Q3 2025 Oracle Corp Earnings Call
Unknown Executive: Ladies and gentlemen, thank you for standing by.
Ladies and gentlemen, thank you for standing by my name is after that will be your conference operator today.
Abby: My name is Abby and I will be your conference operator today.
Abby: At this time, I would like to welcome everyone to the Oracle Corporation Third Quarter Fiscal Year 25 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
At this time I would like to welcome everyone to the Oracle Corporation third quarter fiscal year 'twenty five earnings conference call.
All lines have been placed on mute to prevent any background noise.
Abby: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 a second time. Thank you.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question during that time simply prestige Starkey followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one a second time.
Speaker Change: Thank you and I would now like to turn the conference over to Ken Bond head of Investor Relations. Mr. Bond you may begin.
Ken Bond: And I would now like to turn the conference over to Ken Bond, Head of Investor Relations. Mr. Bond, you may begin.
Ken Bond: Thank you, Abby.
Ken Bond: Thank you Amy good afternoon, everyone and welcome to Oracle's third quarter fiscal year 2025 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 website.
Ken Bond: Good afternoon, everyone, and welcome to Oracle's third quarter fiscal year 2025 earnings conference call. 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.
Speaker Change: 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.
Ken Bond: On the call today are Chairman and Chief Technology Officer Larry Ellison and Chief Executive Officer Safra Katz. As a reminder, today's discussion will include forward-looking statements, 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. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from the statements being made today.
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 forward looking statements. These forward looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from the statements being made today as a result, we caution you against placing undue reliance on these forward looking statements.
Ken Bond: 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, including our 10-K and 10-Q, and any applicable amendments for a complete discussion of these risk factors and other risks that may affect our future results or the market price of our stock. And finally, we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events.
Speaker Change: 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 risk 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 revise our results or these forward looking statements and lie.
Speaker Change: Of new information or future events before taking any questions. We will begin with a few prepared remarks and with that I'd like to turn the call over to Safra.
Safra Catz: Before taking any questions, we will 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. As you can see, this was our strongest booking quarter ever, by a huge margin, as we added $48 billion to our backlog. Our RPO balance is now $130 billion, up from $97 billion last quarter, and up from $80 billion last year. That's a growth of 63% year over year, and this does not include any contracts with Project Stargate. The RPO figure is the leading indicator of demand for our cloud services, while our live data center count and power capacity is the leading indicator of the conversion of RPO to revenue.
Safra: Thanks, Ken and good afternoon, everyone. As you can see this was our strongest booking quarter ever.
Safra: By a huge margin as we added $48 billion to our backlog.
Safra: <unk> balance is now $130 billion.
Safra: Up from 97 billion last quarter and up from.
Safra: <unk> 80 billion last year, that's a growth of 63% year over year. This does not include any contracts with project Star Gate.
Safra: The RP O figure is the leading indicator of demand for our cloud services.
Safra: While our lives data center count power capacity is the leading indicator of the conversion of RP O to revenue.
Safra Catz: Speaking of data centers, we marked a milestone this quarter as we crossed into triple digits with our 101st cloud region coming online. Just a matter of time before we have more cloud regions than all of our competitors combined, reflecting the strategic advantage of our Gen 2 architecture, which offers our customers the most flexibility. From a delivery standpoint, the growth of our power capacity under contract is even higher than the growth in the number of data centers. And we expect that our available power capacity will double this calendar year and triple by the end of next fiscal year.
Safra: Speaking of data centers, we marked a milestone this quarter as we crossed into triple digits with our 101st cloud region coming online.
Safra: Just a matter of time before we have more cloud regions than all of our competitors.
Safra: Bind reflecting the strategic advantage of our Gen. Two architecture, which offers our customers the most flexibility.
Safra: From a delivery standpoint, the growth of our power capacity under contract is even higher than the growth in the number of data centers and we expect that our available power capacity will double this calendar year and triple by the end of <unk>.
Safra: Next fiscal year.
Safra Catz: As we bring more capacity online, our revenues will clearly accelerate. What we are seeing in the market is that we are the destination of choice for both AI training and inferencing. This is due to the fact that our Gen 2 cloud is faster and therefore cheaper than our competitors and also due to our ultra high speed networking engineering that we started decades ago and that is now highly relevant for AI.
Safra: As we bring more capacity online our revenues will clearly accelerate.
Safra: What we are seeing in the market is that we are the destination of choice for both AI training and inference thing. This is due to the fact that our gen. Two cloud is faster and therefore cheaper than our competitors and also.
Safra: Due to our ultra high speed networking engineering that we started decades ago and that is now highly relevant for AI.
Safra Catz: Taken together, we have numerous structural engineering advantages that distinguishes OCI from our competitors and as Larry will discuss in more detail. Beyond that, because of the momentum OCI is enjoying, customers are looking at us for many more workloads.
Taken together, we have numerous structural engineering advantages.
Distinguishes OCI from our competitors.
Safra: And as Larry will discuss in more detail.
Safra: Beyond that because of the momentum OCI is enjoying customers are looking at us for many more workloads.
Safra Catz: Now shifting to Q3 results, I'll be discussing our financials using constant currency growth rate as this is how we manage the business. So here it goes. Total cloud revenue at SAS and IaaS was up 25% at $6.2 billion, with SAS revenue of $3.6 in the quarter, up 10%, and IaaS revenue of $2.7 billion, up 51%, on top of 49% which we reported last year.
Safra: Now shifting to Q3 results I'll be discussing our financials using constant currency growth rate as this is how we manage the business.
Safra: So here goes total cloud revenue.
Safra: <unk> was up 25% at $6 2 billion with SaaS revenue of $3 six in the quarter up 10% on I guess revenue of $2 7 billion up 51% on top of 49% which ripped.
Safra: <unk>, which we reported last year now as a reminder, the exit from our advertising business last year had the effect of lowering total cloud revenue growth by 2% this quarter.
Safra Catz: Now, as a reminder, the exit from our advertising business last year had the effect of lowering total cloud revenue growth by 2% this quarter. Total cloud services and license support revenue for the quarter was $11 billion, up 12%, driven again by OCI, our strategic cloud applications, and cloud database services. Infrastructure subscription revenues, which includes license support, were $6.2 billion, up 18%. Record-level AI demand drove Oracle Cloud Infrastructure revenue up 51% in Q3, and that's 54% when you exclude our legacy hosting. Both a much higher growth rate than any of our hyperscaler competitors. Our infrastructure cloud services now have an annualized revenue of $10.6 billion.
Safra: Total cloud services and license support revenue for the quarter was 11 billion up 12% driven again by OCI, our strategic cloud applications and cloud database services.
Safra: Infrastructure subscription revenues, which includes license support were $6 2 billion up 18%.
Safra: Record level AI demand drove Oracle cloud infrastructure revenue up 51% in Q3, and that's 54% when you exclude our legacy hosting both a much higher growth rate than any of our hyper scaler competitors.
Safra: Our infrastructure cloud services now has an annualized revenue of $10 6 billion.
Safra Catz: OCI consumption revenue was up 57%. Demand continues to dramatically outstrip supply.
Safra: OCI consumption revenue was up 57% demand continues to dramatically outstrip supply now we do expect that the component delays that have slowed cloud capacity expansion. This year should ease in Q.
Safra Catz: Now, we do expect that the component delays that have slowed cloud capacity expansion this year should ease in Q1 FY26, so pretty soon. Growth in the AI segment of our infrastructure business was extraordinary. GPU consumption revenue is now nearly 3 and 1⁄2 times the size of last year. Cloud database services, which were up 28%, now have annualized revenue of $2.3 billion. Autonomous database consumption revenue was up 42% on top of the 32% growth reported last year. So again, we have acceleration as we get bigger.
Safra: One FY 'twenty six so pretty soon.
Safra: Growth in the AI segment of our infrastructure business was extraordinary GPU consumption revenue is now nearly three and a half times the size of last year's.
Safra: Cloud database services, which were up 28% now have annualized revenue of $2 3 billion.
Safra: Economists database consumption revenue was up 42% on top of the 32% growth reported last year. So again, we have acceleration as we get bigger.
Safra Catz: As on-premise databases migrate to the cloud, either on OCI directly, through public cloud, cloud-to-customer, or DRCC, or through our database at cloud services with Azure, Google, or AWS, we expect the cloud database revenues collectively will be the third driver of revenue growth alongside OCI and strategic SAP. We are currently live in 18 cloud regions with database at cloud services with our partners and have another 40 planned with Azure, Google, and AWS. Now finally, database subscription revenues, which includes license support, were up 6%. Application subscription revenues, which again include product support, were $4.8 billion and up 6% too.
Safra: As on premise databases migrate to the cloud either on OCI directly through public cloud cloud, a customer or a D RCC or through our database at cloud services with Azure, Google or AWS, we expect the cloud.
Safra: Database revenues collectively will be the third driver of revenue growth alongside OCI and strategic sense.
Safra: We are currently lives in 18 cloud regions with database App cloud services with our partners and have a another 40 planned with Azure, Google and AWS.
Safra: Now finally database subscription revenues, which includes license support were up 6%.
Safra: Application subscription revenues, which again include product support were $4 8 billion and up 6% to our strategic back office SaaS applications now have annualized revenue of $8 6 billion and were up 18%.
Safra Catz: Our strategic back office SaaS applications now have annualized revenue of $8.6 billion and we're up 18%.
Safra: <unk>.
Safra Catz: software license revenues were down 8% to $1.1 billion. So all in total revenues for the quarter were $14.1 billion up 8% from last year. Now shifting to gross profit and operating income, the gross profit dollars of cloud services and license support grew 10% in Q3. We continue to focus on operating expense discipline, which collectively continue to grow slower, expense discipline, so expenses continue to grow slower than revenue, a trend that I expect will continue. The Q3 operating income grew 9% and the operating margin was 44%, up slightly from last year.
Safra: Software license revenues were down 8% to $1 1 billion. So all in total revenues for the quarter were $14 1 billion up 8% from last year.
Safra: Now shifting to gross profit and operating income the gross profit dollars of cloud services and license support grew 10% in Q3.
Safra: We continue to focus on operating expense discipline, which collectively continue to grow slower expense discipline. So expenses continue to grow slower than revenue a trend that I expect will continue.
The Q3 operating income grew 9% and the operating margin was 44% up slightly from last year.
Safra Catz: The non-GAAP tax rate for the quarter was 19.9, which was higher than my 19% guidance and lowered EPS by $0.02, and EPS currency headwind ended up at $0.04, more than I thought would be hurt by currency as currency continued to strengthen. The non-GAAP EPS was $1.47 in U.S. dollars, up 4% in USD, up 7% in constant currency. The GAAP EPS was $1.02 in U.S. dollars, up 20% in USD, up 25% in constant currency.
Safra: The non-GAAP tax rate for the quarter was $19 nine which was higher than my 19% guidance and lowered EPS by <unk>, <unk> and EPS currency headwind and did.
Safra: He ended up at four cents more than I thought would would be hurt by currency as currency continued to strengthen.
Safra: The non-GAAP EPS was $1 47 in U S dollars up 4% in USD up 7% in constant currency. The GAAP EPS was a dollar two in U S dollars up 20% in USD up 25% in constant currency.
Safra Catz: At quarter end, we had $17.8 billion in cash and marketable securities. The short term deferred revenue balance was $9 billion up 3%. Operating cash flow for Q3 was $5.9 billion, slightly more than our $5.9 billion in CapEx as we front loaded some purchases into the quarter. Given the demand that you see in our RPO growth and the additional demand we see in our pipeline, I expect fiscal year 2025 CAPEX will be a little more than double what it was last year at around $16 billion. As always, we remain careful to pace and align our CapEx investments appropriately and in line with booking trends.
Safra: At quarter end, we had $17 $8 billion in cash and marketable securities.
Safra: The short term.
Safra: <unk> revenue balanced with 9 billion up 3%.
Safra: Operating cash flow for Q3 was $5 9 billion slightly more than our $5 9 billion in Capex as we front loaded some purchases into the quarter.
Safra: Given the demand that you see in our RP O growth and the additional demand we see in our pipeline.
Safra: I expect fiscal year, 2025, Capex will be a little more than double what it was last year at around $16 billion.
Safra: As always we remain careful to pace and align our capex investments appropriately and in line with booking trends.
Safra Catz: On a trailing 12-month basis, operating cash flow was up 14% at $20.7 billion and free cash flow was $5.8 billion. As I mentioned, remaining performance obligations, or RPO, is now $130 billion. up 63% in constant currency, and it reflects the growing trend of customers wanting larger and longer contracts as they see firsthand how Oracle Cloud Services are benefiting their business. Further, our cloud RPO grew over 90% and now represents more than 80% of total RPO, and approximately 31% of that total RPO number is expected to be recognized as revenue over the next 12 months.
Safra: On a trailing 12 month basis operating cash flow was up 14% at $20 7 billion and free cash flow was $5 8 billion.
Safra: As I mentioned remaining performance obligations or RP O is now 130 billion.
Safra: Up 63% in constant currency and it reflects the growing trend of customers wanting larger and longer contracts as they see firsthand how oracle cloud services are benefiting their businesses.
Safra: Further our cloud our P O grew over 90% and now represents more than 80% of total ARPA.
Safra: And approximately 31% of that total RPM number is expected to be recognized as revenue over the next 12 months.
Safra Catz: Now, we are and remain committed to returning value to our shareholders through technical innovations, acquisitions, repurchases, prudent use of debt, and a dividend. This quarter, we repurchased nearly a million shares for a total of $150 million. And over the last 10 years, we've reduced the shares outstanding by more than a third at an average price of $54 to share.
Safra: Now we are and remain committed to returning value to our shareholders through technical innovation acquisitions and repurchases prudent use of cash of debt and the dividend. This quarter, we repurchased nearly 1 million shares for a total of 150.
Safra: Millions of dollars and over the last 10 years, we've reduced the shares outstanding by more than a third at an average price of $54 a share.
Safra Catz: In addition, we have paid out dividends of $4.4 billion over the last 12 months, and the Board of Directors increased the quarterly dividend 25% from $0.40 $2.50 per share today.
Safra: In addition, we have paid out dividends of $4 4 billion over the last 12 months and the board of directors increased the quarterly dividend, 25% from 40 cents.
Safra: 250 per share to day.
Safra Catz: Before I dive into Q4 specific guidance, I'd like to comment on the financial acceleration we expect to see in the coming years. We now have a clear light of sight to our future revenue growth. We remain very confident and committed to total cloud infrastructure revenue for fiscal year 2025 growing faster than the 50% reported last year, and it will be even faster for fiscal year 2026, likely a lot faster. Our confidence in meeting our $66 billion revenue target for FY26 is now stronger than ever and represents around a 15% growth rate. And more importantly, I now expect that our fiscal year 2027 growth rate will be around 20%.
Safra: Before I dive into Q4 specific guidance I'd like to comment on the financial acceleration, we expect to see in the coming years.
Safra: We now have a clear line of sight to our future revenue growth, we remain very confident and committed to total cloud infrastructure revenue for fiscal year 2025 growing faster than the 50% reported last year and it will be easy.
Safra: Even faster for fiscal year, 2026, likely a lot faster.
Safra: Our confidence in meeting our.
Safra: $66 billion revenue target for FY 'twenty, six is now stronger than revenue than ever and represents around a 15% growth rate and more importantly, I now expect that our fiscal year 'twenty seven growth rate will be around.
Safra: <unk>, 20%.
Safra Catz: which is even higher than I previously guided.
Safra: Which is even higher than I previously guided.
Safra Catz: Let me now turn to my guidance for Q4, which I'll review on a non-GAAP basis and assuming exchange rates remain the same as they are now. Currency should have a cent to two cent negative effect on EPS and a one percent negative effect on revenue. However, as usual, currency impact may be different, so focus in on constant currency. Total revenues are expected to grow from nine to eleven percent in constant currency and are expected to grow from eight percent to ten percent in USD at today's exchange rate. Total cloud revenue is expected to grow from 24% to 28% in constant currency, is expected to grow from 25% to 27% in USD.
Safra: Let me now turn to my guidance for Q4, which I'll review on a non-GAAP basis, and assuming exchange rates remain the same as they are now.
Safra: Currency should have a sent to <unk> negative effect on EPS and a 1% negative effect on revenue. However, as usual currency impact may be different so focused in on constant currency total revenues are expected to grow.
Safra: From 9% to 11% in constant currency and are expected to grow from 8% to 10% in USD at today's exchange rate.
Safra: Total cloud revenue is expected to grow from 24% to 28% in constant currency is expected to grow from 25 to 27 in USD.
Safra Catz: Nongap EPS is expected to grow from 0 to 2% and be between $1.62 and $1.66 in constant currency. Nongap EPS is expected to grow between negative 1 and positive 1 and be between $1.61 and $1.65 in USD.
Safra: non-GAAP EPS is expected to grow from zero to 2% and be between $1 62, and $1 66 in constant currency non-GAAP EPS is expected to grow between negative one and positive one and be between $1 61 and 165.
Safra: In USD I should mention that my E. P Q4, EPS guidance is negatively impacted by three cents plus due to losses recognized from an investment in another company.
Safra Catz: I should mention that my Q4 EPS guidance is negatively impacted by $0.03 plus due to losses recognized from an investment in another company. Lastly, my EPS guidance for Q4 assumes a base rate of 19%. However, as you saw in this quarter, one-time tax events could cause actual tax rates to vary and usually do.
Safra: Lastly, my EPS guidance for Q4 assumes a base rate of 19%. However, as you saw in this quarter, one time tax events could cause actual tax rates to vary and usually do and finally I'm sure. This isn't lost on anyone but we are reporting earnings.
Safra Catz: And finally, I'm sure this isn't lost on anyone, but we are reporting earnings just 10 days after the close of the quarter, and that's also because there was a weekend. Using Fusion, we continue to file our quarterly and annual financial statements faster than any other company in the S&P 500.
Safra: Just 10 days after the close of the quarter and that's also because there was a weekend using fusion, we continue to file our quarterly and annual financial statements faster than any other company in the S&P 500.
Larry Ellison: And with that, I'll turn it over to Larry for his comments.
Larry: And with that I'll turn it over to Larry for his comments.
Larry Ellison: Thank you, Safra. Well, as Safra pointed out, some of our existing businesses, AI training and multi cloud database, are experiencing hyper growth. We are in the process of building a gigantic 64,000 GPU liquid cooled NVIDIA GB200 cluster for AI. Our multi-cloud business at Amazon, Google, and Microsoft grew 200% in the last three months alone. But in addition to these rapidly growing existing business New customers and new businesses are migrating to the Oracle Cloud at an unprecedented rate. In Q3, we signed a multi-billion dollar contract with AMD to build a cluster of 30,000 of their latest...
Larry: Thank you Safra.
Speaker Change: The sniper pointed out some of our existing businesses AI training and multi cloud database are experiencing hyper growth.
Speaker Change: We are in the process of building a gigantic 64000, GPU liquid cooled and video GBP 200 cluster for AI training.
Speaker Change: Our module multi cloud business at Amazon, Google and Microsoft grew 200% in the last three months alone.
Speaker Change: But in addition to these rapidly growing existing businesses.
Speaker Change: New customers and new businesses are migrating to the Oracle cloud.
Speaker Change: The unprecedented route.
Speaker Change: In Q3, we signed a multibillion dollar contract with AMD.
Speaker Change: Build the cluster of 30000 of their latest M.
Larry Ellison: MI-355X GPU and all four of the leading cloud security. CrowdStrike, Cyber Reason, Newfold Digital, and Palo Alto, they all decided to move to the Oracle.
Speaker Change: 350 buybacks Gpus.
Speaker Change: And all four of the leading cloud security companies crowd strike cyber reason neutral digital and Palo Alto, They all decided to move to the Oracle cloud.
Larry Ellison: But perhaps most important.
Speaker Change: But perhaps most importantly.
Larry Ellison: Oracle has developed a new product called the AI Data Platform. that enables our huge install base of database customers. to use the latest AI models from OpenAI. XAI and Meta. to analyze all of the data they have stored in their millions of existing Oracle data. By using Oracle version 23 AI's vector capability. Customers can automatically put all of their existing data into the vector format that is understood by AI models. This allows those AI models to learn, understand, and analyze every aspect of your company or government agency. Instantly unlocking the value in your data while keeping your data private.
Speaker Change: Oracle has developed a new product called the AI data platform.
Speaker Change: That enables our huge installed base of database customers.
Speaker Change: To use the latest AI models from open AI.
Speaker Change: And meta.
Speaker Change: Analyzed all of the data they have stored in their millions.
Speaker Change: Listing Oracle databases.
Speaker Change: By using Oracle version 23.
Speaker Change: Vector capabilities.
Speaker Change: Customers can automatically put all of their existing data into the vector format.
Speaker Change: Understood by AI models.
Speaker Change: This allows those models to learn understand and analyze every aspect of your company or government agency.
Speaker Change: Instantly unlocking the value in your data, while keeping your data private.
Larry Ellison: Secure.
Speaker Change: And secure.
Larry Ellison: This AI inferencing will be another great, large, new business for Oracle.
Speaker Change: This.
Speaker Change: Important thing will be another great Lee.
Speaker Change: Large new business support Oracle.
Larry Ellison: Back to you, Ken. Thank you, Larry.
Ken Bond: Back to you Ken.
Ken Bond: Thank you Larry Abby Please poll the audience for questions. In a reminder, one question per analyst. Please thank you.
Abby: Abby, please pull the audience for questions. And a reminder, one question per analyst, please. Thank you.
Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Abby: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the If you would like to withdraw your question, press star 1 a second time.
Ken Bond: If you would like to withdraw your question Press Star one a second time.
Abby: If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Ken Bond: If you are called upon to ask your question or listening via speaker phone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Brad Zelnick: and your first question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open. Great. Thanks so much for taking the question and congrats on just remarkable booking strength.
Speaker Change: And your first question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open.
Brad Zelnick: Great. Thanks, so much for taking the question and congrats on just remarkable bookings strength.
Larry Ellison: Larry, I'm hoping you can expand more on Stargate because this is just a massive scale American first venture with Oracle joined by undisputed AI leaders like OpenAI and NVIDIA, and they chose you over several other choices in the market. What does Oracle's unique value add here? What can Oracle do that others can't? Thanks.
Speaker Change: Larry I'm, hoping you can expand more on Stargate because this is just a massive scale American first venture with Oracle joined by undisputed leaders like open AI and in video and they chose you over over several other choices in the market what is oracle's unique value add here, what's an oracle do that others.
Brad Zelnick: Thanks.
Larry Ellison: Well, I think it's actually very simple. The capability we have is to build these huge AI clusters with technology that actually runs faster and more economically than our competitors. So it really is a technology advantage we have over them. If you run faster and you pay by the hour, you cost less. So that technology advantage translates to an economic advantage, which allows us to win a lot of these huge deals.
Brad Zelnick: Oh well.
Brad Zelnick: I think it's actually very simple.
Brad Zelnick: The.
Brad Zelnick: The capability the capability, we have is to build these huge AI clusters.
Brad Zelnick: Uh huh.
Brad Zelnick: With technology that actually runs faster and more economically than our competitors. So it really is a technology advantage we have over them. If you run faster and you pay by the hour.
Brad Zelnick: Got you.
Brad Zelnick: Costless.
Brad Zelnick: So that technology advantage translates to an economic advantage, which allows us to win a lot of these huge deals and it's not just the Stargate deal, which is in our future by the way.
Larry Ellison: And it's not just the Stargate deal, which is in our future, by the way. You know, we got to over 130 billion in RPO without any transactions from Stargate. So, again, Stargate looks to be the biggest AI training project out there. And we expect that will allow us to grow our RPO even higher in the coming quarters. And we do expect Stargate, our first large Stargate contract fairly soon.
Brad Zelnick: We got to over $130 billion in RP O without any transactions from Starwood. So again Stargate looks to be the biggest project AI training projects out there.
Brad Zelnick: And we expect that that will allow us to grow our RPM.
Brad Zelnick: <unk> been higher in the coming quarters.
Brad Zelnick: And we do expect Stargate of large targeted contract fairly soon.
Brad Zelnick: Thanks for that, Larry.
Brad Zelnick: Thanks for that Larry if I could maybe just sneak in a very quick one for safra when Stargate does hit as it as it related party is there anything that you can share with us is Mr.
Safra Catz: If I could maybe just sneak in a very quick one for Safra. When Stargate does hit, as it is a related party, is there anything that you can share with us as to how we should expect it might flow through the financials?
Brad Zelnick: How we should expect that might flow through the financials. Thanks again.
Safra Catz: Thanks again. Well, it won't flow through us in any unique way. They will place contracts with us and they'll come right through. So I'll be explaining it to you once it's fully laid out. But it's not going to make your work harder. We're going to be very, very clear on as the contracts come through us. It won't be as much of a change as you think. It's just going to be even larger. Number.
Speaker Change: Well it won't flow.
Speaker Change: Through Washington, any unique way, they will place contracts with us and they will come right through.
Speaker Change: Well I'll be explaining it to you once it's fully laid out but it's not going to make your work harder we're going to be very very clear on as the contracts come through us.
Speaker Change: It won't be as much of a change as you think it's just going to be even larger numbers.
Brad Zelnick: Wow, thank you again.
Well, thank you again.
Derek Wood: And your next question comes from the line of Derek Wood with TD Cowan. Your line is open. Safra and Larry, congrats on a strong bookings quarter. I wanted to drill into the growth undercurrents around OCI, especially in light of such a huge RPO number that didn't even include Stargate. In some quarters, we hear about particular demand for AI. AI contracts certainly seems to be a lot of favorable developments going on there. But other times we hear about emerging adoption and multi-cloud and database on hyperscalers. And we can hear about strength and dedicated as well with Sovereign Clouds and Alloy.
Speaker Change: And your next question comes from the line of Derrick Wood with TD Cowen Your line is open.
Speaker Change: Okay.
Speaker Change: Safra, Larry Congrats on a strong bookings quarter I wanted to drill into the growth undercurrents around OCI, especially in light of such a huge RP O number that didn't even include Stargate.
Speaker Change: Some quarters, we hear about particular demand for AI or AI contracts, certainly seems to be a lot of favorable developments going on there.
Speaker Change: But other times, when we hear about emerging adoption and multi cloud and database on hyperscale or and we could hear about strength and dedicated as well with sovereign clouds and alloy I guess as you look at Q3 bookings and pipeline trends can you give us a sense as to how demand is unfolding across those three different jabbar environments.
Larry Ellison: I guess as you look at Q3 bookings and pipeline trends, can you give us a sense as to how demand is unfolding across those three different environments and how you feel about the growth durability and really the infrastructure capacity serviceability of each of these vectors? Well, I mean, the reality is that everything is chugging on all fronts. So multi cloud, I gave you some of the numbers there. These numbers for I was just looking year over year, because we only started really having revenue originally a year ago, it's, it's more than 10 times what it was just a year ago.
Speaker Change: And how you feel about the growth durability and really the infrastructure capacity serviceability of each of these vectors.
Speaker Change: Well I mean, the reality is that everything is chugging on all fronts. So.
Speaker Change: Multi cloud I gave you some of the numbers there. These numbers for I was just looking.
Speaker Change: Our year over year, because we only started really having revenue originally a year ago, it's it's more than 10 times.
Speaker Change: What it was just a year ago and the numbers are exploding as I told you. We've got 18 lives, but 40 coming online. So that is growing unbelievably well OCI public cloud going spectacularly clouded.
Larry Ellison: And the numbers are exploding. As I are sovereign clouds, disconnected clouds. And so we've laid out quite a lot of capacity. And it's starting to fill up. So bookings are going very, very well. And it's turning into revenue. So it pretty much it's we're going on all cylinders. For us, we're happy when customers come, you know, directly to us with their database workloads. But we're also happy when they they do do they come to us through our partners, Azure, AWS, and GCP. So for us, we don't care if they get exactly the same capability at the end.
Speaker Change: Customer really going well and all of the pieces around that.
Speaker Change: And we're starting there are whole parts that are only now rolling out which are sovereign clouds disconnected clouds, and so we've laid out quite a lot of capacity and it's starting to fill up so bookings are going very very well and.
Speaker Change: It's turning into revenue so pretty much.
Speaker Change: It's we're going on all cylinders for us we're happy when customers come.
Speaker Change: Directly to us with their database workloads, but we're also happy when they they do do they come to us through our partners Azure AWS and G. C. P. So for US we don't care, if they get exactly the same capable.
Speaker Change: <unk> at the and it's truly ideal.
Larry Ellison: It's really ideal. By the way, now the customers can get our database everywhere. They can install an Oracle Cloud region on their premises. They can get Oracle from Azure. They can get Oracle from Google. They can get Oracle from AWS. They obviously can get Oracle from OCI. And that Oracle database is becoming more and more capable. It does store most of the world's valuable data. It is by far the largest database installed base in the world with nothing remotely close. And most of those databases are still on premise, but now they're beginning to migrate to the cloud.
Speaker Change: That's great.
Speaker Change: But we know that other customers could get get our database everywhere. They can they can install an oracle cloud region on that on their premises they can get.
Speaker Change: It can get Oracle.
Speaker Change: From Azure, they can get Oracle from Google They can get Oracle from AWS. They obviously can get didnt get a good oracle from OCI.
Speaker Change: And that Oracle database is becoming more and more capable.
Speaker Change: It does store most of the world's valuable data. It is by far the largest database installed base in the world with nothing remotely close and most of those databases are still on premise, but now they are beginning to migrate to the cloud and one of the big drivers of that migrating to the cloud is the autonomous version of the database and now <unk>.
Larry Ellison: And one of the big drivers of them migrating to the cloud is the autonomous version of the database. And now, perhaps just as importantly, the AI data platform, which allows you to take all of your existing data, all of your existing data, and make it available to any of the leading AI models, let's say Grok, ChatGPT, LLAMA, all of them can immediately take advantage of your data. Your existing data and your existing database, and turn it into insights and actions and agents directly, again, on your private data while keeping that private data private. And that has been the missing link in companies and government agencies taking full advantage of that.
Speaker Change: <unk> just as importantly.
Speaker Change: The AI data platform, which allows you to take all of your existing data.
Speaker Change: All of your existing data and make it available to any of the leading AI models.
Speaker Change: Brock.
Speaker Change: GPT Lama all of them all of them can immediately.
Speaker Change: Take advantage of your existing data and your existing database and turn it into insights and actions and agents.
Speaker Change: Directly again on your on your private data, while keeping that private data private and that has been the missing link.
Speaker Change: The companies and government agencies, taking bullish.
Speaker Change: Yeah.
Speaker Change: We trained on all of the public data that is available on the Internet now that's a huge amount of information and makes for brilliant AI.
Larry Ellison: Web Goal Web Goal or your government agency, because that data is not available on the internet. That is not data that the AI model was trained on. Now, with the Oracle database, 23AI, the AI model can look at your data, train itself on that data, and provide you with, again, insights, actions on your existing data while keeping it private. You don't have to share it with anybody.
Speaker Change: But the AI is not does not have a lot of information about your company or.
Speaker Change: Or your government agency, because that a bit that data is not available on the internet that is not data that the AI model was trained on now with the Oracle database 23 AI.
Speaker Change: AI model kind of look at your data.
Speaker Change: Brain itself.
Speaker Change: On that data and provide you with again insights and actions.
Speaker Change: On your on your existing data, while keeping it private you don't have to share it with anybody.
Speaker Change: Yeah.
Aleksandr Zukin: Fantastic, thank you. And your next question comes from the line of Aleksandr Zukin with Wolf Research. Your line is open. Hey, thank you guys. And echoing the congratulations for truly unbelievable bookings number.
Speaker Change: And that's it thank you.
Speaker Change: And your next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.
Alex Zukin: Hey, Thank you guys and echo the congratulations for truly unbelievable bookings number I guess, maybe Larry could you opine on the current kind of state of the AI training versus inferencing opportunity.
Larry Ellison: I guess maybe, Larry, could you opine on the current kind of state of the AI training versus inferencing opportunity? You know, you have potentially investors worried about diminishing returns to training, even some of your hyperscaler peers seemingly walking back on some of their CapEx commitments. What are you seeing out there with respect to training versus inference, both in the incremental bookings that you're adding into the pipeline, and maybe just how Oracle is differentiated on the inferencing side versus both hyperscalers and neoclouds, particularly with this AI data platform product that you just announced? The AI models are only useful if they're familiar with the data, your data, the AI models have to understand your products, your customers, your service requests, your financials.
Alex Zukin: Potentially investors worried about diminishing returns to training, even some of your hyperscale or peers seemingly walking back on some of their capex commitments. What are you seeing out there with respect to training versus inference.
Alex Zukin: And the incremental bookings that you're adding in the pipeline and maybe just how oracle is differentiated on the on the inferencing side versus both hyperscale or neo clouds, particularly with this AI did a platform product that you just announced.
Alex Zukin: Okay well.
Alex Zukin: Obviously, our training business is getting bigger and bigger and bigger very rapidly as evidenced by the by our RPM, but it wasn't just AI training that drove the <unk> up.
Alex Zukin: The AI inferencing that potential of AI inferencing and think about all of the Oracle databases out there.
Alex Zukin: Had that data in those databases are going to train AI models.
The.
Alex Zukin: You can only be AI models are only useful if they're familiar with the data your data. The AI models have to understand your products. Your customers. Your surface request. Your financials. So you have to make all of that data available to the AI models in those databases visit has known this.
Larry Ellison: So you have to make all that data available to the AI models in those databases. This has not, you know, this is, we're right at the beginning of that. And again, on top of those Oracle databases now, we ourselves, because we're in the application built business, have built lots and lots of agents on top of the Oracle, on the Oracle databases, and made those agents a part of our applications, modernizing and automating our application. But customers need to do the exact same thing as they build software inside of their government agency, or they build software inside, you know, again, AI agents inside of their company.
Alex Zukin: We're right at the beginning of that.
Alex Zukin: And again on top of those Oracle database is now we ourselves because we are in the application build business have built lots and lots of the agents on top of the Oracle on the Oracle databases and made those agents are part of our applications are modernizing and automating our applications, but customers need to do.
Alex Zukin: Do the exact same thing as they occur.
Alex Zukin: As they build software inside of their government or government agency or they build software inside they've got AI agents inside of their company.
Larry Ellison: And how do they go about doing that? Well, they go about doing that is training the AI models on their data, on their data that is currently in an Oracle database. And we make that very easy. You push a button, you know, the new version of the Oracle Database 23 AI with vector capabilities, allow you to convert your data into vector format that's understood by the AI models. Nobody else has that. So you can easily now train the AI models on your data for inferencing, obviously, and for building of agents. You can do that automatically with the Oracle database.
Alex Zukin: And how are they what is how do they go about doing that while they go about doing that is training. The AI models on their data on their data that is currently in an Oracle database and we make that very easy you push a button.
Alex Zukin: Or are the new version of the Oracle database twenty-three AI with vector capabilities allow you to convert your data into vector format. That's understood by the AI models nobody else has that.
Alex Zukin: Nobody else has it. So you can you can you can easily now trained.
Alex Zukin: Our models on your data for him and for Inferencing, obviously and for building of agents you can do you can do that automatically.
Alex Zukin: With the Oracle database.
Larry Ellison: We are the only one with that capability. So we think inferencing in the end is a much bigger opportunity than AI training. And there are literally millions of Oracle databases all over the world that will...and that data, all of those millions of databases, all of that data will be used to train AI models. And on top of that, they'll build agents and applications. We think, again, that...I mean, we don't have these one or two or 10 huge contracts for training, because there aren't that many people building frontier models. But there are... Hundreds of thousands of our customers that will be consuming those AI models and training those same AI models on their private data, and then running agents and applications on top of all of that.
Alex Zukin: We are the only one without capability. So we think inferencing in the end is a much bigger opportunity then.
Alex Zukin: And then AI training.
And.
Alex Zukin: There are literally millions of Oracle databases.
Alex Zukin: All over the world that will and that data all of those millions of databases all of that data will be used to.
Alex Zukin: To train AI models.
And.
Alex Zukin: On top of that they'll build build agents and applications, we think again.
Alex Zukin: Yes.
Alex Zukin: We don't have these one or two or 10 huge contracts were training because there arent that many people building frontier models, but there are.
Alex Zukin: Hundreds of thousands of our customers that will be consuming those AI models and training those same AI models on their private data and then running agents and applications on top of all of that that's a much bigger market than they are trading for us.
Larry Ellison: That's a much bigger market than AI training.
Aleksandr Zukin: Super helpful, and maybe just...
Alex Zukin: Super helpful and maybe just.
Safra Catz: Safra, how to think about RPO trends and trending over the course of the next few quarters in light of that. I think... There are going to be lumpiness, as you can see, but we actually expect some extremely significant numbers coming, you know, within the next few months also. So there's, there's, there's just a lot of demand, folks. There's a lot of demand where people want to lock in and schedule in to our cloud. So we're going to see, we're going to see increases in RPO. But, you know, remember, our remaining performance obligation, we also burned down some of it through, you know, through the quarter as, as capacity goes online.
Alex Zukin: Several how to think about RP O trends and trending over the course of the next few quarters in light of that.
Alex Zukin: I think.
Alex Zukin: There are going to be Lumpiness as you can see but we actually expect some extremely significant numbers coming you know within the next few months also so there is there is a there's just a lot of demand folks. It there is a lot of demand where people want to lock.
Alex Zukin: Skin and schedule in to our cloud so what we're going to see we're going to see increases in our P. O. But we you know remember our remaining performance obligation. We also burned down some of that.
Alex Zukin: Through you know through the quarter as a as capacity goes online, but I expect that number to be extremely large and this is this is enormous.
Safra Catz: But I expect that number to extremely large. This is enormous, but I expect it actually to continue to be very large.
Alex Zukin: But I expected actually to continue to be very large.
Alex Zukin: Amazingly.
Safra Catz: Thank you so much.
Alex Zukin: Thank you so much.
Alex Zukin: Okay.
John DiFucci: And your next question comes from the line of John DiFucci with Guggenheim. Your line is open. Thank you. Um, you said you were live on 33 cloud regions and another 40 planned with Azure AWS? 18? Okay, I'm sorry. 18 multi-clouds. I got it. Yeah, I got you. I got you way ahead of yourself. I'm sorry. But anyway, I know you said you had another 40 planned with Azure AWS and Google. Look, this quarter, we saw a big uptick, like in discussions between partners in large enterprises regarding Oracle Database, pick your hyperscaler. Like, the discussion seemed to be happening in mass, but not the deals yet.
And your next question comes from the line of John <unk> with Guggenheim. Your line is open.
Speaker Change: Thank you.
Alex Zukin: You said.
Alex Zukin: You are live on 33 cloud regions and another 40 plan with that.
Alex Zukin: Okay, I'm, sorry, multi clouds.
Alex Zukin: Yeah, Yeah, I got you I got you way ahead of yourself I'm sorry.
Alex Zukin: But anyway I know you said you had another 40 planned with Azure AWS and Google.
Alex Zukin: This quarter, we saw a big uptick like in discussions between partners in large enterprises regarding Oracle database pick your hyper scaler.
Alex Zukin: Like the discussions seem to be like happening in mass, but not the deal here and one of the things limiting factor and talking to partners was that some of these.
John DiFucci: And one of the things, a limiting factor in talking to partners was that some of these global enterprises needed it to be global because they're global enterprises. And those 40, I guess, does that get you there for that? And when, like, when do those 40 get deployed? Are they going to be deployed over the next year? Or is it going to be over the next, I don't know, about how long does that take?
Alex Zukin: Global enterprises needed it to be global because of global enterprises and.
Alex Zukin: Those 40, I guess does that get you there for that and win.
Alex Zukin: When do those forties get deployed are there going to be deployed over the next year or is it could be over the next I don't know about how long does that take.
Larry Ellison: Well, of course, we're not in full control of that. But everyone's motivated to get them as quickly as possible. Because as you know, the way the revenue flows through, it flows through to our partner or our host. And then we and then they pay us. So they're very, motivated to get it as quickly as possible. Because that is holding up revenue for them until they can deploy it. So it's been moving very quickly. They've accelerated recently. And as you can imagine, there's some significant competition between our those three hyperscalers to grab those workloads before their competitor takes them.
Alex Zukin: Of course, we're not in full control of that but everyone is motivated to get them as quickly as possible because as you know the way the revenue flows through it flows through to our partner or our host and then we and then they pay us so.
Alex Zukin: They're very very motivated to get it as quickly as possible because that is holding up revenue for them until they can deploy it so.
Alex Zukin: It's been moving very quickly they have accelerated recently and as you can imagine there are some significant competition between.
Alex Zukin: Those three hyper scaler to grab those workloads before their competitor takes them.
Larry Ellison: So it is moving quickly. And, but there is enormous demand, again, enormous demand. But that capacity is not always within our control. So but, but they're very, very motivated to get it going. Because when those customers move, they often bring a lot of additional workload connected to the database, you know, into their cloud, but often directly into OCI also. And of course, we are the fourth competitor for them at the same time.
So it is moving quickly.
Alex Zukin: And but there is enormous demand again enormous demand.
Alex Zukin: But that capacity is not always within our control so why.
Alex Zukin: But theyre very very motivated to get it going because when those customers move they often bring a lot of additional workload connected to the database.
Alex Zukin: I'm sorry.
Alex Zukin: They're cloud, but it often.
Alex Zukin: Directly into OCI also and of course, we are the fourth competitor for them.
Alex Zukin: At the same time so.
Larry Ellison: So I don't have the exact dates of someone in my organization, no doubt it does. But we do expect it in short order to be to be a lot more deployed very quickly and demand is extremely high. Can I help?
Alex Zukin: I don't have the exact dates of our someone in my organization no doubt it does but we do expect it in short order to be.
Alex Zukin: To be a lot more deployed very quickly and demand is extremely high.
Speaker Change: Can I can I help you and helping us so everyone needs.
Larry Ellison: I think I can help on this. So everyone needs a primary and a backup data center in North America. Everyone needs a primary and a backup data center in Europe, typically Western Europe. And everyone needs a primary, not everyone, and a lot of people need primary and backups in Asia. So that's six data centers. So once we get to a primary, you know, a primary and a backup in North America and Europe and in Asia, for let's just say Google, we're ready to roll. Most of the impediments are out of the way.
Speaker Change: <unk> and our backup data center in North America, everyone needs, a primary and a backup data center in Europe.
Speaker Change: Typically western Europe, and everyone needs, a primary and not everyone. A lot of people on the primary and backups in Asia. So that's six data centers. So once we get to a primary.
Speaker Change: Primary and a backup in North America, and Europe and in Asia for let's just say Google.
Speaker Change: We're ready to we're ready to roll most of the impediments are either out of the way.
Larry Ellison: So, but then it's just a matter of building the people that want, that are Japanese national companies. That's for the multinationals, for the multinationals that work. And then there's obviously the Japanese domestic market and the German domestic market and so on and so forth. But we expect, this is growing extraordinarily fast, and we think we'll be able to meet most of the needs of customers that need for primary and backup around the world, certainly in the coming months.
Speaker Change: But.
Speaker Change: That then it's just a matter of building that people that want that our Japanese national companies, that's where the multinationals for the multinationals that works and then there's obviously the Japanese domestic market and the German domestic market and so on and so on and so forth, but I think by the time, we get to 40, which is around close enough to say 12 months.
Speaker Change: From now.
Speaker Change: The SAP.
Speaker Change: <unk> said its not entirely in our control because AWS has to provide us with the space because we were literally embedding the OCI data centers inside of AWS inside of Google and inside of Azure, but we expect.
Speaker Change: This is growing extraordinarily fast and we think we'll be able to meet most of the needs of customers that need for primary and backup around the world certainly.
Speaker Change: In the coming.
Larry Ellison: And then it's just going to be adding capacity country by country.
Speaker Change: Coming months.
Speaker Change: And then it's just going to be adding capacity country by country.
Speaker Change: Yeah.
Speaker Change: Okay.
Kirk Materne: And your next question comes from the line of Kirk Materne with Evercore ISI. Your line is. Thanks very much for taking the question. And I'll add my congrats on the RPO and booking strength this quarter. Larry, you mentioned some of the agents you've been building out on top of your application platform earlier. I was just wondering, are you now starting to see the demand for those technologies or those functionality that agents are bringing starting to have an impact on your strategic SaaS business and perhaps the pace of conversions from any, you know, legacy on prem systems that still might be out there?
Speaker Change: And your next question comes from the line of Kirk <unk> with Evercore ISI. Your line is open.
Kirk: Thanks, very much for taking the question I'll add my congrats on the <unk> and bookings strength. This quarter. Larry you mentioned some of the agents you've been building out on top of your application platform earlier I was just wondering are you now starting to see the demand for those technologies or the functionality that agents are bringing stern have an impact on your strategic.
Kirk: <unk> SaaS business and perhaps the pace of conversions from any legacy on Prem systems that still might be out there. Thanks.
Larry Ellison: Thanks.
Larry Ellison: Okay, so I would say, I mean, our biggest differentiators, so when we're competing in the healthcare field, our biggest differentiator is the quality of our AI agents, that we have a lot of AI agents in healthcare, you know, you know, one, we listen, you know, when a doctor consults with a patient, we listen to that consultation. And we record all the prescriptions, all the doctor's notes. We automatically, we provide the doctor, prior meeting with the patient, a summary of the patient's, their latest lab tests and vitals. When the doctor is finished meeting with the patient, has given all his orders, prescriptions, and come to, you know, diagnostic conclusions, we automatically update the electronic health records.
Kirk: Okay. So.
Kirk: I would say I mean.
Our biggest differentiator so when we're competing in the health care field.
Kirk: Our biggest differentiator is the quality of our AI agents.
Kirk: We have a lot of AI agents in health care.
Kirk: One we listen when a doctor are consults with a patient we've listened to that consultation.
Kirk: We record all the prescriptions all the doctor's orders all the doctor's notes, we automatically we provide the doctor prior meeting with a patient a summary of the patients their latest lab tests and vital.
When the Doctor. It's finished a meeting with the patient is given all those orders with prescriptions that come to the diagnostic conclusions we automatically update the electronic health Records.
Larry Ellison: I'm taking a huge burden off the position, they don't have to type any of this stuff in, we just listen. The interface, the interface to our system is voice, primarily voice, which is all AI, and it is all, but the whole system is made up of AI agents.
Speaker Change: A huge burden off the position they don't have to type any of this stuff in we just listen the interface the interface to our system as voice, primarily primarily voice, which is all AI on our business, but all system is made up of AI agents. Let me give you another one another AI agent.
Larry Ellison: Let me give you another one, another AI agent that we're in the process of building. It is, the doctors have to, the hospitals have to get permission to prescribe an expensive cancer drug, or to do a heart transplant, or something like that, or a knee transplant. They have to get prior authorization from the payer, the insurance company in the United States, or the government like the NHS in the UK. And there's this negotiation, you send your patient's electronic health records to the insurer, the insurer looks at that, analyzes that, and says, yes, this person is authorized to use Herceptin, or a cancer drug, or not.
Kirk: That where we.
Kirk: Or in the process of building.
Kirk: It is the doctors have the hospitals have to get permission to prescribe an expensive cancer drug or to do a heart transplant or something like that or a knee transplant.
Kirk: They have to get prior authorization from the payer of the insurance company in the United States or the government like the NHS in the U K and there is this negotiation you send your patient's electronic health records to the insurer insurer looks.
Kirk: Looks at that analyzes.
Kirk: And says yes. This person is authorized to use herceptin or a cancer drug or not.
Larry Ellison: But that's all done manually on the phone, but our AI agents, we read the insurance policies, we read all the electronic health records, we actually make the determination whether this is a reimbursable drug, or this is a reimbursable surgery. We do that, we automate that entirely, make it completely electronic. This saves billions of dollars in the healthcare field, and makes a huge difference, and determines whether they're going to buy our system, or buy some other, some alternative system. So I know people are saying, what's the dollar impact when you're selling the agent? Well, the dollar impact is we sell an entire country, an entire health system based on whether our agents and our health and our health software is better than our competitors and save them money.
Speaker Change: But that's all done manually on the on the phone, but our AI agents, we read the insurance policies. We read all the electronic Health Records, we actually make the determination whether this is a reimbursable drug or this is a reimbursable.
Kirk: Surgery.
Kirk: We do that we automate that entirely Megan completely electronic this saves billions of dollars.
Kirk: In the health care field and makes a huge difference and determines whether theyre going to buy our system.
Kirk: Or by some other some alternative system. So I know people are saying whats the dollar what's the dollar impact.
Kirk: When you are selling the agents well the dollar impact as we sell and in country, an entire health system based on the weather our agents and our wholesale and our software is better than our competitors and it saves them money.
Larry Ellison: So it is, it's not just, you know, it's not money really attributable to AI agents in health care. It's the fact we're selling more and more health care systems because we have a lot of AI agents embedded in them, which helps doctors, which produces better outcomes for patients and saves governments and payers money. And the same applies to our Fusion applications, which have dozens of embedded agents, whether it's in supply chain, financials, HCM, we have literally dozens of agents already embedded. in our applications. Unlike our competitors who are talking about it, we actually have them already built and deployed.
Kirk: So it is.
Kirk: It's not just.
Kirk: It's not money really attributable to AI agents in health care.
Kirk: <unk>, we're selling more and more health care systems, because that we have a lot of AI agents embedded in them, which helps doctor, which produces better outcomes for patients and saved governments and payers money.
Kirk: And if I could just real quick life to our fusion applications, which have dozens of embedded agents, whether it's in supply chain financials.
Kirk: HCM, we have literally dozens of agents already embedded.
Kirk: In our applications. Unlike our competitors who are talking about it we actually have them already built and deployed it if I can make it.
Larry Ellison: Let me make one more statement, it's going to be Since our applications are going to be primarily AI agents, Again, the applications themselves will migrate to be basically a bunch of connected AI agents. it really you're not going to be able to separate how much of How much did you make on the AI agents and how much did you make on the rest of the applications? All of our applications are becoming AI agents.
Kirk: One more statement, it's going to be fits.
Kirk: Since our applications are going to be primarily AI agents.
Kirk: Again, I'll say it again the applications themselves will migrate to be basically a bunch of the connected AI agents.
Kirk: It really youre not going to be able to separate how much of this how much of you make on the AI agents and how much did you make on the rest of the applications all of our applications are becoming AI agents.
Safra Catz: And Safra, if I could ask you a really quick follow up.
Kirk: And separately.
Quick follow up.
Safra Catz: Is this the tipping point for any customer that hasn't moved to the cloud to have to get there now to get this functionality? Talking to some partners, it feels like anybody that's been holding out is now ready to go because they can't get any of this functionality if they're still on-prem.
Kirk: Is this the tipping point for any customer that hasnt moved to the cloud to have to get there now to get this functionality target. Some partners that feels like anybody that's been holding out is now ready to go because they can't get any of this functionality if theyre still on prem. Thanks.
Safra Catz: Thanks. Yes, I mean, this is the motivator, the ability to have your system do so much of your work. As I was signing off with my finance and audit committee and talking with my chief accounting officer, they have the entire description of the balance sheet issue, you know, all the different balance sheet parts all done because of our product. That is such a time saver, and so much incredible productivity and insight that you're at a disadvantage if you do not use this.
Kirk: Yes, I mean this is the motivator.
Speaker Change: Our ability to have your system do so much of your work as I was signing off with my Finance Synodic Committee and talking with my Chief Accounting officer. They have the entire description of the balance sheet issue you know all the different balance sheet parts.
Kirk: All done.
Speaker Change: Because of our products.
Speaker Change: That is such a times safer and so much incredible productivity and insight that you're at a disadvantage. If you do not use this and that's why I know every quarter I mention again, we're announcing of course, it's Monday I couldn't announce.
Safra Catz: And that's why I know every quarter, I mention again, we're announcing, of course, it's Monday, I couldn't announce Sunday or Saturday, or of course, Friday, something you do only if you have bad news. So, I mean, I had to announce the 10th. And imagine so much of the work that my teams do is enabled because of these advanced technologies, and it's your way to get there. Ultimately, everyone's going to come to it, and it should be motivating them, because it is such a massive not only productivity improvement, and as a result, lower costs, but it also gives you incredible insight into your business.
Speaker Change: Sunday or Saturday are of course Friday, something you do only if you have bad news. So I mean I had to announce the 10th.
Speaker Change: And imagine a so much of the work that my teams do is enabled because of these advanced technologies and it's your way to get there.
Speaker Change: Ultimately everyone's going to come to it and it should be motivating them because it is such a massive not only productivity improvement and as a result lower cost, but it also gives you incredible insight into your business, it's really amazing.
Safra Catz: It's really amazing.
Speaker Change: Hey.
Speaker Change: Yeah.
Mark Moerdler: And your final question comes from the line of Mark Moerdler with Bernstein Research.
Speaker Change: And your final question comes from the line of Mark <unk> with Bernstein Research. Your line is open.
Safra Catz: Your line is open. Thank you very much for taking my question. And really, congratulations on how incredibly well this is being executed. We know Oracle spends less on CapEx per dollar of IaaS PaaS revenue than your larger hyperscale cloud provider peers. But how should we understand why CapEx is lower? And how should we think about the trajectory of CapEx given the strength of RBO, and especially the strength of OCI and OCI AI?
Speaker Change: Okay.
Mark: Thank you very much for taking my question and really congratulations on how incredibly well this is being executed.
Mark: We knew work, we'll spend less on Capex per dollar of Ias as revenue than your larger hyperscale cloud provider peers, but how should we understand why capex is lower and how should we think about the trajectory of capex given the strength of our P O and especially the strength of OCI and OCI a thank you.
Safra Catz: Thank Okay, well, I'll take a crack at that. So we can start our data centers smaller than our competitors. and then we grow based on demand. So building these data centers are expensive and they're really expensive if they're not full or they're not at least half full. So we tend to start small and then add capacity as demand arises. And that allows us to have higher utilization. That's one thing. The other thing is we have a high degree of standardization and automation inside of our cloud. So the... Operating the cloud also gives us better margins.
Mark: Okay, Okay, well I'll take a crack at that so we can start our datacenter is smaller than our competitors.
Mark: And then we grow based on demand so.
Mark: Building building these datacenters.
Mark: Are expensive and they are really expensive you don't they're not full or theyre not at least helpful. So we tend to start small and then add capacity as demand rises.
Mark: And that allows us to have higher higher utilization, that's one thing.
Mark: The other the other thing is we have a high degree of standardization and automation inside of our cloud.
So the.
Mark: The operating operating the cloud also gives us better margins now that you will not see that on cap you will not see thats on capex that will be on operating profit, but it's really the combination of starting smaller that effects and growing with demand.
Safra Catz: Now, you will not see that on CapEx. That will be on operating profit. But it's really the combination of starting smaller and growing with demand that affects CapEx and then overall margins. The fact that we have a high degree of automation, which lowers our labor costs dramatically. By the way, more importantly than lowering our labor costs, with no labor, there's no human error. There's no human mischief.
Mark: Capex and then overall margins.
Mark: But we have a high degree of automation.
Mark: Which.
Mark: Which lowers our labor costs dramatically by the way more importantly been more important than lowering our labor costs.
Mark: With no labor, there's no human error, there is no human mischief. So we're much more reliable and much more secure because we don't have a lot of human beings in our data centers.
Safra Catz: So we're much more reliable and much more secure because we don't have a lot of human beings in our data. makes a lot of sense. Thank you.
Mark: It makes a lot of sense. Thank you.
Safra Catz: Thank you, Safra. Thank you, Larry. Thank you, Mark.
Speaker Change: Thank you Safra. Thank you Larry Thank you Mark a telephonic replay of this conference call will be available for 24 hours on our Investor Relations website. Thank you for joining us today and with that I'll now turn the call back to Abbvie for closing.
Abby: A telephonic replay of this conference call will be available for 24 hours on our investor relations website. Thank you for joining us today.
Abby: And with that, I'll now turn the call back to Abby for closing. And ladies and gentlemen, this concludes today's call and we thank you for your participation.
Mark: Yes.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.
Abby: You may now disconnect.
Mark: Yeah.
Mark: Yeah.
Mark: Yeah.
Mark: Yeah.
Mark:
Mark: Yeah.
Mark:
Yeah.