What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-10 compared with 2024-09-10 · 142 added, 93 removed, 365 unchanged (39% of the section changed)

41 unchanged sentences

The proportion of our cloud services revenues relative to our total revenues has increased and we expect this trend to continue.

Cloud services revenues represented 42% and 37% of our total revenues in the first three months of fiscal 2025 and 2024, respectively.

Cloud services revenues represented 42% of our total revenues for each of the three- and six-month periods ended November 30, 2024, and 37% of our total revenues for each of the three- and six-month periods ended November 30, 2023.

Our cloud and license business’ revenue growth is affected by many factors, including the strength of general economic and business conditions;

19 unchanged sentences

Each hardware product and its related software, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a combined performance obligation.

The revenues for this combined performance obligation are generally recognized at the point in time that the hardware product and its related software are delivered to the customer and ownership

is transferred to the customer.

The revenues for this combined performance obligation are generally recognized

at the point in time that the hardware product and its related software are delivered to the customer and ownership is transferred to the customer.

We expect to continue to make investments in research and development to improve existing hardware products and services and to develop new hardware products and services.

34 unchanged sentences

From time to time since 2017, we have made investments in Ampere Computing Holdings LLC (Ampere), a related party entity, in the form of equity and convertible debt instruments.

The total carrying value of our investments in Ampere, after accounting for losses under the equity method of accounting, was $1.5 billion as of August 31, 2024.

The total carrying value of our investments in Ampere, after accounting for losses under the equity method of accounting, was $1.5 billion as of November 30, 2024.

We currently expect Ampere to continue to generate net losses in future periods, but we remain confident in the long-term potential of Ampere’s server chips.

Our equity investments in Ampere represent an ownership interest of approximately 29% as of August 31, 2024.

Our equity investments in Ampere represent an ownership interest of approximately 29% as of November 30, 2024.

We also own convertible debt investments in Ampere which, under the terms of an agreement with Ampere and other co-investors, will mature in June 2026 and are convertible into equity securities at the holder’s option under certain circumstances.

During the three months ended August 31, 2024, we invested $75 million in convertible debt instruments issued by Ampere.

During the six months ended November 30, 2024, we invested an aggregate of $135 million in convertible debt instruments issued by Ampere.

In accordance with the terms of an agreement with other co-investors, we are also a counterparty to certain put (exercisable by a co-investor) and call (exercisable by Oracle) options at prices of approximately $450 million to $1.5 billion, respectively, to acquire additional equity interests in Ampere from our co-investors through January 2027.

19 unchanged sentences

We also utilize these inputs to calculate and present a segment margin for each of our three businesses in the discussion below.

Consistent with our internal management reporting processes, research and development expenses, general and administrative expenses, stock-based compensation expenses, amortization of intangible assets, certain other expense allocations, acquisition related and other expenses, restructuring expenses, interest expense, non-operating income (expenses), net and (provision for) benefit from income taxes are not attributed to our three

operating segments because our management does not view the performance of our three businesses including such items and/or it is impracticable to do so.

Consistent with our internal management reporting processes, research and development expenses, general and administrative expenses, stock-based compensation expenses, amortization of intangible assets, certain other expense allocations, acquisition related and other expenses, restructuring expenses, interest expense, non-operating income (expenses), net and provision for income taxes are not attributed to our three operating segments

because our management does not view the performance of our three businesses including such items and/or it is impracticable to do so.

Refer to “Supplemental Disclosure Related to Certain Charges” below for additional discussion of certain of these items and Note 8 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a reconciliation of the summations of total segment margin as presented in the discussion below to total income before income taxes as presented per our condensed consolidated statements of operations for all periods presented.

7 unchanged sentences

Dollars at constant exchange rates (i.e., the rates in effect on May 31, 2024, which was the last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods.

For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on August 31, 2024 and 2023, our financial statements would reflect reported revenues of $1.11 million in the first quarter of fiscal 2025 (using 1.11 as the applicable average exchange rate for the period) and $1.08 million in the first quarter of fiscal 2024 (using 1.08 as the applicable average exchange rate for the period).

The constant currency presentation, however, would translate the results for each of the first quarters of fiscal 2025 and 2024 using the May 31, 2024 exchange rate and indicate, in this example, no change in revenues between the periods compared.

For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on November 30, 2024 and 2023, our financial statements would reflect reported revenues of $1.06 million in the first half of fiscal 2025 (using 1.06 as the applicable average exchange rate for the period) and $1.10 million in the first half of fiscal 2024 (using 1.10 as the applicable average exchange rate for the period).

The constant currency presentation, however, would translate the results for each of the first half of fiscal 2025 and 2024 using the May 31, 2024 exchange rate and indicate, in this example, no change in revenues between the periods compared.

In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency.

Total Revenues and Operating Expenses

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

11 unchanged sentences

(1) Comprised of Europe, the Middle East and Africa

Total revenues increased by $854 million in reported currency in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to a $1.0 billion increase in cloud and license revenues, partially offset by a decrease in hardware and services revenues by $59 million and $120 million, respectively.

Excluding the unfavorable effect of foreign currency rate fluctuations of 1%, the increase in our cloud and license business in the first quarter of fiscal

2025, relative to the first quarter of fiscal 2024, was primarily due to growth in our cloud services revenues as customers purchased our applications and infrastructure technologies and also renewed their related cloud contracts to continue to gain access to the latest versions of our technologies.

In constant currency, applications cloud services and license support and infrastructure cloud services and license support contributed 30% and 70%, respectively, of the growth in cloud services and license support revenues during the first quarter of fiscal 2025.

In our hardware business, the constant currency decrease in revenues in the first quarter of fiscal 2025 was due to the emphasis we placed on the marketing and sale of our growing cloud-based infrastructure technologies.

In our services business, the constant currency decrease in revenues in the first quarter of fiscal 2025 was attributable to a decrease in revenues from each of our primary services offerings.

In constant currency, the Americas, the EMEA and the Asia Pacific regions contributed 63%, 23% and 14%, respectively, of the constant currency total revenue growth during the first quarter of fiscal 2025.

Total GAAP operating expenses increased by $159 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

The increase in GAAP operating expenses was due to a $418 million increase in cloud services and license support expenses primarily due to higher infrastructure expenses that were incurred to support the increase in our cloud services revenues and higher employee related expenses, including increased expenses relating to stock-based compensation, and a $90 million increase in research and development expenses primarily due to higher employee related expenses.

These increases in operating expenses were partially offset by a $139 million decrease in expenses for amortization of intangible assets as certain of our assets were fully amortized;

a $65 million decrease in services expenses primarily due to lower external contractor expenses;

a $65 million decrease in restructuring expenses;

a $57 million decrease in hardware expenses primarily due to lower hardware product and support costs;

and a $35 million decrease in general and administrative expenses.

In constant currency, our total operating margin and total operating margin as a percentage of revenues increased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to higher revenues.

Total revenues increased by $1.1 billion and $2.0 billion in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods, due to a $1.2 billion and a $2.2 billion increase in cloud and license revenues, partially offset by a $28 million and an $87 million decrease in hardware

revenues and a $38 million and a $157 million decrease in services revenues, in each case during the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

Excluding the unfavorable effects of foreign currency rate fluctuations of less than 1% in the second quarter of fiscal 2025 and 1% in the first half of fiscal 2025, the increase in our cloud and license business revenues was primarily due to growth in our cloud services revenues as customers purchased our applications and infrastructure technologies and also renewed their related cloud contracts to continue to gain access to the latest versions of our technologies.

In constant currency, applications cloud services and license support contributed 25% and 28% and infrastructure cloud services and license support contributed 75% and 72% of the growth in cloud services and license support revenues, in each case in the second quarter and the first half of fiscal 2025, respectively.

In our hardware business, the constant currency decrease in revenues in the fiscal 2025 periods presented was due to the emphasis we placed on the marketing and sale of our growing cloud-based infrastructure technologies.

In our services business, the constant currency decrease in revenues in the fiscal 2025 periods presented was attributable to a decrease in revenues from each of our primary services offerings.

The Americas region contributed 82% and 74%, the EMEA region contributed 15% and 18% and the Asia Pacific region contributed 3% and 8% to the constant currency total revenue growth during the second quarter and the first half of fiscal 2025, respectively.

Total GAAP operating expenses increased by $520 million and $679 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

The increase in GAAP operating expenses in reported currency was primarily due to a $472 million and an $892 million increase in cloud services and license support expenses primarily due to higher infrastructure expenses and higher employee related expenses, including higher expenses relating to stock-based compensation, that were incurred to support the growth in our cloud services revenues;

a $245 million and a $335 million increase in research and development expenses primarily due to higher employee related expenses, including higher stock-based compensation expenses;

and a $97 million and a $108 million increase in sales and marketing expenses, in each case during the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

These increases in GAAP operating expenses in reported currency were partially offset by a $164 million and a $303 million decrease in expenses for the amortization of intangible assets as certain of our assets were fully amortized;

an $86 million and a $151 million decrease in services expenses primarily due to lower bad debt expenses and lower external contractor expenses;

and a $41 million and a $99 million decrease in hardware expenses due to lower hardware product and support costs, in each case during the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

A $65 million decrease in restructuring expenses, relative to the corresponding prior year period, further offset the increase in operating expenses in the first half of fiscal 2025.

In constant currency, our total operating margin and total operating margin as a percentage of revenues increased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to higher revenues.

Supplemental Disclosure Related to Certain Charges

2 unchanged sentences

Three Months Ended

Six Months Ended

(in millions)

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(1) Represents the amortization of intangible assets, all of which were acquired in connection with our acquisitions.

As of August 31, 2024, estimated future amortization related to intangible assets was as follows (in millions):

As of November 30, 2024, estimated future amortization related to intangible assets was as follows (in millions):

Remainder of fiscal 2025

1 unchanged sentence

(2) Acquisition related and other expenses consist of personnel related costs for transitional and certain other employees, certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net.

(3) Restructuring expenses in each of the first quarters of fiscal 2025 and 2024 primarily related to employee severance in connection with the Fiscal 2024 Oracle Restructuring Plan (2024 Restructuring Plan).

(3) Restructuring expenses in each of the fiscal 2025 and 2024 periods presented primarily related to employee severance in connection with the Fiscal 2024 Oracle Restructuring Plan (2024 Restructuring Plan).

Additional information regarding certain of our restructuring plans is provided in management’s discussion below under “Restructuring Expenses,” in Note 4 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and in Note 8 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

1 unchanged sentence

Three Months Ended

Six Months Ended

Cloud services and license support

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(5) For all periods presented, the applicable jurisdictional tax rates applied to our income before income taxes after excluding the tax effects of items within the table above such as for stock-based compensation, amortization of intangible assets, restructuring, and certain acquisition related and other items, and after excluding the net deferred tax effects associated with a previously recorded income tax benefit that resulted from a partial realignment of our legal entity structure.

These adjustments resulted in effective tax rates of 18.9% and 18.8%, instead of 7.6% and (1.9%), respectively, for the first quarter of fiscal 2025 and 2024, which represented our effective tax expense (benefit) rates as derived per our condensed consolidated statements of operations.

These adjustments resulted in effective tax rates of 20.1% and 19.5%, instead of 7.1% and 7.3%, respectively, for the second quarter and the first half of fiscal 2025 and 18.8% for each of the second quarter and the first half of fiscal 2024, instead of 8.0% and 3.4%, respectively, for the second quarter and the first half of fiscal 2024, which in each case represented our effective tax rates as derived per our condensed consolidated statements of operations.

Cloud and License Business

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We also continue to market certain of our offerings through indirect channels.

Costs associated with our cloud and license business are included in cloud services and license support expenses and sales and marketing expenses.

These costs are largely personnel and infrastructure related including the cost of providing our cloud services and license support offerings, salaries and commissions earned by our sales force for the sale of our cloud and license offerings and marketing program costs.

Three Months Ended August 31,

Costs associated with our cloud and

license business are included in cloud services and license support expenses and sales and marketing expenses.

These costs are largely personnel and infrastructure related and include the cost of providing our cloud services and license support offerings, salaries and commissions earned by our sales force for the sale of our cloud and license offerings and marketing program costs.

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

17 unchanged sentences

Also excludes amortization of intangible assets and certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.

Our cloud and license business’ total revenues increased by $1.0 billion in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024 primarily due to a $988 million increase in cloud services revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts to continue to gain access to the latest versions of our technologies for which we delivered such cloud services during the period presented and a $61 million increase in our cloud license and on-premise license revenues.

License support revenues decreased slightly by $16 million in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

In constant currency, the Americas, the EMEA and the Asia Pacific regions contributed 70%, 19% and 11%, respectively, of the revenue growth for this business during the first quarter of fiscal 2025.

Total cloud and license business’ expenses increased by $369 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the favorable effects of currency rate fluctuations of less than 1%, the constant currency increase in expenses was primarily due to a $255 million increase in infrastructure expenses and a $75 million increase in employee related expenses to support the increase in our cloud services revenues.

Our cloud and license business’ total revenues increased by $1.2 billion and $2.2 billion in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods, primarily due to a $1.2 billion and a $2.1 billion increase in cloud services revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts to continue to gain access to the latest versions of our technologies for which we delivered such cloud services during the periods presented.

In constant currency, applications cloud services and license support contributed 25% and 28% and infrastructure cloud services and license support contributed 75% and 72% of the growth in cloud services and license support revenues in the second quarter and the first half of fiscal 2025, respectively.

The Americas region contributed 83% and 77%, the EMEA region contributed 14% and 16% and the Asia Pacific region contributed 3% and 7% to the constant currency revenue growth for this business during the second quarter and the first half of fiscal 2025, respectively.

Total cloud and license business’ expenses increased by $541 million and $909 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

Excluding the favorable effects of currency rate fluctuations of less than 1% in each of the second quarter and the first half of fiscal 2025, the increase in expenses was primarily due to a $307 million and a $561 million increase in infrastructure expenses, a $108 million and a $184 million increase in employee related expenses for employees engaged in cloud services delivery and a $93 million and a $92 million increase in sales and marketing expenses, in

each case in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods, to support the increase in our cloud services revenues.

Our cloud services and license support expenses have grown in recent periods, and we expect this trend to continue during fiscal 2025 as we increase our existing data center capacity and establish data centers in new geographic locations in order to meet current and expected customer demand.

Excluding the effects of currency rate fluctuations, our cloud and license business’ total margin increased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to increases in total revenues for this business.

In constant currency, total margin as a percentage of revenues remained flat in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024.

Excluding the effects of currency rate fluctuations, our cloud and license business’ total margin increased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to increases in total revenues for this business.

In constant currency, total margin as a percentage of revenues decreased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to an increase in total expenses for this business.

Hardware Business

8 unchanged sentences

and sales and marketing expenses, which are largely personnel related and include variable compensation earned by our sales force for the sales of our hardware offerings.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

8 unchanged sentences

Total hardware revenues decreased by $59 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the unfavorable impact of currency rate fluctuation of less than 1%, the decrease in hardware revenues was primarily due to our continued emphasis on the marketing and sale of our cloud-based infrastructure technologies, which resulted in reduced sales volumes of certain of our hardware product lines and also impacted the volume of hardware support contracts sold in recent periods.

Geographically, we experienced constant currency hardware revenue decline in the Americas region, partially offset by increase in the EMEA region.

Constant currency hardware revenue remained flat in the Asia Pacific region in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Total hardware expenses decreased by $64 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the favorable currency rate fluctuations effect of 1%, the constant currency decrease in hardware expenses was primarily due to a $57 million decrease in hardware product and support costs, which aligned with lower hardware revenues.

In constant currency, our hardware business’ total margin and total margin as a percentage of revenues increased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to lower total expenses for this business.

Total hardware revenues decreased by $28 million and $87 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

Excluding the unfavorable

impact of currency rate fluctuation of 1% in each of the second quarter and the first half of fiscal 2025, the decrease in hardware revenues was primarily due to our continued emphasis on the marketing and sale of our cloud-based infrastructure technologies, which resulted in reduced sales volumes of certain of our hardware product lines and also impacted the volume of hardware support contracts sold in recent periods.

Geographically, we experienced constant currency hardware revenue declines in all regions in the fiscal 2025 periods presented, relative to the corresponding prior year periods.

Total hardware expenses decreased by $52 million and $115 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

Excluding the favorable currency rate fluctuations effect of less than 1% in each of the second quarter and the first half of fiscal 2025, the constant currency decrease in hardware expenses aligned with lower hardware revenues and was due to a $41 million and a $99 million decrease in hardware product and support costs and an $8 million and a $13 million decrease in sales and marketing expenses, in each case during the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

In constant currency, our hardware business’ total margin and total margin as a percentage of revenues increased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to lower total expenses for this business.

Services Business

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The cost of providing our services consists primarily of personnel related expenses, technology infrastructure expenditures, facilities expenses and external contractor expenses.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

6 unchanged sentences

Also excludes certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.

Total services revenues decreased by $120 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the effects of unfavorable currency rate fluctuations of 1%, the decrease in total services revenues was due to a decrease in revenues in each of our primary services offerings.

The constant currency decrease in services revenues in the Americas region was partially offset by constant currency increases in services revenues in the EMEA and the Asia Pacific regions in the first quarter of fiscal 2025.

Total services expenses decreased by $79 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the favorable effects of currency rate fluctuations of 1%, the decrease in services expenses was primarily due to a decrease in external contractor expenses of $65 million.

In constant currency, our services business’ total margin and total margin as a percentage of revenues decreased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to lower total revenues for this business.

Total services revenues decreased by $38 million and $157 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

Excluding the effects of unfavorable currency rate fluctuations of less than 1% in the second quarter of fiscal 2025 and 1% in the first half of fiscal 2025, the decrease in total services revenues was due to a decrease in revenues in each of our primary services offerings, relative to the corresponding prior year periods.

The constant currency decrease in services revenues in the Americas and the EMEA regions was partially offset by a constant currency increase in services revenues in the Asia Pacific region in the second quarter of fiscal 2025, while a constant currency decrease in services revenues in the Americas region was partially offset by a constant currency increase in services revenues in the EMEA and the Asia Pacific regions in the first half of fiscal 2025.

Total services expenses decreased by $86 million and $166 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

Excluding the favorable effects of currency rate fluctuations of less than 1% in each of the second quarter and the first half of fiscal 2025, the decrease in services expenses was primarily due to a decrease in bad debt expenses of $56 million and $33 million and a decrease in external contractor expenses of $41 million and $105 million, in each case in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

The constant currency decrease in services expenses for the second quarter of fiscal 2025 was partially offset by an increase in employee related expenses of $25 million.

In constant currency, our services business’ total margin and total margin as a percentage of revenues increased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, due to lower total expenses for this business.

Research and Development Expenses :

1 unchanged sentence

We intend to continue to invest significantly in our research and development efforts because, in our judgment, they are essential to maintaining our competitive position.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

4 unchanged sentences

(1) Excluding stock-based compensation

Total research and development expenses increased by $90 million in reported currency in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to higher stock-based compensation expenses.

Total research and development expenses increased by $245 million and $335 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods, primarily due to higher employee related expenses, including higher stock-based compensation expenses.

General and Administrative Expenses :

General and administrative expenses primarily consist of personnel related expenditures for IT, finance, legal and human resources support functions.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

4 unchanged sentences

(1) Excluding stock-based compensation

Total general and administrative expenses decreased by $35 million in reported currency in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Excluding the favorable effects of currency rate fluctuations of 1%, the decrease was primarily due to a $14 million decrease in facilities and related expenses and a $6 million decrease in professional fees.

Fiscal Second Quarter 2025 Compared to Fiscal Second Quarter 2024 :

Total general and administrative expenses increased by $12 million in reported currency in the second quarter of fiscal 2025, relative to the corresponding prior year period, primarily due to an increase in employee related expenses, including higher stock-based compensation expenses.

First Half of Fiscal 2025 Compared to First Half of Fiscal 2024 :

Total general and administrative expenses decreased by $24 million in reported currency in the first half of fiscal 2025, relative to the corresponding prior year period, primarily due to a decrease in facilities and related expenses, partially offset by an increase in employee related expenses, including higher stock-based compensation expenses.

Amortization of Intangible Assets :

3 unchanged sentences

Refer to Note 6 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for additional information regarding our intangible assets and related amortization.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

3 unchanged sentences

Total amortization of intangible assets

Amortization of intangible assets decreased by $139 million in reported currency in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.

Amortization of intangible assets decreased by $164 million and $303 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods, due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.

Acquisition Related and Other Expenses :

Acquisition related and other expenses consist of personnel related costs for transitional and certain other employees, certain business combination adjustments, including adjustments after the measurement period has ended, and certain other operating items, net.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

3 unchanged sentences

Not meaningful

Acquisition related and other expenses increased slightly in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, due to a $12 million increase in other expenses primarily related to certain asset impairment charges, partially offset by a $6 million decrease in business combination adjustments, net, and a $4 million decrease in transitional and other employee related costs.

Acquisition related and other expenses decreased by $16 million and $14 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, relative to the corresponding prior year periods.

The decrease in the second quarter of fiscal 2025 and the first half of fiscal 2025 was due to a $13 million and an $18 million decrease, respectively, in business combination adjustments, net and a $5 million and a $9 million decrease, respectively, in transitional and other employee related costs, partially offset by a $2 million and a $13 million increase, respectively, in other expenses primarily related to certain asset impairment charges, in each case relative to the corresponding prior year period.

Restructuring Expenses :

2 unchanged sentences

For additional information regarding our restructuring plans, see Note 4 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and Note 8 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

Restructuring expenses

Restructuring expenses in each of the first quarters of fiscal 2025 and 2024 primarily related to the 2024 Restructuring Plan.

Restructuring expenses in each of the fiscal 2025 and 2024 periods presented primarily related to the 2024 Restructuring Plan.

Our management approved, committed to and initiated the 2024 Restructuring Plan in order to restructure and further improve efficiencies in our operations.

3 unchanged sentences

Interest Expense :

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

Interest expense

Interest expense decreased in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to $2.0 billion and $3.5 billion of scheduled repayments of senior notes made during the first quarter of fiscal 2025 and full year of fiscal 2024, respectively.

Interest expense decreased in the fiscal 2025 periods presented, relative to the corresponding prior year periods, primarily due to $4.0 billion and $3.5 billion of scheduled repayments of senior notes made during the first half of fiscal 2025 and full year of fiscal 2024, respectively, partially offset by higher interest expense that resulted from the issuance of $6.3 billion of senior notes in September 2024.

Refer to Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information.

Non-Operating Income (Expenses), net :

Non-operating income (expenses), net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan), net losses related to equity investments, including losses attributable to equity method investments (primarily Ampere) and net other income and expenses, including net unrealized gains and losses from our investment portfolio related to our deferred compensation plan and non-service net periodic pension income and losses.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

6 unchanged sentences

Not meaningful

Our non-operating income, net increased by $69 million in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

The increase was primarily due to a $32 million decrease in foreign currency losses and a $49 million decrease in losses from equity investments, partially offset by higher expenses for noncontrolling interests in income.

(Provision for) Benefit from Income Taxes :

Our effective income tax rates for each of the periods presented were the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates.

Non-operating income, net was $36 million and $57 million in reported currency in the second quarter and the first half of fiscal 2025, respectively, in comparison to non-operating expenses, net of $14 million and $63 million in reported currency in the second quarter and the first half of fiscal 2024, respectively.

Non-operating income, net increased in the second quarter and the first half of fiscal 2025 primarily due to higher other income, net, of $46 million and $44 million, respectively, which was primarily attributable to unrealized investment gains associated with certain marketable equity securities that we held for employee benefit plans, and for which an equal and offsetting amount was recorded to our operating expenses during the same period, a decrease in foreign currency losses of $23 million and $54 million, respectively, and an increase in interest income of $16 million and $14 million, respectively, in each case relative to the corresponding prior year period.

Losses from equity investments increased by $29 million in the second quarter of fiscal 2025 and decreased by $20 million for the first half of fiscal 2025, in each case relative to the corresponding prior year period.

Provision for Income Taxes :

Our effective income tax rates for each of the periods presented were the result of the mix of income earned and losses incurred in various tax jurisdictions that apply a broad range of income tax rates.

Refer to Note 7 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a discussion regarding the differences between the effective income tax rates as presented for the periods below and the U.S.

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Future effective tax rates could be adversely affected by an unfavorable shift of earnings weighted to jurisdictions with higher tax rates, by unfavorable changes in tax laws and regulations, by adverse rulings in tax related litigation, or by shortfalls in stock-based compensation realized by employees relative to stock-based compensation that was recorded for book purposes, among others.

Three Months Ended August 31,

Three Months Ended November 30,

Six Months Ended November 30,

Percent Change

(Dollars in millions)

(Provision for) benefit from income taxes

Effective tax expense (benefit) rate

Not meaningful

Provision for income taxes increased during the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to an unfavorable jurisdictional mix of earnings of $215 million and a decrease in tax benefits of $127 million related to stock-based compensation, partially offset by a $65 million benefit in unrecognized tax benefits associated with settlements with taxing authorities and other events.

Provision for income taxes

Effective tax rate

Fiscal Second Quarter 2025 Compared to Fiscal Second Quarter 2024 :

Provision for income taxes increased during the second quarter of fiscal 2025, relative to the second quarter of fiscal 2024, primarily due to the absence of the revaluation benefit of net deferred tax assets due to a change in tax rate of $105 million and the realization of a one-time tax attribute of $49 million, an unfavorable jurisdictional mix of earnings of $99 million and a higher income before provision for income taxes of $53 million, partially offset by an increase in tax benefits related to stock-based compensation of $295 million.

First Half of Fiscal 2025 Compared to First Half of Fiscal 2024 :

Provision for income taxes increased during the first half of fiscal 2025, relative to the first half of fiscal 2024, primarily due to an unfavorable jurisdictional mix of earnings of $314 million, the absence of the revaluation benefit of net deferred tax assets due to a change in tax rate of $105 million and the realization of a one-time tax attribute of $49 million, partially offset by tax benefits related to stock-based compensation of $168 million and $53 million of tax benefits associated with settlements with taxing authorities and other events.

Liquidity and Capital Resources

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Working capital :

The increase in working capital as of August 31, 2024 in comparison to May 31, 2024 was primarily due to favorable impacts to our net current assets resulting from net income during the first quarter of fiscal 2025, substantially offset by $2.3 billion of cash used for capital expenditures, $1.1 billion of cash used to pay dividends to our stockholders, €750 million of long-term senior notes that were reclassified to current liabilities, $672 million of net cash used for our employee stock programs, $375 million of cash used for purchases of non-marketable investments and $150 million of cash used for repurchases of our common stock during the first quarter of fiscal 2025.

The increase in working capital as of November 30, 2024 in comparison to May 31, 2024 was primarily due to favorable impacts to our net current assets resulting from net income during the first half of fiscal 2025 and proceeds from the issuance of senior notes in September 2024, net of issuance costs, of $6.2 billion (refer to Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information), partially offset by $6.3 billion of cash used for capital expenditures, $2.2 billion of cash used to pay dividends to our stockholders, €750 million and $1.0 billion of long-term senior notes that were reclassified to current liabilities, $591 million of net cash used for our employee stock programs, $300 million of cash used for repurchases of our common stock and $137 million of cash used for purchases, net of sales and maturities of non-marketable investments during the first half of fiscal 2025.

Our working capital may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.

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Marketable securities consist of time deposits, marketable equity securities and certain other securities with original maturities at the time of purchase greater than 90 days.

The increase in cash, cash equivalents and marketable securities as of August 31, 2024 in comparison to May 31, 2024 was primarily due to cash inflows from our operations during the first quarter of fiscal 2025.

This increase was partially offset by $2.4 billion of cash used for repayment of senior notes and commercial paper notes, $2.3 billion of cash used for capital expenditures, $1.1 billion of cash used to pay dividends to our stockholders, $672 million of net cash used for our employee stock programs, $375 million of cash used for purchases of non-marketable investments and $150 million of cash used for repurchases of our common stock.

The increase in cash, cash equivalents and marketable securities as of November 30, 2024 in comparison to May 31, 2024 was primarily due to cash inflows from our operations during the first half of fiscal 2025 and proceeds from the issuance of senior notes in September 2024, net of issuance costs, of $6.2 billion.

This increase was partially offset by $6.3 billion of cash used for capital expenditures, $4.5 billion of cash used for scheduled repayments of borrowings and commercial paper notes, $2.2 billion of cash used to pay dividends to our stockholders, $591 million of net cash used for our employee stock programs, $300 million of cash

used for repurchases of our common stock and $137 million of cash used for purchases, net of sales and maturities of non-marketable investments during the first half of fiscal 2025.

Our cash and cash equivalents may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.

Three Months Ended August 31,

Six Months Ended November 30,

(Dollars in millions)

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Our primary uses of cash from operating activities are typically for employee related expenditures, material and manufacturing costs related to the production of our hardware products, taxes, interest payments and leased facilities.

Net cash provided by operating activities increased by $453 million in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to higher net income, partially offset by certain cash unfavorable working capital changes, net.

Net cash provided by operating activities increased by $1.6 billion in the first half of fiscal 2025, relative to the first half of fiscal 2024, primarily due to higher net income adjusted for certain non-cash charges, partially offset by certain cash unfavorable working capital changes, net.

Cash flows from investing activities :

The changes in cash flows from investing activities primarily relate to our acquisitions, purchases, maturities and sales of our investments in marketable securities and other instruments and investments in capital assets primarily to support the growth in our cloud and license business.

Net cash used for investing activities increased by $1.2 billion in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to the increase in capital expenditures.

Net cash used for investing activities increased by $3.7 billion in the first half of fiscal 2025, relative to the first half of fiscal 2024, primarily due to the increase in capital expenditures.

Cash flows from financing activities :

The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments, stock repurchases, dividend payments and net proceeds related to employee stock programs.

Net cash used for financing activities increased by $1.1 billion in the first quarter of fiscal 2025, relative to the first quarter of fiscal 2024, primarily due to higher maturities of senior notes of $1.0 billion, higher repayments of commercial paper notes of $166 million, net of issuances, partially offset by higher net cash used for other activities of $220 million, in each case in the first quarter of fiscal 2025 relative to the first quarter of fiscal 2024.

Further, during the first quarter of fiscal 2025, we refinanced our Term Loan Credit Agreement (defined below) that resulted in no net impact on financing cash flows for the period reported.

Net cash used for financing activities decreased by $4.2 billion in the first half of fiscal 2025, relative to the first half of fiscal 2024, primarily due to proceeds from the issuance of senior notes in September 2024, net of issuance costs, of $6.2 billion, lower net cash used for our employee stock programs of $716 million and lower net cash used for repurchases of common stock of $300 million, partially offset by higher repayments of commercial paper notes of $2.1 billion, net of issuances, higher scheduled repayments of borrowings of $570 million and higher net cash used for other activities of $338 million, in each case in the first half of fiscal 2025 relative to the first half of fiscal 2024.

Further, during the first half of fiscal 2025, we refinanced our Term Loan Credit Agreement (defined below), which resulted in no net impact on financing cash flows for the periods reported.

Free cash flow :

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We calculate free cash flow as follows:

Trailing 4-Quarters Ended August 31,

Trailing 4-Quarters Ended November 30,

(Dollars in millions)

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Refer to Note 7 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for additional details about our borrowings.

Senior Notes :

In September 2024, we issued $6.3 billion of senior notes comprised of the following:

• $1.5 billion of 4.20% senior notes due September 2029;

• $1.75 billion of 4.70% senior notes due September 2034;

• $1.75 billion of 5.375% senior notes due September 2054;

• $1.25 billion of 5.50% senior notes due September 2064.

We issued the senior notes to repay all or a portion of $2.0 billion of senior notes due November 2024, $3.5 billion of senior notes due April 2025 and $2.5 billion of senior notes due May 2025 and to pay accrued interest and any related premiums, fees and expenses in connection therewith;

to repay all or a portion of commercial paper notes outstanding;

and to use any remaining net proceeds from the borrowing for general corporate purposes, which may include stock repurchases, payment of cash dividend on our common stock, repayment of other indebtedness and future acquisitions.

Refer to Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information.

Contractual Obligations :

During the first quarter of fiscal 2025, there were no significant changes to our estimates of future payments under our fixed contractual obligations and commitments as presented in Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, other than an increase in our operating lease commitments to $36.2 billion as of August 31, 2024.

During the first half of fiscal 2025, there were no significant changes to our estimates of future payments under our fixed contractual obligations and commitments as presented in Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, other than an increase in our operating lease commitments to $36.7 billion as of November 30, 2024.

Our operating lease commitments, which are primarily for data centers, are generally expected to commence between the remainder of fiscal 2025 and fiscal 2027 and for terms of nine to fifteen years.

We have not recorded these lease commitments on our Condensed Consolidated Balance Sheets as of August 31, 2024.

We have not recorded these lease commitments on our Condensed Consolidated Balance Sheets as of November 30, 2024.

Refer to Note 10 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for more information about our lease commitments.

Additionally, as discussed above, we issued $6.3 billion of senior notes in September 2024 with various maturity dates.

We believe that our current cash, cash equivalents and marketable securities balances, cash generated from operations, and our borrowing arrangements will be sufficient to meet our working capital, capital expenditures and contractual obligations requirements.

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The potential dilution percentage is calculated as the average annualized new stock-based awards granted and assumed, net of stock-based awards forfeited by employees leaving the company, divided by the weighted-average outstanding shares during the calculation period.

This maximum potential dilution will only result if all stock-based awards vest and, if applicable, are exercised.

Of the outstanding stock options as of August 31, 2024, which generally have a ten-year exercise period, all have exercise prices lower than the market price of our common stock on such date.

This maximum potential dilution will only result if all stock-based awards vest and, if

applicable, are exercised.

Of the outstanding stock options as of November 30, 2024, which generally have a ten-year exercise period, all have exercise prices lower than the market price of our common stock on such date.

In recent years, our stock repurchase program has substantially offset the dilutive effect of our stock-based compensation program.

However, we may modify the levels of our stock repurchases in the future depending on a number of factors, including the amount of cash we have available for acquisitions, to pay dividends, to repay or repurchase indebtedness or for other purposes.

As of August 31, 2024, the maximum potential dilution from all outstanding stock-based awards, regardless of when granted and regardless of whether vested or unvested, was 6.1%.

As of November 30, 2024, the maximum potential dilution from all outstanding stock-based awards, regardless of when granted and regardless of whether vested or unvested, was 6.1%.

Recent Accounting Pronouncements

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Quantitative and Qualitat ive Disclosures About Market Risk

There were no significant changes to our quantitative and qualitative disclosures about market risk during the first quarter of fiscal 2025.

There were no significant changes to our quantitative and qualitative disclosures about market risk during the first half of fiscal 2025.

Please refer to Part II, Item 7A Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for a more complete discussion of the market risks we encounter.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis