Oracle Corporation, Q1 2025 Earnings Call, Sep 09, 2024 - NYSE:ORCL

NYSE:ORCL

Ken Bond, Senior Vice President of Investor Relations, opened the Oracle Corporation Q1 Fiscal Year 2025 Earnings Call. He welcomed participants and provided access details for the press release, financial tables, and additional supplemental financial information on the Investor Relations website. Bond highlighted the forward-looking statements disclaimer and emphasized the risks and uncertainties that could affect these statements. He also noted the recent partnership with Amazon Web Services, adding to existing collaborations with Microsoft Azure and Google Cloud. Finally, Bond introduced Safra Catz and Larry Ellison for their remarks.

** Key Points Mentioned by Safra Ada Catz**

1. Q1 Financial Performance:

   • Total revenue was $13.3 billion, up 8% from last year.
   • Total cloud revenue (SaaS and IaaS) was $5.6 billion, up 22%.
     • SaaS revenue was $3.5 billion, up 10%.
     • IaaS revenue was $2.2 billion, up 46%.
   • Total cloud services and license support revenue was $10.5 billion, up 11%.
   • Application subscription revenues were $4.8 billion, up 7%.
   • Strategic back-office SaaS applications had annualized revenues of $8.2 billion, up 18%.
   • Infrastructure subscription revenues were $5.8 billion, up 14%.
   • Infrastructure cloud services revenue was up 46%.
   • Cloud database services revenue was up 23%, with annualized revenues of $2.1 billion.
   • Software license revenues were up 8% to $870 million.

2. Financial Metrics:

   • Gross profit dollars of cloud services and license support grew 9%.
   • Operating income grew 14% with an operating margin of 43%.
   • Non-GAAP EPS was $1.39, up 17% in USD and 18% in constant currency.
   • GAAP EPS was $1.03, up 20% in USD and 22% in constant currency.
   • Operating cash flow for Q1 was $7.4 billion, and free cash flow was $5.1 billion.
   • Trailing 12-month operating cash flow was $19.1 billion, and free cash flow was $11.3 billion.
   • Remaining performance obligations (RPO) were $99 billion, up 52% in constant currency.

3. Capital Expenditure and Data Centers:

   • Spent $2.3 billion on CapEx in Q1.
   • Expected fiscal year 2025 CapEx to be double that of fiscal 2024.
   • Oracle has 85 cloud regions live, with 77 more planned.

4. Shareholder Value:

   • Repurchased 1.1 million shares for $150 million.
   • Paid out dividends of $4.4 billion over the last 12 months.
   • Declared a quarterly dividend of $0.40 per share.

5. Guidance for Q2:

   • Total revenues expected to grow 7% to 9% in constant currency and 8% to 10% in USD.
   • Total cloud revenue expected to grow 23% to 25% in constant currency and 24% to 26% in USD.
   • Non-GAAP EPS expected to grow 6% to 10% and be between $1.42 and $1.46 in constant currency.
   • Non-GAAP EPS expected to grow 8% to 12% and be between $1.05 and $1.49 in USD.
   • Assumes a base tax rate of 19%.

6. Future Outlook:

   • Confident in achieving double-digit full-year total revenue growth.

   • Expect cloud infrastructure revenue to grow faster than last year.

   • Multi-cloud agreements with Microsoft, Google, and AWS will expand the ubiquity and popularity of Oracle's technologies.

   • Rapid expansion of OCI capacity to meet growing demand.

   • Non-GPU infrastructure business growing faster than competitors.

   • Strategic SaaS apps continuing to grow, with more industry-based cloud apps coming online.

** Key Points Mentioned by Lawrence J. Ellison**

1. Oracle's Data Centers and AI Training:

   • Oracle has 162 cloud data centers live and under construction worldwide.
   • The largest data center is 800 megawatts and will contain acres of NVIDIA GPU clusters for training large AI models.
   • Oracle is planning to build data centers that exceed a gigawatt in capacity.
   • The cost to build a leading AI model is estimated at around $100 billion over the next 4-5 years.

2. Multi-Cloud Strategy:

   • Oracle has partnered with AWS, Microsoft Azure, and Google Cloud to allow customers to run Oracle databases on these platforms.
   • This strategy will accelerate the growth of Oracle's database business.
   • Oracle's data centers are highly automated and scalable, making them suitable for both public and private cloud deployments.

3. Autonomous Database:

   • The Oracle Autonomous Database is fully self-driving, eliminating the need for human database administrators.
   • This reduces human error and enhances security.
   • Moving Fusion and NetSuite to the Autonomous Database will significantly reduce cloud costs by about 50%.

4. Security and Automation:

   • Oracle is eliminating passwords and moving to biometric authentication for logging in.
   • Zero Trust Packet Routing (ZTPR) technology will enhance network security.
   • Automation is crucial for both efficiency and security, reducing the risk of human errors that can lead to cyber attacks.

5. Healthcare Applications:

   • Oracle is using AI to assist doctors in diagnosing diseases, summarizing patient records, and transcribing consultations.
   • AI is integrated into various healthcare processes, including electronic health records, prescription verification, and user authentication.

6. Future Growth:

   • Oracle expects to have 1,000 or more data centers globally, many of which will be dedicated to specific customers or industries.

   • The company is well-positioned to handle the increasing demand for both public and private cloud services.

   • Oracle's focus on automation and security will drive continued growth and profitability.