Q1 2025 Oracle Corp Earnings Call
Hello, and welcome to the Oracle Corporation Key 1 fiscal year 2025 earnings 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, and if you would like to ask a question during this time, please press star 1 on your telephone keypad. I would now like to turn the conference over to Ken Bond, head of investor relations, you may begin.
Ken Bond: Thank you Sarah, and good afternoon everyone and welcome to Oracle's first quarter, fiscal year 2025 earnings conference call.
Speaker Change: 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.
Speaker Change: Additionally, a list of many customers who purchased Oracle Cloud Services or went live on Oracle Cloud recently will be available from the investor relations website. On the call today are Chairman and Chief Technology Officer Larry Ellison and Chief Executive Officer Safra Catz.
Speaker Change: As a reminder, today's discussion will include forward looking statements, including predictions, expectations, estimates or other information that might be considered forward looking.
Speaker Change: Throughout today's discussion, we will present some important factors relating to our business, which may potentially affect these board-looking statements.
Speaker Change: These forward-looking statements are also subject to risks and uncertainties that may cause actual results to different materialy from statements being made today.
Speaker Change: As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports.
Speaker Change: Including our 10K and our 10Q 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.
Speaker Change: And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events. Before taking questions, we'll begin with a few prepare remarks, and with that, I'd like to turn the call over to Safra.
Safra Catz: Thanks Ken and good afternoon everyone. Before I go to our Q1 numbers, I thought I'd take only a moment to review some of the things that you'll be hearing about over the next couple of days from Oracle.
Safra Catz: We are at Cloud Worlds in Las Vegas.
Speaker Change: and Cloud World is where we come together with our customers and partners to share experiences and showcase our latest products and services.
Speaker Change: Our customers are our best folks people when they share how our technologies transform their enterprises.
Speaker Change: The innovations from our labs and research centers in combination with feedback from our customers have helped us build superior products and services.
Speaker Change: You'll hear about new cutting-edge features within OCI, database, analytics, fusion next week and our industry applications.
Speaker Change: We will also be showing new capability that we've been working on for a while, including embedded AI agents in Fusion.
Speaker Change: and those drive productivity and efficiencies for our customers when they're rolled out. And as an Oracle Fusion customer myself,
Speaker Change: I take great pride once again in my team's ability to have a sound earnings and give guidance nine days after the quarter ended.
Speaker Change: Many of our customers ask us how to replicate our results and a cloud world we will be having a lot of Oracle Playbook conversations this week.
Speaker Change: You've already seen today's announcement of our partnership with Amazon Web Services.
Speaker Change: which has now joined Microsoft Azure and Google Cloud.
Speaker Change: in making OCI an Oracle available in their respective clouds.
Speaker Change: Needless to say, we think our multi-cloud strategy will expand the ubiquity and popularity of our differentiated technology, especially the Oracle database.
Speaker Change: Larry will share more details in just a moment.
Speaker Change: But now to Q1, which was clearly another post standing quarter, with total revenue at the high end of my guidance and earnings per share, four cents above the high end of guidance.
Speaker Change: Currency was essentially in line with my guidance, and as usual, I'll be discussing our financials using constant currency growth rates, as this is how we manage the business.
Speaker Change: Total Cloud revenue.
Speaker Change: That's fast and I asked
Speaker Change: with up 22% at 5.6 billion.
Speaker Change: with staff revenue of 3.5 billion up to 10 percent and I asked revenue of 2.2 billion up 46 percent on top of the 64 percent growth reported last year.
Speaker Change: As a reminder, we exit in the advertising business last quarter, which had the effect of lowering the total cloud applications revenue by 2% this quarter.
Speaker Change: Total Cloud Services and License Support for the Quarter was $10.5 billion, up to 11% driven again by our Strategic Cloud Applications, Autonomous Database and OCI.
Speaker Change: Applications subscription revenues, which includes product support, worth $4.8 billion and up $7%.
Speaker Change: Our strategic back office staff applications now have annualized revenues of 8.2 billion and we're up 18%.
Speaker Change: Infrastructure, subscription revenues, which includes licensed support, we're 5.8 billion and up 14%.
Speaker Change: Infrastructure Cloud Services revenue was up 46% and up 49% when you are excluding our legacy hosting services.
Speaker Change: Our infrastructure cloud services now have an annualized revenue of 8.6 billion.
Speaker Change: OCI consumption revenue was up 56% and a demand continued to outstrip supply.
Speaker Change: Cloud Database Services, which were up 23% and now have annualized revenues of 2.1 billion.
Speaker Change: Very importantly.
Speaker Change: As on-premise databases migrate to the cloud.
Speaker Change: On OCI directly, or through our database at Cloud Services with Azure, Google and AWS.
Speaker Change: We expect those cloud database revenues collectively will be the third leg of revenue growth alongside OCI and Strategic SASS.
Speaker Change: Data-based subscription revenues, which includes database license support, we're up for percent.
Speaker Change: Software license revenues were up 8% to 870 million, including Java, which saw excellent growth. So all men, total revenue for the quarter were 13.3 billion up 8% from last year.
Speaker Change: Shifting the gross profit and operating income. The gross profit dollars of cloud services and licensed support grew 9% in Q1s.
Speaker Change: As our cloud businesses continue to scale, the gross margins of both cloud applications and cloud infrastructure has each been climbing higher.
Speaker Change: We continue to display operating at the expense discipline.
Speaker Change: with Q1 operating income growing 14% and the operating margin was 43%.
Speaker Change: The non-gap tax rate for the quarter was 18.9% with non-gap GPS at $1.39 in US dollars, up 17% in USD up 18% in constant currency.
Speaker Change: The Gapy PS was a dollar three in US dollars, up 20% in US state and up 22% in constant currency.
Speaker Change: Including in my guidance at the beginning of the quarter was the expected completion of an assessment of the useful lives.
Speaker Change: of our servers and networking equipment, including an increase of the estimated lives from five years to six years effective at the beginning of this fiscal year. This change in accounting estimate reduced Q1 operating expenses by about $197 million.
Speaker Change: At Quarter End, we had nearly $11 billion in cash and marketable securities. The short term deferred revenue balance.
Speaker Change: was 11.5 billion up to 10%.
Speaker Change: Operating cash flow for Q1 with 7.4 billion while free cash flow with 5.1 billion.
Speaker Change: On a trailing 12-month basis, operating cash flow was 19.1 billion and 3 cash flow was 11.3 billion.
Speaker Change: Our remaining performance obligations for our POF is now 99 billion, up 52% in constant currency.
Speaker Change: Now, while we typically see a seasonal decline of RPO in Q1, we signed several large deals this past quarter, resulting in a sequential increase in RPO compared to the decline that we typically see based on our experience over the previous five years.
Speaker Change: Further, our Cloud RPO grew more than 80% and now represents nearly three-fourth of total RPO.
Speaker Change: And approximately 38% of total RPO is expected to be recognized as a revenue over the next 12 months.
Speaker Change: which reflects the growing trend of customers wanting larger and longer contracts as they see firsthand how Oracle Cloud services are benefiting their businesses.
Speaker Change: We spent 2.3 billion on capex this quarter given the demands that you see in our P.O. growth and the additional demand we have and see in our pipeline, I expect the fiscal.
Speaker Change: Year 2025 Catz will be double what it was in fiscal 2024. As always, we remain careful to pay sorry investments appropriately and in line with booking trends.
Speaker Change: We now have 85 cloud regions live, another 77 plant with more to follow. We have public cloud regions, we have dedicated clouded customer regions, we have national security region.
Speaker Change: We have sovereign regions, we have Oracle alloy regions with our partners, and we have multi-cloud regions with Azure and Google Cloud and now shortly with AWS as well.
Speaker Change: This sizing flexibility and deployment optionality of our cloud regions continue to be significant advantages for us in the marketplace.
Speaker Change: As we've said before, we're committed to returning value our shareholders through technical innovation, strategic acquisition, stock repurchases, prudent use of debt and a dividend.
Speaker Change: This quarter we repurchased 1.1 million shares for a total of 150 million.
Speaker Change: In addition, we paid out dividends of 4.4 billion over the last 12 months, and the board of directors again declared a quarterly dividend of 40 cents per share.
Speaker Change: Before I dive into specific youth to guidance.
Speaker Change: I'd like to share some overarching thoughts.
Speaker Change: and the benefits that I expect they will bring over the coming years.
Speaker Change: First, the Oracle Database is thriving.
Speaker Change: and the multi-cloud agreements we now have with my Fritzalk Google and AWS make it easier for our customers to run their Oracle databases in the cloud.
Speaker Change: Second, we are rapidly expanding our OCI capacity to meet the demands that you see in our 52% RPO CREC Cloud Growth.
Speaker Change: Third.
Speaker Change: While much attention is focused on our GPU-related businesses, our non-GPU infrastructure business continues to grow much faster than our competitors.
Speaker Change: and finally, our strategic staff staff continued to grow while we are starting to see more and more of our industry-based cloud apps come online.
Speaker Change: All these trends point to revenue growth going higher. We will discuss the implications of these positive trends at our financial analyst meeting on Thursday.
Speaker Change: For Fiscal 2025, we remain very confident and committed.
Speaker Change: 2. Follow your total revenue growth growing double digits and full year total cloud infrastructure revenue growing faster than last year.
Speaker Change: Let me now turn to my guidance for Q2, which I'll review on a non-gap basis.
Speaker Change: If currency exchange rates remain the same as they are now, currency should have about a 1% positive effect on total revenue and as much as a 3% positive effect on EPS.
Speaker Change: Cardano for sure. However, the actual currency impact may be different.
Speaker Change: Total revenues are expected to grow from seven to nine percent in constant currency and are expected to grow between eight and ten in U.S.D. today's exchange rate.
Speaker Change: Total Cloud revenue is expected to grow from 23 to 25% in constant currency and 24 to 26 in U.S.D.
Speaker Change: NonGap, EPS, is expected to grow between $6 to 10 and be between $1.42 and $1.46 in constant currency.
Speaker Change: and non-gap EPS is expected to grow 8 to 12 percent and be between $1.45 and $1.49 in USD.
Speaker Change: Play P.S. guidance
Speaker Change: 4Q2 assumes a base tax rate of 19% however one time tax events could cause actual tax rates to vary and with that it was so long and with that I'll turn it over to Larry for his comments.
Larry Ellison: Thank you, Safra. Today Oracle has 152 cloud data centers, live and under construction throughout the world.
Larry Ellison: The largest of these data centers is 800 megawatts and it will contain acres of Nvidia GPU clusters able to train the world's largest AI model.
Larry Ellison: That's what's required to stay competitive in the race to build one, just one of the most powerful artificial neural networks in the world.
Larry Ellison: The stakes are high and the race goes on.
Larry Ellison: Soon, or we'll begin construction of data centers that are more than a giga lot.
Larry Ellison: Building giant data centers with ultra-high performance already in main networks, and huge 32,000 node and Biniad GPU clusters.
Oracle: is something that Oracle has proven to be very good at.
Oracle: It's the reason we're doing so well on the AI training business.
Oracle: It's important to remember that we first developed those high-performance already made networks.
Oracle: The Interconnect are Exadata CPU cluster hardware. The powers are Exadata Database Cloud Service.
Oracle: The Oracle Database Cloud Service running on Exadata and Exus Scale already make clusters.
Oracle: Providing an order of magnitude, better performance.
Speaker Change: Better skill ability.
Speaker Change: Better Reliability.
Speaker Change: and better security than other data bases.
Speaker Change: and it's still the world's only autonomous.
Speaker Change: Fully self-driving database.
Speaker Change: Our large and loyal customer base.
Speaker Change: Understand and appreciate the many technical advantages of using the Oracle database.
Speaker Change: And those customers wanted us to find a way to make the very latest and best Oracle technology available on other clouds in addition to OCI.
Speaker Change: We found the way.
Speaker Change: With today's AWS announcement, our customers will be able to use Oracle's latest Exadata and AccessScale RDMA clusters.
Speaker Change: With the latest versions of our database software, from within the Microsoft Azure cloud, from within the Google Cloud, and from within the AWS cloud.
Speaker Change: This will enable customers to use the Oracle database anywhere and everywhere.
Speaker Change: That has always worked well for our customers and for our database business.
Speaker Change: We believe our proud partnerships with AWS and Microsoft and Google will turbocharge the growth of our database business.
Speaker Change: for years to come. Back to you.
Sarah: Thank you, Larry, Sarah, if you could please pull the audience for questions.
Sarah: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Please ensure that your phone is not on mute when called upon. Thank you.
Speaker Change: Your first question comes from the line of John Dissucci with Guggenheim Securities. Your line is open.
John Dissucci: Thank you.
John Dissucci: Larry and Safra, I mean there's a lot of good stuff here, but I'd like to ask a question on margins.
John Dissucci: You keep putting up strong cloud numbers, especially the OCI numbers that look...
Speaker Change: When you give the guidance and you look at what you have to do to hit them, they look really difficult to do to say the least. We also soon, that upside RPO, and you pointed out for this quenchillone increase. I think the last time there was a sick quenchillone increase is because you bought Serner and they just...
Speaker Change: at RPO because of that. I assume a big part of that SOCI2. You mentioned it's cloud three quarters of it.
Speaker Change: So that indicates this more to come, right? So given the mix of business, continuing to lean into that lower margin OCI, and I know you have, that's changing over time, but it's still lower margin today. How should we think of overall margins versus profit?
Speaker Change: for the entire company going forward.
Speaker Change: Okay, let me start with this and maybe then Larry can add on. So, first of all, I want to remind you that...
Larry Ellison: The third leg of the stool I mentioned, which is our database and autonomous database, that's also part of OCI. And that is beginning to really expand and our multi-cloud agreements again.
Larry Ellison: will help OCI gross margins so that you know gross margins even this quarter as percentage increased.
Larry Ellison: Regardless of the fact that we have a lot more OCI. And so our business is really only now starting to get real scale.
Larry Ellison: and we have built OCI in a way and Larry can really expand on it where it is extremely automated, the management of it is very automated and our whole rollout as it grows.
Speaker Change: We make more money and as much as percentages are great and again.
Larry Ellison: Our operating margin percentages continue to increase, and OCI includes not only...
Larry Ellison: Base, storage, and compute, and GPUs, but it also includes a lot of other capabilities, including database, which have excellent margins too.
Speaker Change: and of course, as you mentioned, our SaaS business, again, an excellent and at-scale business, even that business benefit from our expansion in OCI. And once again, even at each time margins.
Speaker Change: Continued to improve this past quarter. Larry, I don't know if you want to.
Larry Ellison: I'd like to, so let's start with Safra Catz.
Larry Ellison: I am...
Larry Ellison: We go to autonomous database, we get tremendous efficiencies, we're moving a fusion and that's we to autonomous databases we speak.
Larry Ellison: We've decided everything needs to move to autonomous for two reasons, really. First reason, when you have a completely autonomous database, there is no the DBA. The database administrator is a robot.
Larry Ellison: There is no human labor associated with managing the Oracle Autonomous Database.
Larry Ellison: Now, okay, that's obviously a cross-saving.
Larry Ellison: But more importantly, with no human labor, there's no human error. It's a huge security advantage we have over our competitors.
Larry Ellison: We don't, there's no mistakes to be made.
Larry Ellison: There's no human laborers, it's all automated, it's an end.
Larry Ellison: and the potential when you have everything completely automated, and it's also truly elastic. I'm not going to go into exactly what that means, but it means that if you got a job running that suddenly needs 500 micro-processors, you get those 500 for the 3 minutes you need it, and then you return them to the pool.
Larry Ellison: So that's very different than how other databases work, which they may call, you know, the cloud itself may be elastic and places, but their databases are typically not elastic.
Larry Ellison: Autonomous is, so we use a lot less hardware, it's a lot faster, it's a lot more efficient, it's fully automated, no human labor.
Speaker Change: Let's more secure!
Speaker Change: and the margins for the Autonomous Data Business business is much higher than the traditional local business. I think those margins are stunningly high around the same margins as SASS.
Speaker Change: which are also stunningly hardmarked because Saf's runs primarily on that autonomous database.
Speaker Change: So we use hardware very efficiently, we use labor sparingly because labor is a security risk. When people are actually doing things manually, it's a security risk and it flows our down our ability to expand.
Speaker Change: Every Oracle data center from the largest to the smallest are identical in features and functions. They only vary by scale. That means we have one suite of automation software that automates all of this.
Speaker Change: Nobody else does this, no one has that level of automation that level of autonomy.
Speaker Change: It allows us to get much better margins.
Speaker Change: and our database business and our SaaS business and the rest of our cloud business. Our clouds are more automated so we have very low labor costs. Our networks are much more efficient. The already main networks run so much faster if you run twice as fast.
Speaker Change: I, you know, our costs go down by half.
Speaker Change: and our networks are much faster than the other clouds. So we think our potential is we scale, our potential to deliver much better margins than we're currently delivering, our very real.
Speaker Change: So is it safe for me to film that then the upside you keep putting up and you
Speaker Change: Hopefully we'll continue to do. We'll add profit and that profit will actually increase as the percentage of the margins will also increase over time.
Speaker Change: I believe so and I believe for example, you know, I mean, I think it's find different different different points of view from different engineers as we move fusion to autonomous database, you know, I think the cost savings are cost our cloud cost savings will be around 50%.
Speaker Change: That's what I believe, now it might be 40%, it might be 35%, but there will be huge cost savings from where we are now and that's across the entire base.
Speaker Change: Abuse in Customers, and that's just one example of how we're using
Speaker Change: Faster Networks, Faster Databases, more automation to make our products more secure. And I keep emphasizing the security is really the primary goal. But as a second order effect, we also end up spending a lot less money to run those data centers.
Speaker Change: Great, great. Thank you, Larry. Thank you, Safra.
Speaker Change: Your next question comes from the line of Mark Murphy with JP Morgan. Your line is open.
Mark Murphy: Oh, thank you very much and congrats on the great performance.
Mark Murphy: Larry, how do you envision the market transitioning from the AI training phase to the AI? Interesting phase. There's some debate out there on...
Larry Ellison: Whether we have an imbalance or a bubble on the front end of the curve, because training is a compute intensive and then perhaps it recalibrates differently somehow for the inferencing stage, which might be less intensive, or do you see the potential for high growth kind of all the way through both of these phases?
Speaker Change: Well, a lot of people think that my god, I send a kid to college and then I'm done, the training's over. I got four years of training and then I can put the kid to work and they'll be doing inferencing. That's not true.
Speaker Change: This race goes on forever to build a better and better neural network.
Speaker Change: And the cost of that training gets to be astronomical. When I talk about building gigawat, or multi-gigawat data centers,
Speaker Change: I mean, these AI models, these frontier models are going to the entry price for a real frontier model from someone who wants to compete in that area, we're out of a hundred billion dollars.
Speaker Change: Let me repeat around a hundred billion dollars that's over the next four or five years, or anyone who wants to play in that game.
Speaker Change: That's a lot of money and it doesn't get easier so they're not going to be a lot of those.
Speaker Change: I mean we could, you know, this is not the place to lift.
Speaker Change: who can actually build one of these front-to-ear models. But in addition to that, there's going to be a lot of very, very specialized models. I can tell you things that I'm personally involved in.
Speaker Change: which are using computers to look at byopsies of slides or CATz scans to discover cancer. Also, they're also blood tests we're going for, you know, we're discovering cancer.
Speaker Change: Those tend to be very specialized models. Those tend not necessarily to use the foundational you know, the grocks and the open and the chatGPTs and the llamas and the Germanize. They tend to be highly specialized models.
Speaker Change: trained on image recognition on certain data, I mean literally millions of biopsies slides for example, and not much other training data is helpful. So that goes on and we'll see more and more applications like that.
Speaker Change: So, I wouldn't, if you're horizon is over the next five years, maybe even the next 10 years.
Speaker Change: I wouldn't worry about, hey, we've now trained all the models we need and all we need to do is influencing. I think this is an ongoing battle for technical supremacy that will be fought by a handful of...
Speaker Change: Companies and maybe one nation state over the next five years at least, but probably more like 10. So this business is just growing larger and larger and larger. There's no slowdown or shift coming.
Speaker Change: Thank you very much.
Speaker Change: Let me say something that's not sound really bizarre. Well, though, I probably say, well, he says bizarre things all the time. So, why is he announcing this one? It must be really bizarre. So, we're in the middle of a designing a data center that's more than the giga-lock.
Speaker Change: That has, but we found the location in the power place, we've looked at it, they've already got a building permit for three nuclear reactors. These are the small modular nuclear reactors, the power, the data center.
Speaker Change: This is how crazy it's getting.
Speaker Change: This is what's going on.
Speaker Change: Incredible.
Speaker Change: Your next question comes from the line of Ramon Lenschel with Barkley's, your line is open.
Ramon Lenschel: Hey, thank you.
Ramon Lenschel: Just a question more on the database side, on the agreements to you just announced, so they ordered you have in place and now added with the AWS. So now that we have all the...
Speaker Change: The high-rescaler agreements in place, how do you think about that migration movement from data-based workloads that are at the moment running on premise or on cloud a customer to the public cloud? I mean, how should we think about that momentum? Thank you.
Speaker Change: Paulie, make it going next hour. No, you go ahead, Laura.
Laura: I think you're right. Well, there's two things.
Laura: Hi!
Speaker Change: Public Cloud is very interesting and it's very important. I mean, Oracle...
Speaker Change: It became very successful in the database this long time ago because one of our watchers was portability. We ran on IBM mainframes, we ran on Microsoft PCs. We ran on Helipackered Machines and if you remember them digital equipment machines and all sorts of computers but we ran everywhere.
Speaker Change: And that was very important, so our customers could run the Oracle database in any environment.
Speaker Change: We had to find a way to actually make our best versions of our database, the Exadata, Exis scale versions of our database available in other people's clouds. And what we're able to do is basically get get OCI small enough.
Speaker Change: That we could bet and bet an OCI data center within Microsoft Azure or an OCI data center within Google or AWS or wherever we had to put it. Where you could be fully autonomous. Where we could use Exadata and Exus scale clusters.
Speaker Change: We were able to do that. It was not technically easy but we did it.
Speaker Change: and doing that in miniaturizing our...
Speaker Change: Our Oracle Data Centers, one of the, I mentioned earlier that all of our data centers are the same except in scale. The biggest one's 800 gigawatts right now.
Speaker Change: Border and getting close to 800 megawatts, we're getting close to one gigabot. The smallest are about 150 kilowatts, and we're going to get down to 50 kilowatts.
Speaker Change: What that means is...
Speaker Change: We'll have a lot of companies, you know, medium-large size companies that will decide to have an oracle private cloud. I mean, there's no difference between our private cloud and the public cloud. They are identical.
Speaker Change: There are absolutely identical, and a bunch of people will have Oracle Private Clouds. A bunch of deductible companies, but a phone has six Oracle Private Clouds, for example.
Speaker Change: to run their workloads, but they're becoming so inexpensive.
Speaker Change: That anyone can decide, okay, I want to move to the cloud. I want all the advantages of the cloud, but I want to make sure that I'm the only one in the cloud. I don't want any neighbors.
Speaker Change: Or I want only a prove neighbor, so I don't want someone with a credit card moving in. I'm just paranoid about security, or I've got government regulations I have to adhere to. So we think...
Speaker Change: that obviously moving with Oracle database available on AWS Microsoft and Google is incredibly important and it's a separate set of things like that. It will absolutely accelerate database growth in the public cloud.
Speaker Change: But we expect that private clouds will greatly outnumber public clouds.
Speaker Change: As companies decide, they don't want net, they want...
Speaker Change: The Oracle Cloud
Speaker Change: Behind their firewall in their data center with no neighbors.
Speaker Change: And we, because we've gotten our data centers are so automated and they're scalable and they're all identical in terms of function.
Speaker Change: We're organized, so we can actually, we have a hundred and six year due to data centers now. I expect we will have a thousand or two thousand or more.
Speaker Change: Data Centers.
Speaker Change: Oracle Cloud Data Centers around the world and a lot of them will be dedicated to individual banks or telecommunications companies, or technology companies, or what have you, or nation states, sovereign clouds, all of this other stuff. So we think it's...
Speaker Change: It's hard to meet a predict whether the private clouds.
Speaker Change: or the public cloud, which is going to be bigger. I don't know. The good news is we win either way.
Speaker Change: Interesting, very interesting.
Speaker Change: Next question. Thank you. Your next question comes from the line of Mark Mortler with Bernstein. Your line is open.
Mark Mortler: Thank you so much and congratulations on the quarter, very impressive both the quarter and the guide. We've seen a lot of focus on the model training side, but less on applications and inferencing in the rest. You guys have a lot of expertise in the market and in the industry.
Speaker Change: You already have traditional AI sprinkled throughout all the Oracle.
Speaker Change: Products and Capabilities. But where do you see the monetizable value of Gen AI and the Appside? How long do you think it's going to take for Gen AI to be a meaningful revenue not just for Oracle, but to offer a general on the Appside not on the training.
Speaker Change: Life. Thank you.
Speaker Change: Well, let me, let me, let me, let me, let me, let me, let me start with, with healthcare.
Speaker Change: from everything, from us helping doctors diagnose.
Speaker Change: You know, different diseases. When, um...
Speaker Change: Someone goes in to get a sonogram and I've seen the nurses and the technicians and the doctors. I actually measure the baby's skull and measure the baby's spinal cord to see how the baby. So I'd only ridiculous.
Speaker Change: The computer should do all of that.
Speaker Change: And if there's an umbilical wrapped around the fetus, this computer should discover all of that. And now, this should all be recorded. The doctor should get assistance from a computer doing all of this stuff. Looking at the plaque in coronary arteries. All should be done that way.
Speaker Change: Already we've delivered
Speaker Change: When a doctor visits the patient, we prepare a summary for the doctor. We use AI to look the electronic health records, the latest labs that might have been finished just a few hours ago. And let the doctor know whether there's stability or disease progression.
Speaker Change: or whatever the doctor needs to know prior to the consultation with the patient. That summary is created by AI, you know, human readable summary.
Speaker Change: Then AI listens to the consultation between the doctor and the patient.
Speaker Change: This is already delivered, this is already out there.
Speaker Change: The Republic of the List of Consolation is Dr. The Patient.
Speaker Change: If the doctor orders the prescription, the AI checks to make sure the prescription is accurate and enters the prescription. The AI updates the electronic health records.
Speaker Change: The AI transcribes and distributes the doctor's orders all from listening to the conversation. The doctor then gets a draft at the end of the conversation that the doctor can quickly review and approve.
Speaker Change: and then the prescriptions are filled and the orders are executed and the electronic health records are updated. We're already doing all of that, but I can go on, you know, in healthcare.
Speaker Change: We need so many things from reading a vectorase to just the user interface, our user interface is so different than ethics.
Speaker Change: I was at Stanford with my son one time and it took three people, three different positions to actually be able to find his X-rays.
Speaker Change: This is how you find the x-rays for Larry Ellison.
Larry Ellison: He's a Oracle
Speaker Change: Please show me Larry Olson's latest x-rays. It's a voice interface you just ask for them.
Speaker Change: How do you log on? Well, you look at the computer and it recognizes your face and it recognizes your voice but knows you're the doctor and you're authorized to look at that. That's all. All the authorization is done with an AI.
Speaker Change: You know, when are we going to start monetizing it? Well, all of Sernor is the monetization. You know, the fact that we can dramatically expand our health business.
Speaker Change: It's based on AI, AI is just, I don't know how to describe it, let me ask you the best way to describe it. It's not something you sell separately.
Speaker Change: It is the diagnostic system. It's the electronic health record system. It is the pharmacy system, the prescription system, the user authentication, the login system, it's all AI.
Speaker Change: And I know people think it's a separate thing that, oh my god, and I hear a bunch of applications come and say, oh we got, we got now got AI agents will charge for separately.
Speaker Change: I mean that...
Speaker Change: It's our applications are going to be primarily AI applications.
Speaker Change: Everything.
Speaker Change: How do you start separately for everything? I find it bewildering when I listen to them talk.
Speaker Change: I don't understand what they're saying.
Speaker Change: I'm what we'll wonder if I can stop there.
Speaker Change: Larry, I think you're the first person to explain it that way. Thank you, it makes a lot of sense.
Speaker Change: Thank you. Your next question comes from the line of Derek Wood Blizz TD Cowan. Your line is open.
Speaker Change: Great, thanks for all echoing my congratulations. Safra, Larry, you guys have had this big inflection in RPO growth over the last few quarters. Can you update us on how you're feeling about supply availability and your ability to stand up data center infrastructure?
Speaker Change: and a time-efficient manner in order to move from contract signings to consumption and convert backlog into revenue. I guess are you doing anything different today than say a year ago to try and help accelerate these timelines?
Larry: Okay, I'm going to start an Larry Confinished
Larry: So, we have enormous demand that is absolutely true and I will say that demand is still outstripping supply. But I can live with that because we are laying out a lot of supply. As you can see in the revenues and you can see that in the guidance and my commitment for this next year.
Larry: and we'll be talking about beyond on Thursday of Financial Analyst Day.
Larry: We have made a number of changes.
Larry: Including what Larry mentioned earlier, which is the automation of the setting up and laying down our data centers. However, there are, you know, because demand is so large, we do have to get in different places. As I told you, I don't know, a couple of quarters to grow. We made the decision instead of picking up small pieces.
Larry: to actually wait in some cases to pick up larger locations, and that is really playing out very, very well for us, but we are really moving and growing in so many places because it's not only public cloud rollouts.
Larry: but it is also private clouds which are in immense demand, national security regions, immense demand.
Larry: and really we are moving as fast as we can and automation is the thing that has helped us lay this out in the fact that
Larry: It is we have an everything everywhere means nothing's unique, everything's the same and that cannot be said by our competitors and that helps us in our rollouts.
Safra Catz: I just want to have a look at what Safra just said. Our private clouds.
Safra Catz: Our identical to our public clouds, except for the fact they might only have one tenant.
Safra Catz: and it might be in a building that you own.
Safra Catz: Besides that, they're identical. We own the hardware, we manage the hardware for you. It just happens to be being an ablating you own and you're the only one that can get in. So that's very different situation than all of our competitors and it's fully automated. So we're prepared to manage.
Safra Catz: Thousands of data centers.
Speaker Change: By the way, I would compare that to Elon Musk Starling, where he's got close to 7,000 satellites in the sky now, 8,700.
Speaker Change: How do you manage these satellites constantly maneuver? They're not geosynchronous satellites. They're contact their low earth orbiting satellites, so they're constantly flying around and changing location. How do you manage 7,000?
Speaker Change: spacecraft.
Speaker Change: Flying around, well, let me tell you, computers, it's got to be fully automated or it's not going to work. You can't have thousands, even hundreds, I would say, data centers, you can't have. But you certainly can't have thousands of data centers unless they're fully automated. And the only way you could automate something is to make them all the same. You can't automate 25 different things.
Speaker Change: So, you know, that's one thing. The other thing I'll point out, and I think it's interesting about Oracle, that some of the most senior people in our management team.
Speaker Change: our experts in...
Speaker Change: Building Building Electric Power Plants and Electric Transmission Systems.
Speaker Change: Because building these data centers is just that. You can't just build a data center. You also have to account for the energy and the transmission of the energy from words generated to the data center.
Speaker Change: and of course the most efficient way to do this is actually build the generation, the power generation plant right next to the data center. So you transmit over the shortest distance.
Speaker Change: and we actually have very senior people who are very actually come from the utilities industry and strangers that sounds.
Speaker Change: that our expert in doing this and helping us build.
Speaker Change: these gigantic projects. Again, I'll hear her going to eat Elon Musk. One of the hardest jobs he had in building Tesla was when he built the Austin plant.
Elon Musk: He had to build the largest building ever been built by humankind anywhere in any time.
Elon Musk: And you want to know largest building ever built, it's not the Pentagon, it's not the NASA building for the space shuttle. Largest building is the test plan, and so you have to be the contractor of that plan, you have to be able to build those things.
Elon Musk: and then fill it with robots that then build your cars. You've got to build the building, get the power, build all the automation systems, which is the hardest part about building the cloud, or building the automation system.
Elon Musk: Billed all the automation systems so it works efficiently and reliably and cost effectively.
Speaker Change: That is um...
Speaker Change: and we have some really interesting people here with a very different experience space than we had even five years ago.
Speaker Change: Thank you very much.
Speaker Change: Your final question comes from the line of Brad Selmick of Doritobank, your line is open.
Brad Selmick: Great, thanks so much for fitting me in, and I'll just start by saying I can't remember a Q1 ever being this exciting. Larry, we've talked about a lot of the reasons why you win in cloud infrastructure, especially by addressing areas of the market where your competitors can't even reach.
Speaker Change: But in light of many high-profile cyber incidents lately, can you talk about how being more secure, not just in being so highly automated as you've already discussed, but how is being more secure, helping to win some of these very large OCI deals, especially in the US and other government's around the world? Thank you.
Speaker Change: Well, I couldn't thank you more for the question because I have two things I'm talking about, a cloud world on Tuesday. One is multi-cloud and the other is security. And let me announce right here we're done with passwords.
Speaker Change: The idea is utterly ridiculous.
Speaker Change: They're easily hacked. The more difficult they are to remember, the more likely you are to write them down, the more likely they are to be stolen. Everything done to make passwords better is made them worse.
Larry: It's a terrible idea, so we're getting rid of passwords entirely. This is the way log on is going to work. I'm going to type in Larry.ellisonadoracle.com. The computer is going to look at me and say, okay, hi, Larry, we're done. Why would I type in it? Safra can recognize me?
Larry: You know, my kids can recognize me, you tell me the computer can't recognize me in a log man.
Speaker Change: This is Ridiculous.
Speaker Change: So, the end.
Speaker Change: So we're not, no more passwords, but that doesn't gotta go.
Speaker Change: There are other things we can do to secure network communications. We have this new technology, we actually go to live in our cloud this week.
Speaker Change: Cold zipper is called zero trust packet routing that I'll be talking about and it guarantees the, well, well, biometric authentication will guarantee that you.
Speaker Change: You are who you say you are when you log in, so users will find a very difficult to infiltrate our systems.
Speaker Change: with Biometric Authentication, and by the way, there are keys on the keyboard that will look at your fingerprint. It depends on how if you want facial recognition, plus fingerprint, all volunteer, you don't have to do it if you don't want to. But I certainly, a whole bunch of people will...
Speaker Change: Perfurbion metric authentication, that's why Google pays popular in Apple Pay as popular. So, it's for my convenience. I don't want to remember passwords. Look at me and recognize me and log in.
Speaker Change: Don't ask me to cut into some stupid 17-letter password that someone can steal. There's that. The Zero Trust packet routing actually authenticated you from the user all the way to the data.
Speaker Change: and we've greatly simplified network security by separating it from network configuration. That's another thing I'm going to talk about. But when we go back to automation, automation is more of a security issue than it is an efficiency issue.
Speaker Change: Automated cars, whose self-driving cars will kill a lot fewer people every year than human drivers.
Speaker Change: They don't get drunk. They don't go 135 miles an hour. Automation is a safety issue in a security issue.
Speaker Change: Almost all cyber attacks.
Speaker Change: Begin the same way with human error.
Speaker Change: If there is no oracle database administrator as there isn't with the autonomous database.
Speaker Change: The Data of the DBA cannot make a configuration mistake that exposes your data.
Speaker Change: You can't have a human being involved if you want to make your data secure. A economy is the huge portion of it. And the fourth piece of security that I'll talk about is code generation.
Speaker Change: When you generate a computer program rather than handwrite it in job, hey, where the owners of job are, I don't know, maybe this spring great said we're not the owners of job, I'm not sure, I'm not sure what it even means.
Speaker Change: I'm not a lawyer, but I...
Speaker Change: If the computer generates the program rather than a human being writing it.
Speaker Change: The computer will not generate security vulnerabilities. They will not generate something called state, which means your application can't fail over automatically. In case your data center loses power or burns down or something like that.
Speaker Change: Code Generation is a huge portion of that generation security. Zero-truth packet routing is another important one. Biometric authentication and automation are all the four key attributes.
Speaker Change: to winning the cyber wars. It's going to be our defensive robots against their robots. And we have to better technology on the defensive side. They currently have on the offensive side because they are winning.
Speaker Change: I mean, every year there are more successful cyber attacks and you know what the FBI says when you're attacked?
Speaker Change: Pay the ransom there's nothing we can do about it. Well, that's not very encouraging. I have an idea. Let's keep the ransom money. But implement, you know, next generation technology that makes it much harder for cyber criminals.
Speaker Change: And it's not so bad with cybercriminal now compared to what state actors have the ability to do.
Speaker Change: So we have to harden our computer systems. We have to make them more secure. The good news is there is a whole new generation of AI-based security systems.
Speaker Change: Like biometric authentication, like zero trust packet routing, that we can use to stop these attacks, but we have to actually deploy the technology.
Speaker Change: Amazing Larry, look forward to learning more this week in Vegas.
Speaker Change: Thank you, Brad. Thank you, Larry. A telephonic replay of this conference call would be available for 24 hours on our investor relations website. Thank you for joining us today and with that, we'll turn the call back to Sarah for closing.
Speaker Change: [inaudible]
