Oracle(US:ORCL)2024-09-10 10:05Cloud and License Business Performance - Cloud and license business represented 84% of total revenues on a trailing 4-quarter basis[78] - Cloud services revenues accounted for 42% and 37% of total revenues in the first three months of fiscal 2025 and 2024, respectively[79] - Oracle's cloud and license business' margin has historically trended upward over the course of the four quarters within a particular fiscal year[79] - Cloud and license revenues grew by 10% in reported currency and 11% in constant currency to $11,389 million, contributing 86% of total revenues[90] - Total cloud and license revenues increased by $1.0 billion to $11.389 billion, driven by a $988 million increase in cloud services revenues and a $61 million increase in cloud license and on-premise license revenues[97] - Cloud services revenues grew by 21% to $5.623 billion, with applications cloud services contributing 30% and infrastructure cloud services contributing 70% of the growth[97] - Total cloud and license margin increased to $7.196 billion, with a margin percentage of 63%, consistent with the previous year[97] - Applications cloud services and license support contributed 30% of cloud services revenue growth, while infrastructure cloud services and license support contributed 70%[91] Hardware Business Performance - Hardware business represented 6% of total revenues on a trailing 4-quarter basis[80] - Hardware revenues decreased by 8% in both reported and constant currency to $655 million, while services revenues declined by 9% in reported currency and 8% in constant currency to $1,263 million[90] - Total hardware revenues decreased by $59 million to $655 million, primarily due to reduced sales volumes of certain hardware product lines and hardware support contracts[99] - Hardware margin increased to $438 million, with a margin percentage of 67%, up from 61% in the previous year[99] - Hardware expenses decreased by $64 million to $217 million, primarily due to a $57 million decrease in hardware product and support costs[99] Services Business Performance - Services business represented 10% of total revenues on a trailing 4-quarter basis[82] - Services revenues decreased by $120 million to $1.263 billion, with a 14% decline in the Americas region partially offset by increases in EMEA and Asia Pacific[103] - Services expenses decreased by $79 million to $1.066 billion, mainly due to a $65 million decrease in external contractor expenses[103] Investments in Ampere Computing - Total carrying value of investments in Ampere Computing Holdings LLC was $1.5 billion as of August 31, 2024[85] - Oracle invested $75 million in convertible debt instruments issued by Ampere during the three months ended August 31, 2024[85] - Oracle's equity investments in Ampere represent an ownership interest of approximately 29% as of August 31, 2024[85] - Oracle expects Ampere to continue to generate net losses in future periods but remains confident in the long-term potential of Ampere's server chips[85] Operating Expenses and Margins - Total operating margin increased to 30% of revenues in Q1 2025, up from 26% in Q1 2024, driven by higher revenues[90] - Cloud services and license support expenses increased by $418 million due to higher infrastructure and employee-related costs, including stock-based compensation[91] - Research and development expenses rose by $90 million primarily due to higher employee-related expenses[91] - Stock-based compensation totaled $1,007 million in Q1 2025, up from $849 million in Q1 2024, with significant increases in R&D and sales and marketing segments[95] - Amortization of intangible assets decreased by $139 million to $624 million in Q1 2025 as certain assets were fully amortized[93] - Total cloud and license expenses increased by $369 million to $4.193 billion, driven by a $255 million increase in infrastructure expenses and a $75 million increase in employee-related expenses[97] - Research and development expenses remained flat at $1.737 billion, with stock-based compensation increasing by 18% to $569 million[104] - Total research and development expenses increased by $90 million in Q1 fiscal 2025 compared to Q1 fiscal 2024, primarily due to higher stock-based compensation expenses[105] - General and administrative expenses decreased by $35 million in Q1 fiscal 2025 compared to Q1 fiscal 2024, with a $14 million decrease in facilities and related expenses and a $6 million decrease in professional fees[106] - Amortization of intangible assets decreased by $139 million in Q1 fiscal 2025 compared to Q1 fiscal 2024, primarily due to certain intangible assets becoming fully amortized[107] - Acquisition related and other expenses increased by $2 million in Q1 fiscal 2025 compared to Q1 fiscal 2024, driven by a $12 million increase in other expenses partially offset by decreases in business combination adjustments and employee-related costs[108][109] - Restructuring expenses decreased by $65 million in Q1 fiscal 2025 compared to Q1 fiscal 2024, primarily related to the 2024 Restructuring Plan aimed at improving operational efficiencies[111] Financial Position and Cash Flow - Working capital increased slightly to $(8,973) million as of August 31, 2024, compared to $(8,990) million as of May 31, 2024, primarily due to net income during Q1 fiscal 2025[117] - Cash, cash equivalents, and marketable securities increased by $250 million to $10,911 million as of August 31, 2024, compared to $10,661 million as of May 31, 2024, driven by cash inflows from operations[117] - Net cash provided by operating activities increased by $453 million to $7,427 million, a 6% increase compared to the same period last year[118] - Net cash used for investing activities increased by $1.2 billion to $2,765 million, a 77% increase, primarily due to higher capital expenditures[118] - Net cash used for financing activities increased by $1.1 billion to $4,585 million, a 30% increase, driven by higher maturities of senior notes and repayments of commercial paper[118] - Free cash flow for the trailing 4-quarters increased by 19% to $11,271 million, with net cash provided by operating activities at $19,126 million, an 8% increase[119] - Net cash provided by operating activities as a percentage of net income was 174%, compared to 189% in the previous year[119] - Free cash flow as a percentage of net income increased to 103% from 101% in the previous year[119] - Capital expenditures decreased by 5% to $7,855 million for the trailing 4-quarters[119] Regional Revenue Contribution - The Americas contributed 63% of total revenue growth in constant currency, followed by EMEA at 23% and Asia Pacific at 14%[91] Interest and Non-Operating Income - Interest expense decreased by $30 million in Q1 fiscal 2025 compared to Q1 fiscal 2024, due to scheduled repayments of senior notes totaling $2.0 billion in Q1 fiscal 2025 and $3.5 billion in fiscal 2024[112] - Non-operating income increased by $69 million in Q1 fiscal 2025 compared to Q1 fiscal 2024, driven by a $32 million decrease in foreign currency losses and a $49 million decrease in losses from equity investments[113][114] Tax and Income Provisions - Provision for income taxes increased by $285 million in Q1 fiscal 2025 compared to Q1 fiscal 2024, primarily due to an unfavorable jurisdictional mix of earnings and a decrease in tax benefits related to stock-based compensation[115][116] Lease and Debt Commitments - The company's operating lease commitments increased to $36.2 billion as of August 31, 2024, primarily for data centers expected to commence between fiscal 2025 and 2027[121] - The company borrowed $5.6 billion under a new Term Loan Credit Agreement, with the principal balance due on August 16, 2027[121] Stock-Based Compensation and Dilution - The maximum potential dilution from all outstanding stock-based awards as of August 31, 2024, was 6.1%[122] Asset Useful Life Adjustment - Oracle increased the estimated useful lives of its servers from five years to six years, effective at the beginning of fiscal 2025[86]