ORACLE CORP

Previous wording

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our businesses and significant trends. This overview is followed by a summary of our critical accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.

Current wording

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our businesses and significant trends. This overview is followed by a summary of our critical accounting estimates that we believe are important to understanding significant assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.

Previous wording

Oracle provides products and services that address enterprise information technology (IT) environments. Our products and services include enterprise applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models. These models include on-premise, cloud-based and hybrid deployments (an approach that combines both on-premise and cloud-based deployments). Accordingly, we offer choice and flexibility to our customers and facilitate the product, service and deployment combinations that best suit our customers’ needs. Through our worldwide sales force and Oracle Partner Network, we sell to customers all over the world including businesses of many sizes, government agencies, educational institutions and resellers.

Current wording

Oracle provides products and services that address enterprise information technology (IT) needs. Our products and services include enterprise applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models. These models include on-premise, cloud-based and hybrid deployments (an approach that combines both on-premise and cloud-based deployments). Accordingly, we offer choice and flexibility to our customers and facilitate the product, service and deployment combinations that best suit our customers’ needs. Through our worldwide sales force and Oracle Partner Network, we sell to customers all over the world including businesses of many sizes, government agencies, educational institutions and resellers.

Previous wording

cloud services revenues, which are earned by providing customers access to Oracle Cloud applications and infrastructure technologies via cloud-based deployment models that Oracle develops, provides unspecified updates and enhancements for, deploys, hosts, manages and supports and that customers access by entering into a subscription agreement with us for a stated period. Oracle SaaS and OCI (collectively Oracle Cloud Services) arrangements are generally billed in advance of the cloud services being delivered; generally have durations of one to three years; are generally renewed at the customer’s option; and are generally recognized as revenues ratably over the contractual period of the cloud contract or, in the case of usage model contracts, as the cloud services are consumed over time; and

Current wording

cloud services revenues, which are earned by providing customers access to Oracle Cloud applications and infrastructure technologies via cloud-based deployment models that Oracle develops, provides unspecified updates and enhancements for, deploys, hosts, manages and supports and that customers access by entering into a subscription agreement with us for a stated period. Oracle Cloud Applications and Oracle Cloud Infrastructure (collectively Oracle Cloud Services) arrangements generally: are billed in advance of the cloud services being delivered; have durations of one to four years; are renewed at the customer’s option; and are recognized as revenues ratably over the contractual period of the cloud contract or, in the case of usage model contracts, as the cloud services are consumed over time; and

Previous wording

license support revenues, which are earned by providing Oracle license support services to customers that have elected to purchase support services in connection with the purchase of Oracle applications and infrastructure software licenses for use in cloud, on-premise and other IT environments. Substantially all license support customers renew their support contracts with us upon expiration in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements, which current license support customers are entitled to receive. License support contracts are generally priced as a percentage of the net fees paid by the customer to purchase a cloud license and/or on-premise license; are generally billed in advance of the support services being performed; are generally renewed at the customer’s option; and are generally recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year.

Current wording

license support revenues, which are earned by providing Oracle license support services to customers that have elected to purchase support services in connection with the purchase of Oracle applications and infrastructure software licenses for use in cloud, on-premise and other IT environments. Substantially all license support customers renew their support contracts with us upon expiration in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements, which current license support customers are entitled to receive. License support contracts are generally: priced as a percentage of the net fees paid by the customer to purchase a cloud license and/or on-premise license; billed in advance of the support services being performed; renewed at the customer’s option; and recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year.

Previous wording

Providing choice and flexibility to our customers as to when and how they deploy Oracle applications and infrastructure technologies are important elements of our corporate strategy. In recent periods, customer demand for our applications and infrastructure technologies delivered through our Oracle Cloud Services has increased. To address customer demand and enable customer choice, we have introduced certain programs for customers to pivot their applications and infrastructure software licenses and the related license support to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads. 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 38% and 37% of our total revenues for the three and nine months ended February 29, 2024, respectively, and 33% and 32% of our total revenues for the three and nine months ended February 28, 2023, respectively.

Current wording

Providing choice and flexibility to our customers as to when and how they deploy Oracle applications and infrastructure technologies are important elements of our corporate strategy. In recent periods, customer demand for our applications and infrastructure technologies delivered through our Oracle Cloud Services has increased. To address customer demand and enable customer choice, we have certain programs for customers to pivot their applications and infrastructure software licenses and the related license support to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads. 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.

Previous wording

Our hardware business, which represented 6% of our total revenues on a trailing 4-quarter basis, provides a broad selection of enterprise hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, industry-specific hardware offerings, operating systems, virtualization, management and other hardware-related software and related hardware support. 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. We expect to make investments in research and development to improve existing hardware products and services and to develop new hardware products and services. The majority of our hardware products are sold through indirect channels, including independent distributors and value-added resellers. Our hardware support offerings provide customers with unspecified software updates for software components that are essential to the functionality of our hardware products and associated software products. Our hardware support offerings can also include product repairs, maintenance services and technical support services. Hardware support contracts are entered into and renewed at the option of the customer, are generally priced as a percentage of the net hardware products fees and are generally recognized as revenues ratably as the hardware support services are delivered over the contractual terms.

Current wording

Our hardware business, which represented 6% of our total revenues on a trailing 4-quarter basis, provides a broad selection of enterprise hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, industry-specific hardware offerings, operating systems, virtualization, management and other hardware-related software and related hardware support. 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. 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. The majority of our hardware products are sold through indirect channels, including independent distributors and value-added resellers. Our hardware support offerings provide customers with unspecified software updates for software components that are essential to the functionality of our hardware products and associated software products. Our hardware support offerings can also include product repairs, maintenance services and technical support services. Hardware support contracts are entered into and renewed at the option of the customer, are generally priced as a percentage of the net hardware products fees and are generally recognized as revenues ratably as the hardware support services are delivered over the contractual terms.

Previous wording

Our selective and active acquisition program is another important element of our corporate strategy. Historically, we have invested billions of dollars to acquire a number of complementary companies, products, services and technologies. We acquired certain companies and technologies during the first nine months of fiscal 2024 and full year fiscal 2023, including Cerner Corporation (Cerner). Refer to Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information related to our acquisition of Cerner and our other recent acquisitions. As compelling opportunities become available, we may acquire companies, products, services and technologies in furtherance of our corporate strategy.

Current wording

Our selective and active acquisition program is another important element of our corporate strategy. Historically, we have invested billions of dollars to acquire a number of complementary companies, products, services and technologies. As compelling opportunities become available, we may acquire companies, products, services and technologies in furtherance of our corporate strategy.

Previous wording

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 as of February 29, 2024 after accounting for losses under the equity method of accounting was $1.4 billion. 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.

Current wording

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. 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.

Previous wording

Our equity investments in Ampere represent an ownership interest of approximately 29% as of February 29, 2024. We also own convertible debt investments in Ampere which, under the terms of an agreement with Ampere and other co-investors, as amended on March 5, 2024, will mature in June 2026 and are convertible into equity securities at the holder’s option under certain circumstances. During the three months ended February 29, 2024, we invested an additional $125 million in convertible debt instruments issued by Ampere. In accordance with the terms of an agreement with other co-investors, as amended on March 5, 2024, we are also a counterparty to certain put (exercisable by a co-investor) and call (exercisable by Oracle) options at prices of approximately $400 million to $1.5 billion, respectively, to acquire additional equity interests in Ampere from our co-investors through January 2027. If either of such options is exercised by us or our co-investors, we would obtain control of Ampere and consolidate its results with our results of operations.

Current wording

Our equity investments in Ampere represent an ownership interest of approximately 29% as of August 31, 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. 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. If either of such options is exercised by us or our co-investors, we would obtain control of Ampere and consolidate its results with our results of operations.

Previous wording

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (ASC), and we consider various staff accounting bulletins and other applicable guidance issued by the U.S. Securities and Exchange Commission (the SEC). GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent that there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include:

Current wording

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires us to make certain estimates, judgments and assumptions that can affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure. Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. To the extent that there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. We have critical accounting estimates in the areas of business combinations, income taxes and non-marketable investments.

Previous wording

During the first nine months of fiscal 2024, there were no significant changes to our critical accounting estimates. Refer to “Critical Accounting Policies and Estimates” under Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2023 for a more complete discussion of our critical accounting estimates.

Current wording

During the first quarter of fiscal 2025, we completed an assessment of the useful lives of our servers and increased the estimated useful lives from five years to six years, effective at the beginning of fiscal 2025. Refer to Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for more information. There were no other significant changes to our critical accounting estimates. Refer to “Critical Accounting Estimates” under Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 for a more complete discussion of our critical accounting estimates.

Previous wording

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 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 9 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.

Current wording

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. Refer to “Supplemental Disclosure Related to Certain Charges” below for additional discussion of certain of these items and Note 7 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.

Previous wording

Our international operations have provided and are expected to continue to provide a significant portion of each of our businesses’ revenues and expenses. As a result, each of our businesses’ revenues and expenses and our total revenues and expenses will continue to be affected by changes in the U.S. Dollar against major international currencies. In order to provide a framework for assessing how our underlying businesses performed, excluding the effects of foreign currency rate fluctuations, we compare the percent change in the results from one period to another period in this Quarterly Report using constant currency. To present this information, current and comparative prior period results for entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at constant exchange rates (i.e., the rates in effect on May 31, 2023, 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 February 29, 2024 and February 28, 2023, our financial statements would reflect reported revenues of $1.08 million in the first nine months of fiscal 2024 (using 1.08 as the month-end average exchange rate for the period) and $1.05 million in the first nine months of fiscal 2023 (using 1.05 as the month-end average exchange rate for the period). The constant currency presentation, however, would translate the results for each of the first nine months of fiscal 2024 and 2023 using the May 31, 2023 exchange rate and indicate, in this example, no change in revenues during the period. In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency.

Current wording

Our international operations have provided, and are expected to continue to provide, a significant portion of each of our businesses’ revenues and expenses. As a result, each of our businesses’ revenues and expenses and our total revenues and expenses will continue to be affected by changes in the U.S. Dollar against major international currencies. In order to provide a framework for assessing how our underlying businesses performed, excluding the effects of foreign currency rate fluctuations, we compare the percent change in the results from one period to another period in this Quarterly Report using constant currency. To present this information, current and comparative prior period results for entities reporting in currencies other than U.S. Dollars are converted into U.S. 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. In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency.

Previous wording

Excluding the effects of foreign currency rate fluctuations, our total revenues increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to growth in our cloud and license business’ revenues, which were partially offset by a decline in our hardware business’ and services business’ revenues. The constant currency revenues increase in our cloud and license business in the fiscal 2024 periods presented, relative to the corresponding prior year periods, was attributable to growth in our cloud services and license support revenues as customers purchased our applications and infrastructure technologies via cloud and license deployment models and also renewed their related cloud contracts and license support contracts to continue to gain access to the latest versions of our technologies and to receive support services, partially offset by a decrease in our cloud license and on-premise license revenues. In our hardware business, the decrease in revenues in the fiscal 2024 periods presented was due to the emphasis we placed on the marketing and sale of our growing cloud-based infrastructure technologies and strategic hardware offerings and the de-emphasis of our sales and marketing efforts for certain of our non-strategic hardware products and related support services. In our services business, the constant currency decrease in revenues in the fiscal 2024 periods presented was attributable to a decrease in revenues from each of our primary services offerings. In constant currency, the Americas region contributed 67% and 63%, the EMEA region contributed 21% and 23% and the Asia Pacific region contributed 12% and 14% of the constant currency total revenue growth during the third quarter and first nine months of fiscal 2024, respectively.

Current wording

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.

Previous wording

Excluding the effects of foreign currency rate fluctuations, our total operating expenses increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to higher cloud services and license support expenses, which were primarily due to higher infrastructure investments that were made to support the increase in our cloud and license business’ revenues; higher research and development expenses, which were primarily due to higher employee related expenses; and higher acquisition related and other expenses, which were primarily due to certain asset impairment charges. These increases in operating expenses were partially offset by lower hardware expenses in line with lower hardware revenues; lower sales and marketing expenses, which were primarily due to lower employee related expenses; lower expenses for amortization of intangible assets as certain of our assets were fully amortized; and lower general and administrative expenses. During the third quarter of fiscal 2024, the constant currency decrease in services expenses partially offset the increase in total operating expenses, while the constant currency increase in restructuring expenses contributed to higher total operating expenses. In constant currency, services expenses contributed to higher total operating expenses and lower restructuring expenses partially offset the increases in total operating expenses during the first nine months of fiscal 2024.

Current wording

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.

Previous wording

In constant currency, our total operating margin and total operating margin as a percentage of revenues increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to higher revenues.

Current wording

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.

Previous wording

Our operating results reported pursuant to GAAP included the following business combination accounting adjustments and expenses related to acquisitions and certain other expense and income items that affected our GAAP net income:

Current wording

Our operating results reported pursuant to GAAP included the following business combination accounting adjustments and expenses related to acquisitions and certain other expenses, including stock-based compensation, that affected our GAAP net income:

Previous wording

Represents the amortization of intangible assets, substantially all of which were acquired in connection with our acquisitions. As of February 29, 2024, estimated future amortization related to intangible assets was as follows (in millions):

Current wording

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):

Previous wording

Restructuring expenses in the fiscal 2024 periods presented primarily related to employee severance in connection with the Fiscal 2024 Oracle Restructuring Plan (2024 Restructuring Plan). Restructuring expenses in the fiscal 2023 periods presented primarily related to employee severance in connection with the Fiscal 2022 Oracle Restructuring Plan (2022 Restructuring Plan). Additional information regarding certain of our restructuring plans is provided in management’s discussion below under “Restructuring Expenses,” in Note 5 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, 2023.

Current wording

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). Additional information regarding certain of our restructuring plans is provided in management’s discussion below under “Restructuring Expenses,” in Note 3 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.

Previous wording

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 16.2% and 8.0%, respectively, for the third quarter and first nine months of fiscal 2024 and 18.4% and 19.4%, instead of 14.5% and 13.8%, respectively, for the third quarter and first nine months of fiscal 2023, which in each case represented our effective tax rates as derived per our condensed consolidated statements of operations.

Current wording

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.

Previous wording

Our cloud and license business engages in the sale and marketing of our applications and infrastructure technologies that are delivered through various deployment models and include: Oracle license support offerings; Oracle Cloud Services offerings; and Oracle cloud license and on-premise license offerings. License support revenues are typically generated through the sale of applications and infrastructure software license support contracts related to cloud licenses and on-premise licenses; are purchased by our customers at their option; and are generally recognized as revenues ratably over the contractual term, which is generally one year. Our cloud services deliver applications and infrastructure technologies on a subscription basis via cloud-based deployment models that we develop, provide unspecified updates and enhancements for, deploy, host, manage and support. Revenues for our cloud services are generally recognized ratably over the contractual term, which is generally one to three years, or in the case of usage model contracts, as the cloud services are consumed. Cloud license and on-premise license revenues represent fees earned from granting customers licenses, generally on a perpetual basis, to use our database and middleware and our applications software products within cloud and on-premise IT environments and are generally recognized up front at the point in time when the software is made available to the customer to download and use. We continue to place significant emphasis, both domestically and internationally, on direct sales through our own sales force. 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.

Current wording

Our cloud and license business engages in the sale and marketing of our applications and infrastructure technologies that are delivered through various deployment models and include: Oracle Cloud Services offerings; Oracle cloud license and on-premise license offerings; and Oracle license support offerings. Our cloud services deliver applications and infrastructure technologies on a subscription basis via cloud-based deployment models that we develop, provide unspecified updates and enhancements for, deploy, host, manage and support. Revenues for our cloud services are generally recognized ratably over the contractual term, which is generally one to four years, or in the case of usage model contracts, as the cloud services are consumed. Cloud license and on-premise license revenues represent fees earned from granting customers licenses, generally on a perpetual basis, to use our database and middleware and our applications software products within cloud and on-premise IT environments and are generally recognized up front at the point in time when the software is made available to the customer to download and use. License support revenues are typically generated through the sale of applications and infrastructure software license support contracts related to cloud licenses and on-premise licenses; are purchased by our customers at their option; and are generally recognized as revenues ratably over the contractual term, which is generally one year. We continue to place significant emphasis, both domestically and internationally, on direct sales through our own sales force. 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.

Previous wording

Excluding the effects of foreign currency rate fluctuations, our cloud and license business’ total revenues increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to growth in our cloud services and license support revenues as customers purchased our applications and infrastructure technologies via cloud and license deployment models and renewed their related cloud contracts and license support contracts to continue to gain access to the latest versions of our technologies and to receive support services for which we delivered such cloud and support services during the periods presented. The growth in our cloud services and license support revenues was partially offset by a decrease in our cloud license and on-premise license revenues. In constant currency, the Americas region contributed 72% and 69%, the EMEA region contributed 18% and 20% and the Asia Pacific region contributed 10% and 11% of the constant currency revenue growth for this business during the third quarter and first nine months of fiscal 2024, respectively.

Current wording

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. 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. 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.

Previous wording

In constant currency, our total cloud and license business’ expenses increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to higher technology infrastructure expenses to support the increase in our cloud and license business’ revenues. These constant currency expense increases were partially offset by lower sales and marketing expenses, which decreased primarily due to lower employee related expenses due to lower headcount. Our cloud services and license support expenses have grown in recent periods, and we expect this growth to continue during fiscal 2024 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.

Current wording

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 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.

Previous wording

Excluding the effects of currency rate fluctuations, our cloud and license business’ total margin increased in the fiscal 2024 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 remained flat in the third quarter of fiscal

Current wording

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.

Previous wording

Our constant currency hardware revenues decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to our continued emphasis on the marketing and sale of our cloud-based infrastructure technologies and strategic hardware offerings and the de-emphasis of our sales and marketing efforts for certain of our non-strategic hardware products, 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 revenue declines in all regions in the fiscal 2024 periods presented, except for a constant currency revenue increase in the Asia Pacific region in the first nine months of fiscal 2024.

Current wording

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.

Previous wording

In constant currency, our hardware business’ total margin decreased in the fiscal 2024 periods presented due to lower total revenues for this business and total margin as a percentage of revenues increased in the fiscal 2024 periods presented due to lower total expenses for this business, in each case relative to the corresponding prior year period.

Current wording

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.

Previous wording

Excluding the effects of currency rate fluctuations, our total services revenues decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to a decrease in revenues in each of our primary services offerings. Constant currency decreases in services revenues in the Americas region were partially offset by constant currency increases in services revenues in the EMEA and the Asia Pacific regions in the fiscal 2024 periods presented.

Current wording

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.

Previous wording

In constant currency, our services business’ total margin and total margin as a percentage of revenues decreased in the fiscal 2024 periods presented due to lower total revenues for this business, and in the first nine months of fiscal 2024, also due to an increase in expenses, in each case relative to the corresponding prior year period.

Current wording

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.

Previous wording

On a constant currency basis, total research and development expenses increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, primarily due to higher employee related expenses, including higher stock-based compensation expenses.

Current wording

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.

Previous wording

Amortization of Intangible Assets: Substantially all of our intangible assets were acquired through our business combinations. We amortize our intangible assets over, and monitor the appropriateness of, the estimated useful lives of these assets. We also periodically review these intangible assets for potential impairment based upon relevant facts and circumstances. Refer to Note 4 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information regarding our intangible assets and related amortization.

Current wording

Amortization of Intangible Assets: Substantially all of our intangible assets were acquired through our business combinations. We amortize our intangible assets over, and monitor the appropriateness of, the estimated useful lives of these assets. We also periodically review these intangible assets for potential impairment based upon relevant facts and circumstances. 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.

Previous wording

Amortization of intangible assets decreased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.

Current wording

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.

Previous wording

On a constant currency basis, acquisition related and other expenses increased in the fiscal 2024 periods presented, relative to the corresponding prior year periods, due to higher other expenses primarily related to certain asset impairment charges and higher expenses for business combination adjustments, partially offset by lower transitional and other employee related costs.

Current wording

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.

Previous wording

Restructuring expenses in the fiscal 2024 periods presented primarily related to the 2024 Restructuring Plan. Restructuring expenses in the fiscal 2023 periods presented primarily related to the 2022 Restructuring Plan, which is substantially complete. Our management approved, committed to and initiated the 2024 Restructuring Plan and the 2022 Restructuring Plan in order to restructure and further improve efficiencies in our operations. We may incur additional restructuring expenses in future periods due to the initiation of new restructuring plans or from changes in estimated costs associated with existing restructuring plans.

Current wording

Restructuring expenses in each of the first quarters of fiscal 2025 and 2024 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. We may incur additional restructuring expenses in future periods due to the initiation of new restructuring plans or from changes in estimated costs associated with existing restructuring plans.

Previous wording

Non-Operating Expenses, net: Non-operating 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.

Current wording

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.

Previous wording

Provision for 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. Refer to Note 8 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. federal statutory income tax rates that were in effect during these periods. 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.

Current wording

(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. Refer to Note 6 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. federal statutory income tax rates that were in effect during these periods. 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.

Previous wording

Working capital: The decrease in working capital as of February 29, 2024 in comparison to May 31, 2023 was primarily due to $4.0 billion of long-term senior notes that were reclassified to current liabilities, cash used to pay dividends to our stockholders, cash used for capital expenditures, cash used for purchases of non-marketable investments, net cash used for our employee stock programs and cash used for repurchases of our common stock during the first nine months of fiscal 2024. These unfavorable impacts were partially offset by favorable impacts to our net current assets resulting from net income during the first nine months of fiscal 2024. 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.

Current wording

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. 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.

Previous wording

Cash, cash equivalents and marketable securities: Cash and cash equivalents primarily consist of deposits held at major banks, money market funds and other securities with original maturities of 90 days or less. Marketable securities consist of time deposits, marketable equity securities and certain other securities. The decrease in cash, cash equivalents and marketable securities at February 29, 2024 in comparison to May 31, 2023 was primarily due to $3.5 billion of repayment of senior notes due July 2023 and September 2023, cash used for capital expenditures and purchases of non-marketable investments, payments of cash dividends to our stockholders, net cash used for our employee stock programs and repurchases of our common stock. This decrease was partially offset by cash inflows from our operations and our issuances of commercial paper notes, net of repayments, during the first nine months of fiscal 2024. 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.

Current wording

Cash, cash equivalents and marketable securities: Cash and cash equivalents primarily consist of deposits held at major banks, money market funds and other securities with original maturities of 90 days or less. 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. 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.

Previous wording

Cash flows from operating activities: Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their license support and cloud services agreements. Customers for these license support and cloud services agreements are generally billed in advance of services being provided. Over the course of a fiscal year, we also have historically generated cash from the sales of new licenses, hardware offerings and other services. 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.

Current wording

Cash flows from operating activities: Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their cloud services and license support agreements. Customers for these cloud services and license support agreements are generally billed in advance of services being provided. Over the course of a fiscal year, we also generate cash from the sales of new licenses, hardware offerings and other services. 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.

Previous wording

Net cash provided by operating activities increased during the first nine months of fiscal 2024, relative to the corresponding prior year period, primarily due to higher net income, partially offset by certain cash unfavorable working capital changes, net.

Current wording

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.

Previous wording

Cash flows from investing activities: The changes in cash flows from investing activities primarily relate to our acquisitions, the timing of our purchases, maturities and sales of our investments in marketable securities and other instruments and investments in capital and other assets, including certain intangible assets, to support our growth.

Current wording

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.