Q2 2024 Oracle Corp Earnings Call

First Speaker: Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oracle Corporation's second quarter 2024 earnings conference call.

Good afternoon. My name is Anna and I will be your conference operator today at this time I would like to welcome everyone to the Oracle corporations second quarter 2024 earnings Conference 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. If you'd like to ask a question during that time, simply press star followed by the number 1 on your telephone keypad.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question during that time simply press star followed by the number one on your telephone keypad.

And bond you may begin your conference.

Emma: Thank you, Emma. Good afternoon, everyone, and welcome to Oracle's second quarter fiscal year 2024 earnings conference call.

Thank you Amit good afternoon, everyone and welcome to Oracle's second quarter fiscal year 2024 earnings conference call a copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information can be viewed and downloaded from our investor relations.

Speaker Change #3: 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 our Investor Relations website. On the call today are Chairman and Chief Technology Officer Larry Ellison and Chief Executive Officer Saffra Capp.

<unk> website. Additionally, our list of many customers, who purchased Oracle cloud services or went live on Oracle cloud recently will be available from our Investor Relations website on the call today are chairman and Chief Technology Officer, Larry Ellison, and Chief Executive Officer, Safra Cats as a reminder, today's discussion.

As a reminder, today's discussion will include a forward-looking statement.

It will include forward looking statements, including predictions expectations estimates or other information that might be considered forward looking.

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.

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.

These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today.

First Speaker: As a result, we caution you against placing undue reliance on these forward-looking statements.

<unk> 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 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're not obligating ourselves to review.

And we encourage you to review our most recent reports, including our 10-K and 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.

First Speaker: And finally, we are not obligating ourselves to revise our results or at least forward looking statements 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.

As a result or at least forward looking statements 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.

Emma: We had another great quarter. When you look at the top of our financial results table, a few things are very clear. The largest number, cloud services and license support is now 74% of the revenue and it's recurring revenue and it's the one growing by a billion dollars this quarter. The smaller numbers, which are not recurring, now accounts for only 26%.

We had another great quarter. When you look at the top of our financial results table. A few things are very clear the largest number of cloud services and license support is now 74% of the revenue and its recurring revenue and it's the one growing by a bit.

This quarter the <unk>.

Mahler numbers, which are not recurring now account for only 26%.

this is exactly what we told you would happen and it's happening and as this continues.

This is exactly what we told you would happen and it's happening and if this continues total revenue growth will accelerate every year.

Total revenue growth will accelerate every year.

To that point, OCI is now one of the clear drivers of our acceleration.

To that point OCI is now one of the clear drivers of our acceleration.

Emma: Imagine just three years ago, OCI was rarely, if ever, mentioned as a viable hyperscale alternative. Of course, we knew what we had built and we kept talking about it and we knew it was only a matter

<unk> just three years ago OCI was rarely if ever mentioned as a viable hyperscale alternative of course, we knew what we had built and we kept talking about it and we knew it was only a matter of time and now more industry analysts.

And now, more industry analysts are catching on to what customers are choosing.

To what customers are choosing for example, just last week, we were recognized as a leader in the 2023 Gartner Magic quadrant for strategic cloud platform services.

Emma: For example, just last week, we were recognized as a leader in the 2023 Gartner Magic Quadrant for strategic cloud platform service.

Our financial results reflect the customers have figured out that by moving to OCI, they really can get more while paying less. On top of that, we are now the default choice for AI workloads given our unique differentiation and price performance capability.

Our financial results reflect the customers have figured out that by moving to OCI.

Really can get more well paying less on top of that we are now the default choice for AI workloads, given our unique differentiation in price performance capabilities.

Emma: Why specifically are they coming to Oracle Cloud Infrastructure? Well, it's a combination of several.

Why specifically are they coming to Oracle cloud infrastructure, well, it's a combination of several things.

Creating the second generation cloud enabled us to build a much better, more scalable, and more efficient cloud. We understood the limitations of the first generation and engineered very differently.

Creating the second generation cloud enabled us to build a much better more scalable and more efficient cloud.

Understood the limitations of the first generation and engineered.

Very differently.

First Speaker: Second, we know what it takes to run at enterprise scale, performance and security better than I say anyone else. Our 45 year history as the leading enterprise software company gives us unique knowledge of what exactly is required to run mission critical systems.

Second.

We know what it takes to run at enterprise scale performance and security better than I see anyone else. Our 45 year history is the leading enterprise software company gives us unique knowledge of what exactly is required to run.

Mission critical systems.

Baird.

Emma: We recognize that customers need deployment flexibility, rather than just offer public cloud services like our competitors.

We've recognized the customers' need deployment flexibility rather than just offer public cloud services like our competitors. We are the only vendor, which also offers dedicated cloud at customer dedicated region.

We are the only vendor which also offers dedicated clouded customer, dedicated region.

Sovereign Clouds and Alloy, our partner cloud.

Sovereign clouds and alloy our partner clubs and then finally, our belief in the importance of multi cloud offerings will be industry changing.

And then finally, our belief in the importance of multi-cloud.

will be industry changing as these collaborations roll out.

These collaborations rollout.

With all this success and exploding demand, we are working as quickly as we can to get the cloud capacity built out.

With all this success and exploding demand we are working as quickly as we can to get the cloud capacity built out.

Now.

First Speaker: to the Q2 results with total revenue at the midpoint of my constant currency guidance and EPS at the high end of guidance.

The Q2 results with total revenue at the midpoint of my constant currency guidance and EPS at the high end of guidance now as a reminder, currency with one point less helpful than when we gave guidance three months ago.

First Speaker: Now, as a reminder, currency was one point less helpful than when we gave guidance three months ago.

Speaker Change #3: Total cloud revenue, that's SAS plus IaaS, excluding Cerner, was 4.1 billion, up 25%. Including Cerner, total cloud revenue was up 24% at 4.8 billion. With IaaS revenue at 1.6 billion, up 50%. And SAS revenue of 3.2 billion, up 14%.

Total cloud revenue that SaaS, plus Ias, excluding cerner was $4 1 billion up 25%, including Cerner total cloud revenue was up 24% at $4 8 billion with Ias revenue at $1.

6 billion up 50% and SaaS revenue of $3 2 billion up 14%.

Emma: Total cloud services and license support revenue for the quarter was 9.6 billion, up 11% driven again by our strategic cloud applications, autonomous database, and our Gen 2 OCI.

Total cloud services and license support revenue for the quarter was $9 6 billion up 11% driven again by our strategic cloud applications Autonomous database and our Gen. Two OCI.

application subscription revenues, which includes support.

Applications subscription revenues, which includes support.

we're 4.5 billion up 9%. Our strategic back office staff applications now have an annualized revenue of 7.1 billion and we're up 19%.

We're four four.

$4 5 billion up 9%.

Our strategic back office SaaS applications now have an annualized revenue of $7 1 billion and were up 19%.

First Speaker: infrastructure subscription revenues, which includes license support, were $5.2 billion, up 12%.

Infrastructure subscription revenues, which includes license support were five 2 billion up 12%.

First Speaker: infrastructure cloud services revenue was up 50 percent. Excluding legacy hosting services, Gen 2 infrastructure cloud services revenue grew 55 percent with an annualized revenue of 6 billion.

Infrastructure cloud services revenue was up 50%.

Excluding legacy hosting services Gen. Two infrastructure cloud services revenue grew 55% with an annualized revenue of $6 billion.

OCI consumption revenue was up 71 percent.

OCI consumption revenue was up 71%.

Database subscription revenues, which includes database license support, were up 4%, highlighted by Exadata database cloud services revenue, which was up 40%, and Autonomous Database up 26%.

Database subscription revenues, which includes database license support were up 4% highlighted by extra David.

Extra data database cloud services revenue, which was up 40% and autonomous database up 26%.

Emma: Very importantly, as on-premise databases migrate to the cloud, we expect these cloud database services will be the third leg of revenue growth alongside strategic SaaS and Gen 2 OCI.

Very importantly, as on premise databases migrate to the cloud. We expect these cloud database services will be the third leg of revenue growth alongside strategic SaaS and Gen. Two OCI.

First Speaker: Software license revenues were $1.2 billion, down 19% in a tough comparison to last year where it was up 23%.

Software license revenues were $1 2 billion down 19% in a tough comparison to last year, where it was up 23%.

Emma: So, all in, total revenues for the quarter were $12.9 billion, up 4% including Cerner, actually up 6% excluding Cerner.

So all in total revenues for the quarter were $12 9 billion up 4%, including Cerner actually up 6% excluding cerner.

First Speaker: Now shifting to margins, the growth margin for cloud services and license support was 78%.

Now shifting to margins the gross margin for cloud service system license support with 78%.

First Speaker: This is because of the mix between support and cloud, in which cloud is growing much faster than support.

This is because of the mix between support and cloud in which cloud is growing much faster than support.

Speaker Change #44: Support and SAS margins are consistent with last year, while IS gross margins improved

Support and SaaS margins are consistent with last year, well I as gross margins improved substantially.

First Speaker: While we continue to build data center capacity, gross margins go higher as these new cloud regions fill up.

While we continue to build data center capacity gross margins go higher as these new cloud regions fill up.

First Speaker: We monitor these expenses carefully to ensure gross margin percentages expand as we scale. To this point.

We monitor these expenses carefully to ensure gross margin percentages expand as we scale to this point the.

First Speaker: the gross profit dollars of cloud services and license support grew 10% in Q2.

The gross profit dollars of cloud services and license support grew 10% in Q2.

First Speaker: non-GAAP operating income was $5.5 billion, up 7% from last year. The operating margin was 43%, up from 41% last year.

non-GAAP operating income was $5 5 billion up 7% from last year. The operating margin was 43% up from 41% last year as.

First Speaker: As we continue to benefit from economies of scale in the cloud and drive CERN or profitability to Oracle standards, we will not only continue to grow operating income, but we will also expand the operating margin.

As we continue to benefit from economies of scale in the cloud and drive Cerner profitability to Oracle standards, we will not only continue to grow operating income, but we will also expand the operating margin.

First Speaker: The non-GAAP tax rate for the quarter was 19% and non-GAAP EPS was $1.34 in USD, up 11% in USD, and up 9% in constant current.

The non-GAAP tax rate for the quarter was 19% and non-GAAP EPS was $1 34 in USD up 11% in USD and up 9% in constant currency GAAP EPS was <unk> 89 in USD.

Gap EPS was $0.89 in U.S.

At quarter end, we had nearly $8.7 billion in cash and marketable securities and the short-term deferred revenue balance was $8.9 billion, up 1%.

At quarter end, we had nearly eight $7 billion in cash and marketable securities and the.

And the short term deferred revenue balance was $8 9 billion up 1%.

First Speaker: Over the last four quarters, operating cash flow was $17 billion, up 13%. And free cash flow was $10.1 billion, up 20%.

Over the last four quarters operating cash flow was $17 billion up 13% and free cash flow was $10 1 billion up 20% cap.

First Speaker: Capital expenditures were 6.9 billion over the same period as we continue to seek cashflow benefits from our cloud transformation.

Capital expenditures were $6 9 billion over the same period as we continue to see cash flow benefits from our cloud transformation.

our remaining performance obligation or RPO.

Our remaining performance obligations or RP O.

is now over $65 billion, with the portion excluding Cerner up 11% in constant currency.

Yes.

Now over 65 billion with the portion excluding cerner up 11% in constant currency.

First Speaker: We continue to sign large deals with many in the pipeline, approximately.

We continue to sign large deals with many in the pipeline.

Proximately, 48%.

First Speaker: of total RPO is expected to be recognized as revenue over the next 12.

Total RPM is expected to be recognized as revenue over the next 12 months.

First Speaker: CAPEX was $1.1 billion in Q2, as we continue to build capacity for bookings and our customers' growing needs.

Capex was $1 1 billion in Q2, as we continue to build capacity for bookings and our customers' growing needs.

Given the enormity of our pipeline and backlog, I expect...

Given the enormity of our pipeline and backlog I expect.

CAPEX will be somewhere around eight billion this fiscal year, meaning our second half CAPEX will be considerably higher as we bring online more capacity.

Capex will be somewhere around 8 billion this fiscal year, meaning our second half capex will be considerably higher.

We bring online more capacity.

First Speaker: To that point, we now have 66 customer-facing cloud regions live with 45 public cloud regions around the world and another six being built.

To that point, we now have 66 customer facing cloud regions live with 45 public cloud regions around the world and another six being built.

Speaker Change #7: 12 of these public cloud regions interconnect with Azure, and starting next year, customers will be able to run Oracle Database at Azure, on OCI, inside Azure. We also have 10 dedicated regions live and 13 more planned. Nine national security regions and two EU sovereign regions live, with increasing demand for more of each.

12 of these public cloud regions interconnect with Azure and starting next year customers will be able to run Oracle database add hasher on OCI inside Azure.

We also have 10 dedicated regions live and 13 more planned.

Nine national security regions and to EU sovereign regions live with increasing demand for more of each and finally, we have seven alloy cloud regions planned where oracle partners become cloud providers offering customized.

Speaker Change #7: And finally, we have seven alloy cloud regions planned where Oracle partners become cloud providers, offering customized cloud services alongside the Oracle Cloud. And of course, we also have so many, many, many cloud at customer installations.

<unk> services alongside the Oracle cloud and of course, we also have so many many many cloud customer installation.

First Speaker: the sizing and flexibility, the sizing flexibility and deployment optionality of our cloud regions continues to be to be advantages for us in the marketplace.

Sizing and flexibility decisive flexibility and deployment optionality of our cloud regions continues to be to be advantages for us in the marketplace.

Speaker Change #7: And finally, 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.

And finally, 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 the dividend. This quarter, we repurchased 4 million shares for a total of 450 million.

First Speaker: This quarter, we repurchased 4 million shares for a total of $450 million. And in addition, we paid out dividends of $4.1 billion over the last 12 months.

<unk>.

And in addition, we paid out dividends of $4 1 billion over the last 12 months and the board of directors declared a quarterly dividend of <unk> 40 per share.

First Speaker: and the Board of Directors declared a quarterly dividend of 40 cents per share.

Speaker Change #7: Now let me turn to my guidance for Q3, which I will review, as always, on a non-GAAP basis.

Now, let me turn to my guidance for Q3, which I will review as always on a non-GAAP basis.

If currency exchange.

Speaker Change #9: change rates remain the same as they are now, currency should have little effect on total revenue and EPS. However, the actual currency and.

Exchange rates remain the same as they are now currency should have little effect on total revenue and EPS. However.

The actual currency impact may be different.

First Speaker: So, because of that, all the numbers I give you are the same for constant currency and U.S.

So because of that all the numbers I gave you are the same for constant currency and USD total revenues, including Cerner are expected to grow from 6% to 8%.

Speaker Change #7: Total revenues, including Cerner, are expected to grow from 6% to 8%.

First Speaker: total revenues excluding Cerner are expected to grow from 8% to 10%.

Total revenues, excluding cerner are expected to grow from 8% to 10%.

First Speaker: total cloud revenue excluding Cerner is expected to grow from 26 to 28%.

Total cloud revenue, excluding cerner is expected to grow from 26% to 28%.

Speaker Change #9: non-GAAP EPS growth is expected to grow between 10% and 14% and be between $1.35 and $1.39.

non-GAAP EPS growth is expected to grow between 10% and 14% and be between $1 35 and $1 39.

First Speaker: My EPF guidance for Q3 assumes a base tax rate of 19 percent. However, one-time tax events could cause actual tax rates to vary.

My EPS guidance for Q3 assumes a base tax rate of 19%. However, one time tax events could cause actual tax rates to vary.

First Speaker: Finally, I remain firmly committed to our fiscal 26 financial goals for revenue, operating margins, and EPS growth.

Finally, I remain firmly committed to our fiscal 2006 financial goals for revenue operating margins and EPS growth.

Larry: And with that, let me turn it over to Larry for his comments.

And with that let me turn it over to Larry for his comments.

Larry: Thank you, Sacra. The demand for Oracle's cloud infrastructure and generative AI is consistently increasing quarter after quarter. Oracle's total remaining performance obligations, or RPO, has now reached $65 billion, slightly more than our annual revenue.

Yes.

Thank you Safra.

For Oracle's cloud infrastructure and generative AI.

Is consistently increasing quarter after quarter Oracle's total remaining performance obligations or IPO has now reached $65 billion slightly.

Slightly more than our annual revenue.

Speaker Change #9: In response to this sharply increasing demand, Oracle is in the process of expanding 66 of our existing cloud data centers.

In response to this sharply increasing demand Oracle is in the process of expanding 66 of our existing cloud data centers and building 100, new cloud data centers.

and building 100 new cloud data.

We have to build 100 additional cloud data centers because there are billions of dollars more in contracted demand than we currently can supply. Cloud infrastructure demand is huge and growing.

We have to build 100 additional cloud data centers.

There are billions of dollars more in contracted demand than we currently can supply.

Cloud infrastructure demand is huge and growing.

And an unprecedented rate.

First Speaker: In the next few weeks, we expect to sign a couple more billion dollar cloud infrastructure contracts.

And the next few weeks, we expect to sign a couple of more billion dollar cloud infrastructure contracts.

First Speaker: Gartner recently named Oracle OCI as a leader in cloud platform and infrastructure services.

Gartner recently named Oracle OCI is a leader in cloud platform and infrastructure services.

First Speaker: The demand for cloud infrastructure services and new Oracle Cloud data centers is broad-based, driven not only by...

The demand for cloud infrastructure services, and new Oracle cloud data centers is broad based driven.

Driven not only by January of the AI customers, but also by a nation states volume sovereigns Oracle cloud data centers.

but also by nation states, buying sovereign Oracle Cloud data.

plus large banks, telecommunications companies, and industrial companies on dedicated cloud data centers, dedicated Oracle cloud data centers.

Plus large banks telecommuting telecommunications companies and industrial companies buying dedicated cloud data centers dedicated Oracle cloud data centers.

And perhaps most interestingly.

First Speaker: demand from other hyperscalers and other cloud service providers co-locating and connecting their clouds with Oracle Cloud Data Center.

Demand from other hyper scaler.

And other cloud service providers co locating and conducting their clouds with Oracle cloud Datacenters.

Customers don't want clouds to be walled gardens.

Customers don't want clubs to be walled gardens.

In the next few months, we will turn on 20 new Oracle Cloud data centers.

And the next few months, we will turn on.

<unk>, New Oracle cloud data centers co located with and conducted to Microsoft Azure as a part of our joint multi cloud initiative.

Speaker Change #11: co-located with and connected to Microsoft Azure as a part of our joint multi-cloud initiative.

Speaker Change #9: These 20 new multi-cloud data centers will house over 2,000 full racks of Exadata database machines.

These 20, new multi cloud data centers will house over 2000 foot racks of extra data database machines.

designed to meet head-up demand for the Oracle Cloud Database.

Volume to meet pent up demand for the Oracle cloud database.

We're able to build new data centers rapidly and operate them inexpensively because all of our data centers are architecturally identical, highly automated with an identical high performance RDMA network, autonomous services, and applicants.

We were able to build new data centers rapidly and operate them inexpensively because all of our data centers are architecturally identical highly automated with an identical high performance Rdna network autonomous services and applications Oracle cloud data centers.

Oracle Cloud Datacenters vary only by scale.

<unk> only by scale.

Again, several nation states have ordered multiple sovereign data centers to be built within their countries so that they can move their government, healthcare, and commercial workloads to the Oracle Cloud.

Again, several nation states have ordered multiple sovereign data centers, we built within their country. So that they can move their government health care and commercial workloads to the Oracle cloud.

Speaker Change #9: These new countries include Japan, Italy, Saudi Arabia, Bangladesh, New Zealand, and others.

New countries, including Japan, Italy, and Saudi Arabia, Bangladesh, New Zealand and others.

Some of the world's largest banks, telecommunications and industrial.

Some of the world's largest banks telecommunications and industrial companies have also contracted with us to build Oracle cloud data centers dedicated entirely to them. So that they can migrate their workloads to an Oracle cloud data center. These.

have also contracted with us to build Oracle Cloud Data Centers dedicated entirely to them so that they can migrate their workloads to an Oracle Cloud Data Center. These companies.

These companies include Nomura.

Speaker Change #10: Vodafone, Telecom Italia Mobile, Saudi Telecom, a huge Korean conglomerate, and a huge U.S. defense contract.

Vodafone Telecom Italia Mobily.

Woody Telecom, a huge Korean conglomerate and a huge U S defense contractor visa.

Larry: These are but a few examples that demonstrate the diversity of the growing demand for Oracle's highly differentiated Gen2 cloud infrastructure and data center technology. Back to you, Ken. Thank you, Larry. Emma, if we could

These are but a few examples that demonstrate the diversity of the growing demand for oracle's highly differentiated Gen. Two cloud infrastructure and data center technology back to you again.

Thank you Larry and if we could please poll the audience for questions.

Thank you.

Speaker Change #11: As a reminder, if you'd like to ask a question, press star followed by the number one on your telephone keypad.

As a reminder, if you'd like to ask a question press star followed by the number one on your telephone keypad.

Speaker Change #10: Your first question today comes from the line of Ben Ritzes with Melius Research. Your line is open.

Your first question today comes from the line of.

Ben Reitzes with Melius Research your line is open.

Hey, thanks a lot. It's great to be speaking with you this afternoon. Do you mind going through your thoughts on the OCI trajectory from here and how you feel backlog will play out into revenue? And perhaps you can comment also, is the acceleration potential that you guided for due to getting more GPUs and more AI backlog moving into revenue? Thanks a lot.

Hey, Thanks, a lot it's great to be speaking with you. This afternoon.

Do you mind going through your thoughts on the OCI trajectory from here.

And.

How you feel backlog will play out into revenue.

Perhaps you can comment also is the acceleration potential that you guided for due to getting more gpus.

And more AI backlog moving into revenue thanks, a lot.

Okay.

Speaker Change #10: Larry, you want me to take it or you know, either one after you tell me.

Larry you want me to take it or you know either one safra you tell me.

Speaker Change #9: how would I get started? So where do we expect OCI to go from here? Frankly, the only limiting factor is our ability to get the data centers handed over and filled up fast enough.

Well, how would I get started.

Okay.

Correct.

Where do we expect OCI to go from here frankly, the only limiting factor is our ability to get the data centers handed over and filled up fast enough.

Speaker Change #11: This quarter alone, we're talking about hundreds of millions of dollars that we would have been able to recognize if our capacity was available. So, the reality is, as we roll out, and we've got just so many moving parts, as you can hear from us, we have a lot of capacity coming online.

This quarter alone, we're talking about hundreds of millions of dollars that we would've been able to recognize if our capacity was available. So the reality is as we roll out and we've got just so many moving parts as you can hear from US we have a lot of capacity coming on.

Line and and as you can as you can see in my Capex guidance, we expect OCI to just grow astronomically frankly.

Speaker Change #10: And as you can see in my CAPEX guidance, we expect OCI to just grow astronomically, frankly. It is the ideal infrastructure for so much use. And of course, also, as more GPUs become available and we can put those in, we have just a really unlimited amount of demand. Larry, I don't know if you want to say...

Is it is the ideal infrastructure for so much use and of course also as more.

Gpus become available.

And we can put those and we have just.

Really unlimited amount of demand.

Larry I don't know if you want to say anything else.

Larry: Yeah, well, again, in the next few weeks, I mentioned we're going to sign two additional contracts right around a billion dollars.

Yes.

A few weeks I mentioned, we're going to sign two additional contracts right around $1 billion.

Speaker Change #9: I mean, the backlog is growing astronomically, I think it's the word SACRE used, and that's accurate. There's no reason why, you know, OCI grew 50% this quarter. I think OCI is going to get much bigger, and actually the growth rate will be above 50%, I believe, as these data centers come along.

I mean, the backlog is growing astronomically.

It works out for us.

That's accurate.

There is no reason why.

OCI grew 50% this quarter I think is.

This is going to get much bigger than actually the growth rate will be above 50% I believe.

As these data centers come online.

Speaker Change #9: We think we can build a lot of these data centers very quickly. By the way, again, I emphasize, it's not just Gen-AI demand.

We think we can build a lot of these data centers very quickly by the way, but again I emphasize it's not just <unk> demand.

There is huge pent-up data, you know, cloud database demand.

There is huge pent up data.

Cloud database demand there is huge demand overseas for sovereign cloud, where people governments haven't been able to move their workloads on a lot of those are or government Oracle workloads. They haven't been able to move their workloads to the cloud I mean, there are literally.

There's huge demand overseas for sovereign clouds where governments haven't been able to move their workloads.

Speaker Change #12: On a lot of those are or or government Oracle workloads. They haven't been able to move their workload to the cloud. I mean, there are literally.

Speaker Change #11: I don't know, 5, 6, 7 large companies in Japan that will be building at least two Oracle data centers each. So again, the demand is extraordinary. We can build the data centers relatively fast. And I expect the OCI growth rate to be over 50% for a few years.

I don't know 567.

Large companies in Japan that will be.

Building a building at least two datacenters Oracle data centers each so.

Again, the demand is extraordinary we can build the data center is relatively fast.

And I expect the OCI growth rate to be over 50%.

Few years.

Speaker Change #10: Yes, we're not demand limited in any way right now. Thanks a lot.

Yes, we're not demand limited in any way right now.

Thanks, a lot the SaaS for Adler I appreciate it.

Okay.

Speaker Change #11: Your next question comes from the line of John D'Souci with Guggenheim. Your line is open.

Your next question comes from the line of John <unk> with Guggenheim. Your line is open.

Yeah.

John D'Souci: Thank you. Thanks for the question. Thanks, Larry, for those comments on the future OCI growth.

Thank you. Thanks for the question Thanks, Larry for the San Francis comments on future OCI growth.

Speaker Change #11: So since Ben asked about the growth, and maybe I'll take a step back on the other part of.

So thats been asked about the growth and maybe ill take a step back on the other the other part of of all of this and Thats the profit side.

Speaker Change #17: of all this. And that's the profit side. Per Larry's comments, you're building out a lot of capacity and Safra's comments agree with that, with the CapEx growth. But Clay's also spoken about the time it takes to build out those AI superclusters. And I know that's not the only AI workloads you're doing, but that sounds like some pretty exciting stuff. And it takes time before you get revenue.

<unk> comments Youre building out a lot of capacity in safra's comments with that with the with the Capex group.

But <unk> also spoken about the time it takes to build out those AI super clusters, and I know thats not the only AI workloads, youre doing but that sounds like some pretty exciting stuff.

It takes time before you get revenue.

Speaker Change #9: I realize you're also seeing ramp up of those what I'll call core OCI deals like Uber.

I realize youre also seeing ramp up of those what I'll call core OCI feels like Uber.

Speaker Change #9: and you actually get revenue from them over time. But how should we think about cloud gross margins over time in this context? With both those things, there's a lot happening here.

And you actually get revenue from them over time, but how should we think about cloud gross margins overtime in this context with both those things there's a lot happening here.

Speaker Change #10: Yes and I'm really glad you asked. I'm really glad you asked because one of the lines that we show you even though I give you more more detail is I show you a number that is a mix of cloud and support and obviously support

Yes, and I'm really glad you asked.

I'm really glad you asked because one of the lines that we show you, even though I can give you more more detail is.

Show you a number that is a mix of cloud and support.

And obviously support is.

Speaker Change #9: extremely profitable because of the structure of the way it works and because we are at such a large

Extremely profitable because it is because of the structure of the of the way it works and because we are at such a large scale, but the reality is that our cloud businesses are also very profitable our SaaS business, our SaaS cloud business is.

But the reality is that our cloud businesses.

are also very profitable. Our SaaS business, our SaaS cloud business is very profitable and our IaaS, our OCI business is

Very profitable and our Ias or OCI business is improving profitability as it grows and so the target gross margins for it are much higher and I think you expect because you're probably comparing it.

improving profitability as it grows.

And so the target growth margins for it are much higher than I think you expect because you're probably comparing it to some of the more pure play cloud folks who somehow don't end up making as much money in all of this. As we grow, our gross margin percentage goes

To some of the more pure play cloud folks, who who somehow don't end up making as much money in all of this are as we grow our gross margin percentage goes up.

Speaker Change #11: So yes, we make a lot of investments and we'll be making a lot of investments.

Oh, yes, we make a lot of investments and we will be making a lot of the investments.

Larry: but our profitability continues to go up. Because once the worst moment is at the moment where the data center is full of computers and you don't have any tenants that first day, but that's not actually how we work. Yes, we have the floor space.

Our profitability continues to go up because once the date the worst moment is at at the moment, where the data center is full of computers and you don't have any tenants that first day, but that's not actually how we work yes, we.

<unk> the floor space, but we grow in pieces. Unlike some of the others that they have to do a full out build out and put everything there before they have a penny of revenue that's not how we work, we and more and more of our.

Speaker Change #11: But we grow in pieces, unlike some of the others that they have to do a full out, build out and put everything there before they have a penny of revenue. That's not how we work. We and more and more of our, so we start small and.

So we start small and build up and that allows us to match, our spending with the revenues much better and that's because we have that engineering deployment flexibility that the.

Larry: and build up. And that allows us to match our spending with the revenues much better. And that's because we have that engineering deployment flexibility that, you know, the first generation folks don't have. I don't know, Larry, if you want to add anything to that. Yeah, I do. I think one thing is.

The first generation folks don't have I don't know Larry if you want to add anything to that yes, I do I think one thing is very important we are much more highly automated than the older data centers. So.

Larry: Very important. We're much more highly automated than the older data.

Speaker Change #11: So to give you an idea, to run Oracle Cloud, we have to keep track of all of our customers, how much they're using. We have to have a variety of databases and applications that run the cloud. Those databases are all the Autonomous Database. We have no labor associated with those databases.

To give you an idea of Oracle cloud to run Oracle cloud yet we have to keep track of all of our customers how much they're using.

We have to have a variety of databases and applications that run in the cloud databases.

Databases are all the economists database, we have no labor associated with those databases.

All completely automated.

Our installations, when we bring up a new cloud you plug it in.

The process of bringing it up is largely automated.

Speaker Change #11: There aren't a lot, you know, lots and lots of people in the data center to bring it up or, and there certainly aren't lots and lots of people in the data center to run it every day. We focus on autonomous services. Our Linux, our operating system is fully autonomous. There's no labor associated with running it.

There arent a lot lots.

Lots and lots of people in the data center to bring it up.

And there are certainly arent lots of lots of people in the data center to run it every day.

We focus on autonomous services are Linux, our operating system is fully autonomous there's no labor associated with running it.

Speaker Change #11: There's certainly labor associated with building the software, but not running the software. It doesn't cost us more to run a hundred data centers than it costs us to run ten in terms of database DBAs or people running Oracle Autonomous Linux.

There are certainly labor associated with building the software, but not running the software.

It doesn't cost us more to run 100 data centers and it cost us to run in terms of database DBA or people running Oracle Autonomous Linux.

Speaker Change #11: So we have a very different model than our old data centers or our competitor's data.

So we have a very different model than.

Our old data centers or our competitive our competitors datacenters.

Speaker Change #26: We can run these things, we can bring them up relatively quickly, and we can run them very inexpensively and efficiently. One last thing about being autonomous, the fact that it's automated. There are far fewer errors, and there are far fewer security vulnerabilities because the system is completely self-driving.

Right.

We can run these things that we can bring them up relatively quickly and we can run them very inexpensively inefficiently, one last thing about being autonomous. The fact that it's automated there are far fewer errors and there are far fewer security vulnerabilities because the system is completely self driving.

Speaker Change #24: If I might, Safrae, go back to something you said. Is it fair to assume that OCI gross margins have consistently grown over time, quarter to quarter, okay?

If I if I might.

Go back to something you said is it fair to assume that OCI gross margins have consistently grown over time.

Quarter to quarter, Okay, and then maybe.

Yes, and then and then as you know.

And then, and then is it, and I.

And I got to growing a lot okay.

Grown a lot, okay. And then finally, what Larry just said about the database, Safra, I've heard you say at times, we're at the beginning of the beginning of the transition of the database to cloud. So, I know you have database in cloud today, but that migration of the on-prem, that's still...

And then finally the.

What Larry just said about the database Safra I've heard you say a times were at the beginning of the beginning of the transition of the database to cloud so.

I know you have database and cloud today, but.

That migration of the on Prem that's still.

Safra: still to come. Yeah, it is really still to come. We're talking about tens of billions of dollars when it comes over. So it's starting to come.

So.

Yes, it is really still to come.

We're talking about.

The billions of dollars when it comes over so it's starting to come.

Speaker Change #11: but we haven't been in a place to receive it all on mass. And customers have to get comfortable with it. And also multi-cloud has to really roll out and that's gonna be another piece of it. So customers are gonna have.

But we haven't been in the place to receive it all on math and customers have to get has to get comfortable with it and also multi cloud has to really roll out and that's going to be another piece of it so customers who is going to have so many excellent choices. They can go.

Speaker Change #11: so many excellent choices. They can go in the public cloud. They can go in OCI. They can go in their cloud of customer. They can go in OCI at Azure is one possibility. So there's just, it is the absolute beginning. Because remember, the Oracle database.

In the public cloud they can go in OCI. They can go in one in there.

A customer they can go in OCI at at <unk>.

<unk> is one of the one possibility.

There is just it is the absolute beginning because remember the Oracle database is not a toy it's a mission critical system. If it just disappeared at companies the whole planet would come to a standstill and so this is coming and it's.

Speaker Change #26: is not a toy. It's a mission-critical system. If it just disappeared at companies, the whole planet would come to a standstill. And so this is coming and it's just the beginning. So you see what's going on with OCI. No one believed us this was possible. Now here we're at. And then right behind it is going to come the database.

Just the beginning so you see what's going on with OCI No. One believed us. This was possible now here, we're at and now and then right behind it is going to come the database.

And that's going to be and for Larry's comments and I'll stop talking.

Speaker Change #26: And for Larry's comments, and I'll stop talking, but for Larry's comments, the database gross margins, given the autonomous nature of it, we should expect that to be different than the OCI core infrastructure as a service gross margin.

Larry's comments.

The database gross margins given Dr. Tommy Thomas nature of it.

We should expect that to be different than the OCI core infrastructure as a service gross margin.

Speaker Change #42: Absolutely. I don't want to go into detail, but the Autonomous Database is one autonomous, there's no labor associated with it, but it's also the only database that's fully elastic. In other words, if you're not using it.

Yes.

Absolutely, yes, the database you have.

I don't want go into details of the autonomous database is one autonomous there's no labor associated with it but it's also the only database it's fully elastic in other words, if youre not using it.

Speaker Change #11: no one's using it. I mean, there are no cores, there's no cores occupied. It goes back into the pool. So if you as a customer aren't doing something with the database, literally no cores are occupied. It's very different than an Amazon database where you allocate. I always need 64

No one is using it I mean, there are no quarters Theres no called <unk>. It goes back into the pool. So if you use the customers arent doing something with the database literally no cores are occupied it's very different than an Amazon database, where you allocate.

I always need 64 cores, we're 64 processors to run my database and Thats seven days, a week 24 hours a day.

Speaker Change #26: or 64 processors to run my database and that's seven days a week, 24 hours a day. We only charge you for what you use when you're using it. We only consume what you use when you're using it. Otherwise, it goes to other customers.

Only we only charge you for what you use when youre using it we only consume and what you use when youre using it otherwise it goes to other customers. It's totally different that allows us to have dramatically higher gross margins.

Speaker Change #9: it's totally different. That allows us to have dramatically higher growth.

Speaker Change #24: Thank you very much. Sorry for the several part question, but thank you.

Thank you very much sorry for the several part question, but thank you.

Sure.

Speaker Change #25: Your next question comes from the line of Mark Mohler with Bernstein. Your line is open.

Your next question comes from the line of Mark Modeler with Bernstein. Your line is open.

Mark Mohler: Thank you very much for taking the question. I really appreciate it. I want to change gears a little bit and turn to Cerna, which people don't really focus on that much. Cerna license revenue has been down, likely in preparation for customers shifting to SAS. But Oracle does not yet have a full multi-tenant scalable Cerna SAS solution. So what I'd like to ask is a couple parts. How should we think about the timing of one, the availability of? Yep.

Thank you very much for taking the question I really appreciate it.

Wanted to change gears, a little bit and turn to Cerner.

People don't really focus on that much.

Certain of license revenue has been down likely in preparation for customer shifting to SaaS, but oracle does not yet have a full multi tenant scalable certain a SaaS solution.

So what I'd like to ask US a couple of parts how should we think about the timing of one the ability of yep.

Speaker Change #34: That's not correct. So Cerner has several pieces and I believe about half the customers will be moved, half of the millennium customers. You can think of Cerner as just automating hospitals like Epic.

That's not correct. So oh, Okay go ahead several people.

The center has several pieces.

Okay.

I believe about half the customers will be move after the millennium customers. You can think of Cerner is just automating hospitals like epic.

Speaker Change #25: And that's a product called Millennium. And about half of those customers will move to OCI by February . Half of all existing customers will be in Oracle OCI.

And that's a product called millennium and about half of those customers would move to OCI by February Apple all existing customers will.

It'd be an Oracle OCI, but we've also developed.

Speaker Change #10: But we've also developed something that began at Cerner and we have finished now, we completely rewritten it pretty much. Well, we're in the process, we will finish next calendar year, but it is largely rewritten and available right now. Something called our Health and Data Intelligence Platform.

It's something that began at Cerner and we have finished now and will be completely rewritten it pretty much well we're in the process we will finish.

Next calendar year, but it is largely rewritten and available right now.

Something called our help.

Our help the data intelligence platform.

Speaker Change #11: And it was known as sort of healthy intent. And that's for public health. That's for population scale public health management. Again, it's sold to US states.

Was known as <unk> is helping us out and Thats, where public health, that's where that's where population scale public health management again, it's sold to U S States.

Speaker Change #14: It's sold to Australian states, it's sold to European countries, it's for managing population health. Remember during COVID when we didn't know, New York thought they were running out of hospital rooms, but they really weren't, but no one knew. Because no one kept track of our inventory of hospital rooms, there was no national view. No one knew how many people contracted COVID yesterday. We didn't have that national view. We have that national view, it is fully staffed.

Two Australians dates it's sold in European countries. It is for managing population health remember during Covid. When we didn't know New York thought they're living out of hospital rooms, but they really werent, but no one knew because no one knows and kept.

Kept track of our of our our inventory of hospital rooms. There is no national view no one knew how many people contracted.

Yesterday, we didn't have that national view, we have that that national view it as fully SAS.

And it is it is available right now, so.

And it is it is available right now so some of the pieces some of the Cerner pieces are coming online and other <unk>.

Some of the pieces, some of the Cerner pieces are coming online. Other Cerner pieces are moving more gradually, but they're all going into OCI and they're all very quickly moving from a license basis to a subscription basis.

Pieces are moving more gradually but theyre all going into OCI.

And there are and they are all very quickly moving from a license basis to a subscription basis.

Speaker Change #28: So, that's very helpful. So, that starts to answer the question I was asking was how should we think about the timing of the transition? Millennium, you're saying, is going to be an OCI. Is that going to be a fully SaaS version? When will the rest of the solutions be fully SaaS? And how should we think about the revenue lift as the license and maintenance moves to the cloud, to SaaS?

So that's very helpful. So that starts to answer the question I was asking was how should we think about the timing of the transition millennium Youre, saying is going to be an OCI is that going to be a fully SaaS version when will the rest of the solutions be fully SaaS and how should we think about the revenue lift as our license and maintenance moves to the cloud to SaaS.

Speaker Change #10: So it will be fully in OCI and SAS, but it will not be the new, we are rewriting, we are replacing Millennium a piece at a time, not a big lift and shift, but we are upgrading and modernizing Millennium a piece at a time. And different pieces will be available starting next year.

So it will it will be fully in OCI and.

Got it.

It will not be the new <unk>.

We are rewriting, we replacing millennium a piece at a time not a big lift and shift, but we are upgrading and modernizing millennium a piece at a time and different pieces will be available starting next year.

Speaker Change #26: And so, Cerner customers will be getting new features and capabilities as a part of Millennium, as Millennium moves to OCI. And again, half the customers will be in OCI by February . So, we're making a lot of progress. At the same time, we're adding a lot of new products to Millennium, like the public

And so with Cerner customers will be getting new features and capabilities as a part of a millennium as millennium moves to OCI and again half the customers will be in OCI by February So, we're making a lot of progress at the same time at the same time, we're adding a lot of new products to millennium.

Public public health products, but we're also adding much of new products for pharmaceutical companies.

Speaker Change #11: but we're also adding much of new products for pharmaceutical companies, we're adding additional products for hospitals to keep track of their inventory, for hospitals to manage their workforce. Really what we think of is our health division in Oracle has products for the entire healthcare ecosystem.

We're adding additional products.

For a hospital to keep track of their inventory for hospitals to manage their workforce really what we think of as our health.

Health Division and Oracle.

As products for the entire health care ecosystems.

Speaker Change #11: payers, including governments, including insurance companies, providers, including ambulatory clinics and hospitals, pharmaceutical companies, research companies, and public health departments in national governments and state governments.

Here's including governments, including insurance companies providers, including ambulatory clinics and hospitals.

Pharmaceutical companies research companies.

In public.

Public health departments, and national governments and state governments. So we are we have products bring entire health care ecosystem, which is a much larger footprint than <unk> ever had so we are going after a much larger market than cerner was so we expect cerner to be a growth story.

Speaker Change #11: So we have products for the entire healthcare ecosystem, which is a much larger footprint than Cerner ever had. So we are going after a much larger market than Cerner was. So we expect Cerner to be a growth story. I guess that's what I'm getting.

I guess, that's what I'm getting at.

Speaker Change #57: Right, that's where I'm where I'm going with the question. Yeah, so let me just tell you, I think for the year for the full fiscal year Turner will be sort of negative 1 to 2 points, but that will be it. It'll, it'll end this fiscal year and from then on, it will be a growth story. So it will no longer be a drag on the on the on Oracle. Growth. Okay. Perfect.

Great, that's what I'm, where I'm going with the question Yeah. So let me just tell you I think for the year for this full fiscal year cerner will be sort of negative one to two points, but that will be it it'll it'll end this fiscal year and from then on it will be a growth.

Story, so it will no longer be a drag on the on the on Oracle.

Okay.

Perfect. Thank you so much I really appreciate it was very helpful.

Great.

Speaker Change #31: Your next question comes from the line of Siti Panigrahi with Mizuho. Your line is open.

Your next question comes from the line of Cte <unk> with Mizuho. Your line is open.

Siti Panigrahi: Thanks for taking my question, Larry and Safra, many mission-critical workloads will run on Oracle Database and you have a sticky maintenance revenue stream.

Thanks for taking my question.

Larry Safra.

Many mission critical workloads run on Oracle database, and you have a sticky mentioned I'm, sorry of and his team and.

Speaker Change #24: And we expect, you know, Oracle will start migrating those database workloads to OCI, which will bring 3x revenue uplift, which you call even the third-leg uplift.

And we expect Oracle and start migrating those database workloads to OCI, which.

Which will bring three X revenue uplift would you call the third leg up cloud growth.

Speaker Change #33: You also have now OCI inside Azure Data Center. So my question is, how does this being multi-cloud change your outlook for Oracle?

Also of note was.

<unk> insight as your data center.

So my question is how does this being multi cloud change your outlook for Oracle database and what are you hearing from your database customer in terms of their comfort and sleep at night preparedness to move their Oracle database to the cloud.

Speaker Change #24: And what are you hearing from your database customer in terms of their comfort and preparedness to move their Oracle database to the cloud, either OCI or Azure?

Uh huh.

Larry: Larry, why don't you start with this? No, yes, I do. OK. You go. OK, thanks. Our customers are very happy with the idea. Remember, Oracle started as one of the first databases that ran everywhere. We ran on IBM mainframes. We ran on personal computers. We ran on digital equipment, if you remember them. Many computers. On abroad, NHP mini computers. We ran on every operating system on every computer.

Larry what is operating.

No, yes, I do.

Okay. Thanks.

The our customers are very happy with the idea or Oracle has started is one of the first databases that ran everywhere.

We ran an IBM mainframe, we ran on personal computers, where he ran on digital equipment. If you remember them mini computers on abroad and HP. Many computers. We ran we ran on every operating system on every computer now in cloud. They are very happy to see that they can not only get the Oracle database.

Speaker Change #48: Now, in cloud, they're very happy to see that they can not only get the Oracle database at OCI, they can also get the identical capability from Microsoft. Microsoft, we are building...

At OCI.

They can also get the identical capability.

From Microsoft Microsoft We are building.

data centers for Microsoft inside Azure.

Data centers for Microsoft inside Azure and Microsoft It wasn't us that decided 2000 was the right number of exited of machines.

And Microsoft, it wasn't us that decided 2000 was the right number of Exadata machines to install in those 20 data centers. That was Microsoft.

To install and those 'twenty 'twenty data centers that was Microsoft the demand is enormous they want the same but our customers want the same flexibility they've always had with oracle they want to use oracle they want a transition, but if they are using the Microsoft cloud they want to run the best and latest and greatest version of Oracle.

Speaker Change #44: The demand is enormous. They want the same flexibility. Our customers want the same flexibility they've always had with Oracle. They want to use Oracle. They want to transition. But if they're using the Microsoft Cloud, they want to run the best and latest and greatest version of Oracle in the Microsoft Cloud. They'd want to do that in other clouds as well.

In the Microsoft cloud, they want to do that and other other clouds as well.

Speaker Change #44: Some of them, it's very important to have it in Japan, for example. It's very important for some of that data remaining in Japan.

<unk>.

Some of them, it's very important to have it in Japan for example is very important.

Sure.

Some of that data remaining in Japan, one of the things the Oracle database does is it run.

Speaker Change #11: One of the things the Oracle database does is it runs the Tokyo Stock Exchange.

<unk> stock exchange and it does that in a dedicated data center run by Nomura Research.

Speaker Change #11: And it does that in a dedicated data center run by Nomura Research.

Speaker Change #46: who supplies financial services and Oracle cloud, Oracle Gentoo cloud services to the Japanese market. There are a number of other partners in Japan that are going that same direction.

Uh-huh supplies financial services, and <unk> and Oracle cloud Oracle Gen. Two cloud services to the Japanese market. There are a number of other partners in Japan that are going that same direction. So they used to in Japan. They used to buy the Oracle database from Nomura, where they used to buy it.

Speaker Change #26: So they used to, in Japan, they used to buy the Oracle database from Nomura or they used to buy it from Fujitsu or they bought it from Hitachi or they bought it from NEC. They wanted that Oracle database. It is quite natural for all of those companies to build their own, have their own dedicated regions of OCI and sell to their and support their customers out of those regions.

From Fujitsu, where they bought it from Hitachi or they bought it from any seat they want that Oracle database. It is quite natural for all of those companies to build their own have their own dedicated regions.

Of OCI.

And sell to their end support their customers out of those regions. That's the flexibility we allow that said something that nobody else can do we can build these regions for our partners. We can build these regions for sovereign states. We can build these regions for large companies that want to have that don't want.

Speaker Change #26: That's the flexibility we allow. That's something that nobody else can do. We can build these regions for our partners. We can build these regions for sovereign states. We can build these regions for large companies that want to have.

Speaker Change #11: that don't want their data commingled with anyone else's data. They want a public cloud, they want a full OCI, they want every part of OCI.

Their data co mingled with anyone else that they want they want a public cloud they want a full OCI. They want every part of OTI.

Speaker Change #44: but they don't want anyone else in their region. They want it to be theirs and theirs alone. We can do that, nobody else can.

But they don't want anyone else and that in their region. They wanted to be there isn't there is a loan we can do that nobody else can.

Next question please Laurie.

Speaker Change #49: Your next question comes to the line. That means literally any way you want to get Oracle, any way you want to get Oracle, you'll be able to get it. It'll be a little bit back to the future. And we think the impact on demand, on database demand, we're seeing it already. Let me close with 2,000 Exadata reps.

Your next question comes from the line, let me summarize does that mean that means literally any way you want to go to Oracle any way you want to get Oracle, you'll be able to get it it'll be a little bit a little bit back to the future and we think the impact on demand.

Database demand, we're seeing it already let me close with 2000 extra data.

Exited at rack.

That.

Speaker Change #35: that's a stunning number in terms of how many customers you can put on that. That's tens of thousands of customers you can put on that much hardware. Thanks, Larry.

That's a stunning number in terms of how many customers you can put on that.

Tens of thousands of customers you can put up put on my hardware.

Hardware.

Thanks for that color.

And that is Microsoft alone Okay.

Speaker Change #42: Your next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.

Your next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.

Alex zuin: Hey, guys. Thanks for taking the question. I wanted to ask around some of the Gen AI functionality inside of the applications portfolio, specifically Fusion and NetSuite. Any update or uptick that you're seeing or can share around some of your partnerships around Cohere, maybe any early feedback from the field that informs incremental value capture, whether or not it's starting to resonate either in the form of

Hey, guys. Thanks for taking the question I wanted to ask around.

Some of the Gen AI functionality inside of the applications portfolio, specifically fusion unnecessarily.

Any update or uptake that youre seeing or can share around some of your partnerships around the coke here, maybe any early feedback from the field that informs incremental value capture.

Whether or not it's starting to resonate either in the form of increased migration activity increased market share gains were increased monetization opportunities around the application portfolio.

Speaker Change #11: increased migration activity, increased market share gains, or increased monetization opportunities around the application portfolio.

Speaker Change #46: Yeah, well, we're using it every place. Perhaps the most stunning is our new tele... Again, I mentioned it a minute earlier that we're doing a lot of things that Cerner never did what is now called Oracle Health. One of those things is our new telecommunication module summarizes a consultation between a doctor and a patient.

Yes.

We're using it every place.

Perhaps the most stunning is our nutella again mentioned amendments at Cerner earlier that we're doing a lot of things that that certainly never did.

What is now called Oracle health one of those things is our new telecommunications module summarizes a consultation between the doctor and a patient and writes the doctor's notes for the Doctor automatically in fact for the first time, we've done it we now have our large language model generate generating the summary without us.

Speaker Change #48: and writes the doctor's notes for the doctor automatically. In fact, for the first time we've done it, we now have our large language model generating the summary without a scribe that the doctor can edit.

Scribe that the Doctor can edit and a couple of minutes.

Speaker Change #11: So it's actually succeeded in doing one of the very hardest, one of the very hardest tasks we.

So it's actually succeeded in doing one of the very hardest.

One of the very hardest task, we assigned to it.

Speaker Change #11: And, of course, we're using everything from as simple as doing product descriptions or job descriptions, all of those. You've read about all of those. We've actually got those implemented and are delivering those to customers.

And of course, where you are.

We were using an all in everything from as simple as doing.

Descriptions, where job descriptions all of those you've read about all of those we've actually got those implemented are delivering those to customers, but EBIT. Some of them are in the most some of the most challenging areas in drug design, we're having success with pharmaceutical companies, but with dock actually writing the doctor's notes without.

Speaker Change #11: but even in some of the most challenging areas in drug design.

Speaker Change #44: We're having success with pharmaceutical companies, but actually writing the doctor's notes without a scribe has shocked a great many people and, well, another area in terms of diagnosing cancer from biopsy, just biopsy images.

I'll describe.

Has shocked a great many people.

And.

Another area in terms of diagnosing cancer from biopsy, just biopsy images being.

Speaker Change #11: being able to do that very, very quickly where the patient knows.

Being able to do that very very quickly where the patient knows.

Speaker Change #48: you know, weeks sooner than they would otherwise, and they get the news weeks sooner from just the immediate AI processing of the biopsy image. They find out weeks sooner whether they have to go on chemotherapy or whether they're cancer-free. And we're doing that with an Israeli partner called Imaging. So no, we're seeing a huge uptake of this technology, everything from complex health care.

You know weeks sooner than they would've been otherwise they get the Newsweek center from the from the just the immediate immediate AI processing the biopsy image. They did find out we consider whether they have to go on chemotherapy or whether theyre cancer free.

And we're doing that with an Israeli partner called imaging.

So no we're seeing a huge uptake of this technology.

Everything from <unk>.

Complex health care and health Science.

Speaker Change #11: to more mundane tasks that you find throughout an enterprise, but still very important in making your employees in your company more efficient and more competitive.

Two more mundane task, but.

That you find through throughout in enterprise, but still very important and making your employees and your company more efficient and more competitive.

Speaker Change #46: Got it. And then from a monetization standpoint, do you, you know, is this a monetizing in a copilot way similar to Microsoft or how do you envision ultimately, you know, seeing some of the incremental value capture inside of the model?

Got it and then from a monetization standpoint.

No.

Is this a monetizing in a copilot way similar to Microsoft or how do you envision ultimately youre seeing some of the incremental value capture and inside of the model.

Speaker Change #49: Well, we think inside of our... Remember, we're a little bit different than Microsoft. We have a lot more enterprise applications, for example, in healthcare. We run clinical trials. We run hospitals. We run ambulatory clinics.

Well, we think.

And inside of <unk>, We're building remember, we're a little bit different than Microsoft we have a lot more enterprise applications for example in health care.

Uh huh.

In.

In running we run clinical trials.

We run hospitals, we run ambulatory clinics.

Speaker Change #44: we run, we have diagnostic databases for image processing databases, you know, conventional blood testing, blood testing databases, all of those. So our monetization is really

<unk>.

Ron we have diagnostic databases imaged image across the database business conventional blood testing blood testing databases all of those so our monetization is really.

Speaker Change #44: at the highest end of the value chain, which is we actually supply the application with our partner that does cancer diagnosis, that does the doctor's notes, that does the doctor's orders, that actually automatically generates the prescriptions, that reminds the patient to take the subscription so you get compliance. Right now, I can't spend too much time on it. Right now, doctors don't know if patients have refilled their prescription.

At the highest end of the value chain, which is we actually supply the application with our partner that does cancer diagnosis that does the doctor's notes that does the doctor's orders that actually automatically generates the prescriptions that reminds the patient to take the subscription so you've got.

Get compliance.

Right now without again.

This has been too much on that right now doctors don't know if patients have refilled their prescriptions.

Speaker Change #11: The doctors aren't notified and the patients aren't notified, reminding them. We're doing all of that. We're doing a bunch of things with it, and that's the high end, that's the high value end of AI, when you're preventing someone from being re-hospitalized, which has a huge cost in terms of human suffering and money.

Because aren't notified in the patients on the other side reminding them.

Doing all of that we're doing a bunch of things with and Thats. The high end, that's a high value end of AI, when you're preventing some of them being re hospitalized which has a huge cost.

In terms of human suffering and and money.

Okay.

Okay.

Speaker Change #11: Now, we have multiple ways, by the way, to monetize it, not only as part of our applications, but also as part of our infrastructure, because one of the unique capabilities we allow is for customers when they use our products.

Now we have multiple ways by the way to monetize that not only as part of our applications, but also as part of our infrastructure because one of the unique capabilities. We allow is for customers when they use our product to enrich to basically use their private day.

Speaker Change #26: to basically use their private data in some of these models for them to learn, but then to ultimately keep control of their data. And this is applicable in many, many different types of applications. And this is a service we provide in addition. So there's just a lot.

Data in some of these models to for them to learn but then to ultimately keep control of their data and this is applicable in many many different types of applications and this is a service we provide in addition, so.

The law.

Speaker Change #44: That was making a very good point in that we have our own applications in health care, but we have partners and other companies that come to us to use our AI to enrich their applications.

Yes, Jeff is making a very good point.

And that we have our own applications in health care, but we have partners.

And other than other companies that come to us to use our AI to enrich their applications and we may and we keep their data private.

Speaker Change #44: and we keep their data private and allow them to enrich their applications. That company I mentioned earlier, Imogene, that's not our application that does the cancer diagnosis. That's an Israeli company that's doing that, but they're using our AI to develop their healthcare application.

And allow them to enrich their obligations that company I mentioned earlier imaging, but that's not our application that does the cancer diagnosis. That's an Israeli are an Israeli company, that's doing that but they are using our AI to develop their apple their health care application.

Speaker Change #27: So, we monetize through imaging, enabling them to build their AI application, and we also build a lot of our own. So, of course, Zafra is right, it's a combination of the two.

So.

And they're in there.

So we monetize through image imaging.

Enabling them to build their AI application.

And we also build a lot of our own so of course <unk> right. It's a combination of the two.

Okay perfect. Thank you guys. Thanks.

Thank you.

Speaker Change #46: Your last question today comes from the line of Brad Zelnick with Deutsche Bank.

Your last question today comes from the line of Brad Zelnick with Deutsche Bank.

Your line is open.

Brad Zelnick: Great, thanks so much. Larry, it's taken Oracle several years to reach 66 cloud data centers. And you're now talking about plans to build 100 new ones, which, frankly, seems very ambitious. What is it that you're seeing that maybe we don't see? And then related, perhaps, Safra, if you could speak to the capital requirements and time frame for that, especially in light of CapEx this quarter that was a bit less than we'd expected. Thank you.

Great. Thanks, so much Larry it's taken Oracle several years to reach 66 cloud data centers and Youre now talking about plans to build 100 new ones.

Frankly, it seems very ambitious what is it that youre seeing that maybe we don't see and then related <unk>.

Perhaps safra, if you could speak to the capital requirements and timeframe for that especially in light of Capex. This quarter that was.

There was a bit less than we had expected. Thank you.

Speaker Change #45: Well, okay. How about Microsoft puts in an order for 20 cloud data sets?

Well, okay, how about Microsoft puts an order for 2000 and an order for 20 cloud data center.

That's what we're seeing.

Speaker Change #49: When one company, as you say, we have 60, by the way, that's a little bit misleading. That's not quite right. I mean, we have 66 cloud regions, and we sometimes use those synonymously. They're not always, they don't, data center and regions don't necessarily translate one-to-one, but the, yeah, when someone comes along and orders 20.

When one company as you say, we have 60 by the way that's a little bit and that's not quite right that we have 66 cloud regions and we sometimes use those synonymously theyre not always the data center in the region doesn't necessarily translate one to one.

But.

When someone comes along and orders 20.

Speaker Change #48: then that creates a lot of opportunity for us to build more data centers and get more OCI customers.

And then that.

Create that creates a lot.

The opportunity for us to build more data centers and get more OCI customers, because we're building OCI data centers inside of the Azure cloud.

Speaker Change #48: Because we're building OCI data centers inside of the Azure cloud.

So those are the kinds of things we're seeing. We're building our own public regions based on direct customer demand, and then we're building partner regions like the 20 data centers from Microsoft. The combination of the two adds up to 100.

So those are the times, we're seeing things, we're seeing we're building our own public regions based on direct customer demand and then we're building.

We are building partner regions like the micro like the 20 data centers for Microsoft the combination of the two adds up to a 100.

Speaker Change #46: Yeah, and also one of the things is in that number, it doesn't include the many, many clouded customers, which started small and now companies have decided they want their own region.

Yeah and also one of the things is in that number. It doesn't include the many many cloud customers, which started small and now companies have decided they want their own region. So they had a cloud customer which is a smaller and they've decide no.

Speaker Change #26: So they had a cloud of customer, which is a smaller and they decide, no, no, no. Now I want a dedicated region of my own. I get it. This is working. I've I've saved.

No no no I want a dedicated region of my own I.

I get it this is working.

Speaker Change #48: Millions, tens of millions, sometimes hundreds of millions, now I want my own. Also, really, it is absolutely true, we did not bring up as much capacity as we could have used this past quarter because we had to make some audible calls, you know, on the field to decide how to allocate.

Saved millions tens of millions, sometimes hundreds of millions now what I want my own also.

It really is.

It is absolutely true we did not bring up as much capacity as we could have used this past quarter, because we had to make some audible calls on the field to decide how to allocate.

Speaker Change #44: Whether to build something small, which was available, which I could have recognized revenue in right in the quarter, or instead to go much bigger and to wait until some larger capacity was going to be available to hand over to me.

Whether to build something small, which wasn't available which I could have recognized revenue in right in the quarter or instead to go much bigger and to wait until some larger.

Some larger capacity was going to be available to hand over to me. So as I think I've hinted and.

So as I think I've hinted and we're talking about.

We're talking about.

Demand.

Speaker Change #44: Had we had capacity this quarter in the hundreds of millions of dollars more that was just sitting there waiting to take it, and we had made some deployment choices because.

Had we had capacity this quarter in the hundreds of millions of dollars more that was just sitting there waiting to take it and we have made some deployment choices, because we need more and we need to bigger instead of taking small pieces or small loss.

Speaker Change #44: we need more and we need it bigger. Instead of taking small pieces or smaller pieces, we decided to focus on the bigger parts and try to also treat our customers fairly and work with them to

There are pieces, we decided to focus on the bigger the bigger parks and tried to also.

Our customers fairly and work with them too.

To meet their needs.

Speaker Change #44: Let me give you one example of that, what Safra is describing, is we got enough NVIDIA GPUs for Elon Musk's company, XAI, to bring up the first version, the first available version of their large language model called Grok. They got that up and running. But boy, did they want a lot more. Boy, did they want a lot more GPUs than we gave them.

Let me let me give you. One example of that with Whatsapp is describing is we got enough.

Nvidia Gpus for Elon.

Eli most company X AI to bring up the first version the first available version of their large language model called rock, they got that up and running but boy did they want a lot more.

What do they want a lot more gpus than we gave them.

Speaker Change #48: We gave them quite a few, but they wanted more and we are in the process of getting them more. So the demand...

We gave them quite a few but they wanted wanted more and we are in the process of getting them more.

So the demand.

Speaker Change #48: We got that up pretty quickly, they were able to use it, but they want dramatically more as there's this gold rush towards building the world's greatest large language model. And we are doing our best to give our customers what we can this quarter, and then dramatically increase our ability to give them more and more capacity each succeeding quarter.

We got that up pretty quickly.

They were able to use it but they wont dramatically more as there's this gold rush towards.

Towards building the world's greatest large language model.

We are doing our best to keep give our customers. What we can this quarter and then dramatically increase our ability to give them more and more capacity each succeeding quarter.

Okay.

Thanks very much.

Okay. Thank you Brad.

Speaker Change #46: A telephonic replay of this conference call will be available for 24 hours on our Investor Relations website. Thank you for joining us on the call today, and with that, I'll turn the call back to Emma for closing.

A telephonic replay of this conference call will be available for 24 hours on our Investor Relations website. Thank you for joining us on the call today and with that I'll turn the call back to Emma for closing.

Speaker Change #48: This concludes today's conference call. Thank you for attending. You may now disconnect.

This concludes today's conference call. Thank you for attending you may now disconnect.

Yeah.

Yeah.

Hmm.