, Neo First Life ensures high availability and scalability for its mission-critical policy management system, which manages over 1 million contracts while optimizing costs.

Neo First Seimei adopted Oracle Database at Azure as the database of the insurance contract management system. By implementing Oracle Database at Azure on Oracle Cloud Infrastructure hosted by Microsoft Azure Data Center, we have secured high availability and scalability of mission-critical insurance contract management systems that manage more than 1 million contracts and optimize costs.

Customer No. 3, Tokyo Marine Holdings. Tokyo Marine has achieved profit growth, particularly in its overseas businesses through operations spanning 57 countries worldwide.

The third customer is Tokyo Mariner Holdings. Tokyo Mariner Holdings has developed in 57 countries around the world, especially in overseas business.

As they expanded, there was a growing need for a more advanced management system that could facilitate the timely collection and analysis of overseas group companies' performance to enable swift decision making and support smooth communication across group companies.

With the expansion of the business, we analyzed the achievements of overseas group companies in a timely manner, and the needs for a more advanced management system were increased, which supported rapid decision-making and close communication between group companies.

To address this, the company has implemented Oracle Fusion Cloud EPM as its global management system. This allows for construction of interfaces without altering the accounting systems of the overseas group companies, enabling efficient and timely collection of information consistent with those of overseas subsidiaries. As a result, various management performance indicators can now be analyzed in accordance with the granularity of the segment information maintained by the overseas group companies.

We introduced Oracle Fusion Cloud EPM as a global management system. This allows us to build an interface without changing the accounting system of overseas group companies and to collect efficient and timely information with foreign companies.

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

We have shown that various products and services are very widely available. Most of them emphasize the existence of mission-critical systems, applications, and Oracle in the industry.

Now let me move to the numbers. Total revenue was 134,677,000,000 JPY, growing at 7.5% compared to previous year, driven by strong growth in our cloud revenue.

Let's talk about the numbers. First, Japan's overall sales, 13,467,700 million yen, 7.5% increase compared to the previous year. There is a significant increase in cloud revenue. Total cloud revenue was 39,129,000,000 JPY.

Up 38.3% and now represents 29% of the total company revenues.

Infrastructure consumption revenues had very strong momentum which includes autonomous database. The consumption of infrastructure is also very strong, and autonomous databases are included. Operating income was 42,659,000,000 JPY, increasing 1.8%.

The operating income is 4,265,900,000 JPY, increasing 1.8%. Net income was 29,913,000,000 JPY, up 1.9%. Total revenue and all profit categories hit record high for the second quarter. We also have a robust pipeline for the second half of the year and at this point in time I intend to stick with my revenue guidance for the year. Thank you very much.

Thank you very much. Back to you, Nishio-san.

I would like to take questions from all of you. This presentation is for those of you who are in the market, so please refrain from asking questions to the press. Please note that from the Q&A of the Zoom system, please enter the company name, name of the company, and three questions. I will skip the questions that are not listed in the name, so please understand. I will read them one by one and answer them by CFO KK. I will not repeat the questions. Let's start the question and answer. Do you have any questions? If you have any questions, please send them to me first. I'm waiting for your questions. Here is the first question. This is from J.P. Morgan Shoken.

So the first question from Matthew of JP Morgan, it is about the AI related revenue and the breakdown of the percentage as well as growth rate.

We don't break down revenues by AI because AI is embedded in all our products. So we can't identify AI revenues separately. But the fact is that AI is driving and will drive our future growth in Japan. The segments that we already split for public consumption is what you see in the supplementals and they will continue to be the same. Thank you very much.

As for AI, it is incorporated into all the products, so we don't do any analysis of the AI part alone. We don't raise the AI revenue separately. However, we think that AI will obviously lead to future growth. As for the segment, it is written in the Supplemental Information Data, but it is the same.

This is the second question. This is from Kikuchi-sama of SMBC Shokken, Nikosho-ken. What kind of pipeline do you have? The license of the paper machine was weak, but is the pipeline of the license better? Or is it an increase in the cloud such as Alloy?

The second question is from Kikuchi-san of SMBC Nikko Securities. You mentioned that the second half pipeline is robust. So could you elaborate what kind of pipeline is it? And the license in the first half was a little weak. So could you tell us that the pipeline of the license is stronger in the second half or is it the robustness comes from the alloy related business?

Thank you for the question. It is a mixture of everything. We do have a strong license pipeline in the second half. And by the way, we do expect our license to decline in small percentages because the future is in cloud and our cloud revenue, growth in our cloud revenue will overcome the decline in license revenues as we go into the future. So yes, our outlook for the second half of license continues to be strong as expected and growth will continue to come from cloud revenues.

Thank you for your question. I think that various elements are involved in the mix of what you just said. The license pipeline is also very strong, but the license is expected to decrease a little. This is because the future is that the cloud will grow. The growth of the cloud has led to a decrease in the number of licenses. In the case of smoke, the number of licenses is also very high. However, it is clear that the cloud will continue to grow.

Thank you very much. Mr. Watanabe of Mitsuri Sumitomo DS Asset Management asked the same question about licensing sales, so I will skip this part. The fourth question. I have a question for Mr. Mashu from JP Morgan. It's okay as long as you can answer. While the parent company, Oracle Corporation, is concerned about cash flow, it is known that the company's stock market is also affected. Basically, it is known that it has nothing to do with it, but it would be nice if there were any comments about the concern that the parent company's spending money will increase and concerns about the concern of the small number of shareholders.

Another question from Matthew from JP Morgan. So about the financing of the parent company, the Oracle Corporation, and as well as the cash flow, there are some concerns and probably that is impacting the share price of Oracle Japan. We understand that basically they are not related. But if you can comment on the potential increase of the loan to the parent company, as well as this concern about the minority shareholder, we would appreciate it.

Oracle Japan is an independent company and we finance our own growth. We rely on the corporation for the intellectual property that it supplies to us and it will continue to do so. So I don't think anything that happens at Oracle Corporation impacts Oracle Japan's independent business. I think I would leave it at that. Thank you.

Yes, Japan Oracle is an independent company, and the growth of Japan Oracle is done by Japan Oracle. We are doing business using our knowledge, so the influence from the Oracle Corporation does not affect our business independence.

Thank you very much. I have a second question from Kikuchi-sama of SMBC Nikko Shoken. The cost of the paper machine has increased particularly in terms of labor costs, but the labor costs have increased from the previous quarter, so is it possible to expect the increase in this quarter to be reduced? Also, is there a cost to increase the quarter strongly?

Another question from Kikuchi-san of SMBC Nikko. The question is that the first half of our expenses, the personnel cost, especially increased year on year, but the personnel cost was up from the second half of the previous year. So is it okay to forecast that this growth is smaller than the year before? And are there any other expenses which are likely to increase in the second half?

So for overall expenses at this point in time, we don't see any extraordinary increases or changes in the second half. You know, there will be the normal increases that you would expect to correspond to a growing business. Regarding the first half personal expenses, there was some one-time restructuring expenses as we Continue to look at our organization and refresh our people with the right skill sets to support future Oracle Corporation's growth. Some of these expenses have to be incurred at some point. So it's basically that it's a one-time expense.

Thank you for your question. Regarding the increase in human resources, this is related to Ristora. Refreshing the human resources in the organization, people with appropriate skill sets, and people who can contribute to future growth. Thank you very much. Do you have any questions?

Thank you for joining us today.