ORACLE CORP

Previous wording

Oracle provides products and services that address enterprise 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.

Current wording

Oracle provides products and services that build, run and support enterprise information technology (IT) frameworks. Our products and services include enterprise applications and infrastructure offerings that incorporate and are enhanced by artificial intelligence (AI) technologies, including embedded AI-driven automation and analytics and generative AI capabilities. These offerings are delivered worldwide through a variety of flexible and interoperable IT deployment models. These models include cloud-based, on-premise and hybrid deployments. We provide choice and flexibility to our customers as to when and how they deploy Oracle applications and infrastructure technologies. Through our worldwide sales force and Oracle Partner Network, we sell to customers all over the world, including businesses of various sizes and industries, government agencies, educational institutions and resellers.

Previous wording

We have three businesses: cloud and license; hardware; and services; each of which comprises a single operating segment. The descriptions set forth below as a part of this Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations and the information contained within Item 1 Business and Note 13 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report provide additional information related to our businesses and operating segments and align to how our chief operating decision makers (CODMs), which are our Chief Executive Officer and Chief Technology Officer, view our operating results and allocate resources.

Current wording

We have three businesses: cloud and software (formerly referred to as cloud and license); hardware; and services; each of which is comprised of a single operating segment. The descriptions set forth below as a part of this Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations and the information contained within Item 1 Business and Note 13 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report provide additional information related to our businesses and operating segments and align to how our chief operating decision makers (CODMs), which are our Chief Executive Officers and Chief Technology Officer, view our operating results and allocate resources.

Previous wording

Our cloud and license business, which represented 86% and 84% of our total revenues in fiscal 2025 and 2024, respectively, markets, sells and delivers a broad spectrum of enterprise applications and infrastructure technologies through our cloud and license offerings. Revenue streams included in our cloud and license business are:

Current wording

Our cloud and software business, which represented 87% and 86% of our total revenues in fiscal 2026 and 2025, respectively, markets, sells and delivers a broad spectrum of enterprise applications and infrastructure technologies through our cloud and software offerings. Revenue streams included in our cloud and software business are:

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 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

Current wording

Cloud 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) arrangements generally: have durations of one to five 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

Cloud license and on-premise license revenues, which include revenues from the licensing of our software products including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, which our customers deploy within cloud-based, on-premise or other IT environments. Our cloud license and on-premise license transactions are generally perpetual in nature and are generally recognized as revenues up front at the point in time when the software is made available to the customer to download and use. Revenues from usage-based royalty arrangements for distinct cloud licenses and on-premise licenses are recognized at the point in time when the software end user usage occurs. The timing of a few large license transactions can substantially affect our quarterly license revenues due to the point-in-time nature of revenue recognition for license transactions, which is different than the typical revenue recognition pattern for our cloud services and license support revenues in which revenues are recognized over time. Cloud license and on-premise license customers have the option to purchase and renew license support contracts, as further described above.

Current wording

software license revenues, which are generated from licensing our software products, including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, for deployment by our customers in cloud-based, on-premise or other IT environments. Our software license transactions are generally perpetual in nature and are generally recognized as revenues up front at the point in time when the software is made available to the customer to download and use. Revenues from usage-based royalty arrangements for distinct software licenses are recognized at the point in time when the software end user usage occurs. The timing of a few large software license transactions can substantially affect our quarterly software license revenues due to the point-in-time nature of revenue recognition for software license transactions. Software license customers have the option to purchase and renew software support contracts, as further described below; 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; 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.

Current wording

software support revenues, which are generated by providing Oracle software support services to customers that have elected to purchase support services in connection with the purchase of Oracle applications and infrastructure software licenses. Substantially all software 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 software support customers are entitled to receive. Software support contracts are generally: priced as a percentage of the net fees paid by the customer to purchase a software 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 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 43%, 37% and 32% of our total revenues during fiscal 2025, 2024 and 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 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 software 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 revenues relative to our total revenues has increased and we expect this trend to continue. Cloud revenues represented 51% and 43% of our total revenues during fiscal 2026 and 2025, respectively.

Previous wording

Our cloud and license business’ revenue growth is affected by many factors, including the strength of general economic and business conditions, including the effects of inflation, tariffs and trade policy, geopolitical conditions and other macroeconomic factors on customer demand; governmental budgetary constraints; the strategy for and competitive position of our offerings; customer satisfaction with our offerings; the continued renewal of our cloud services and license support customer contracts by the customer contract base; substantially all customers continuing to purchase license support contracts in connection with their license purchases; the pricing of license support contracts sold in connection with the sales of licenses; the pricing, amounts and volumes of licenses and cloud services sold; our ability to manage Oracle Cloud capacity requirements to meet existing and prospective customer demand; and foreign currency rate fluctuations.

Current wording

Our cloud and software business’ revenue growth is affected by many factors, including the strength of general economic and business conditions, including the effects of inflation, tariffs and trade policy, geopolitical conditions and other macroeconomic factors on customer demand; governmental budgetary constraints; the strategy for and competitive position of our offerings; customer satisfaction with our offerings; the continued renewal of our cloud and software support customer contracts by the customer contract base; substantially all customers continuing to purchase software support contracts in connection with their license purchases; the pricing of software support contracts sold in connection with the sales of licenses; the pricing, amounts and volumes of cloud services and licenses sold; our ability to manage Oracle Cloud capacity requirements to meet existing and prospective customer demand; and foreign currency rate fluctuations.

Previous wording

On a constant currency basis, we expect that our total cloud and license revenues generally will continue to increase due to:

Current wording

On a constant currency basis, we expect that our total cloud and software revenues generally will continue to increase due to:

Previous wording

We believe these factors should contribute to future growth in our cloud and license business’ total revenues, which should enable us to continue to make investments in research and development and our cloud operations to develop, improve, increase the capacity of and expand the geographic footprint of our cloud and license products and services.

Current wording

We believe these factors should contribute to future growth in our cloud and software business’ total revenues, which should enable us to continue to make investments in research and development and our cloud operations to develop, improve, increase the capacity of and expand the geographic footprint of our cloud and software products and services. 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 cloud and software offerings through indirect channels.

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 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 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.

Current wording

Costs associated with our cloud and software business are included in cloud and software expenses and sales and marketing expenses. These costs are largely infrastructure- and personnel-related and include the cost of providing our cloud and software support offerings, salaries and commissions earned by our sales force for the sale of our cloud and software offerings and marketing program costs.

Previous wording

Our cloud and license business’ margin has historically trended upward over the course of the four quarters within a particular fiscal year due to the historical upward trend of our cloud and license business’ revenues over those quarterly periods and because the majority of our costs for this business are generally fixed in the short term. The historical upward trend of our cloud and license business’ revenues over the course of the four quarters within a particular fiscal year is primarily due to the addition of new cloud services and license support contracts to the customer contract base, which we generally recognize as revenues ratably or based upon customer usage over the respective contractual terms and the renewal of existing customers’ cloud services and license support contracts over the course of each fiscal year, which we generally recognize as revenues in a similar manner; and the historical upward trend of our cloud license and on-premise license revenues, which we generally recognize at a point in time upon delivery; in each case over those four fiscal quarterly periods. Our margin for this business may be adversely impacted due to increases in supply chain and energy costs, the impact of tariffs and trade policy and other factors.

Current wording

Our cloud and software business’ margin has historically trended upward over the course of the four quarters within a particular fiscal year due to the historical upward trend of our cloud and software business’ revenues over those quarterly periods and because the majority of our costs for this business are generally fixed in the short term. The historical upward trend of our cloud and software business’ revenues over the course of the four quarters within a particular fiscal year is primarily due to the addition of new cloud and software support contracts to the customer contract base, which we generally recognize as revenues ratably or based upon customer usage over the respective contractual terms and the renewal of existing customers’ cloud and software support contracts over the course of each fiscal year, which we generally recognize as revenues in a similar manner; and the historical upward trend of our software license revenues, which we generally recognize at a point in time upon delivery; in each case over those four fiscal quarterly periods. Our margin for this business may be adversely impacted due to increases in supply chain and energy costs, the impact of tariffs and other trade barriers on our costs, and our ability to pass such costs on to customers; inflation; foreign currency rate fluctuations; governmental budgetary constraints; trade policy and other factors.

Previous wording

Our hardware business, which represented 5% and 6% of our total revenues in fiscal 2025 and 2024, respectively, 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.

Current wording

Our hardware business, which represented 5% of our total revenues in each of fiscal 2026 and 2025, 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. 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 term, which is generally one year. The majority of our hardware products are sold through indirect channels, including independent distributors and value-added resellers, and we also market and sell our hardware products through our direct sales force. 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.

Previous wording

Our hardware business’ revenues are generated from the sales of our Oracle Engineered Systems, server, storage and industry-specific hardware offerings. The hardware product and 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 is delivered to the customer and ownership is transferred to the customer. Our hardware business also earns revenues from the sale of hardware support contracts purchased by our customers at their option and that are generally recognized as revenues ratably as the hardware support services are delivered over the contractual term, which is generally one year. The majority of our hardware products are sold through indirect channels such as independent distributors and value-added resellers and we also market and sell our hardware products through our direct sales force. Operating expenses associated with our hardware business include the cost of hardware products, which consists of expenses for materials and labor used to produce these products by our internal manufacturing operations or by third-party manufacturers, warranty and related expenses and the impact of periodic changes in inventory valuation, including the impact of inventory determined to be excess and obsolete; the cost of materials used to repair customer products with eligible support contracts; the cost of labor and infrastructure to provide support services; 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.

Current wording

Costs associated with our hardware business include the cost of hardware products, which consists of expenses for materials and labor used to produce these products by our internal manufacturing operations or by third-party manufacturers, warranty and related expenses and the impact of periodic changes in inventory valuation, including the impact of inventory determined to be excess and obsolete; the cost of materials used to repair customer products with eligible support contracts; the cost of labor and infrastructure to provide support services; 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.

Previous wording

Our services business, which represented 9% and 10% of our total revenues in fiscal 2025 and 2024, respectively, helps customers and partners maximize the performance of their investments in Oracle applications and infrastructure technologies. We believe that our services are differentiated based on our focus on Oracle technologies, extensive experience, broad sets of intellectual property and best practices. Our services offerings include consulting services and advanced customer services. Our services business has lower margins than our cloud and license and hardware businesses. Our services revenues are affected by many factors including our strategy for, and the competitive position of, our services; customer demand for our cloud and license and hardware offerings and the related services that we may market and sell in connection with these offerings; general economic conditions; governmental budgetary constraints; personnel reductions in our customers’ IT departments; tighter controls over customer discretionary spending; and foreign currency rate fluctuations.

Current wording

Our services business, which represented 8% and 9% of our total revenues in fiscal 2026 and 2025, respectively, helps customers and partners maximize the performance of their investments in Oracle applications and infrastructure technologies. We believe that our services are differentiated based on our focus on Oracle technologies, extensive experience, broad sets of intellectual property and best practices. Our services offerings include consulting services and customer success services (formerly referred to as advanced customer services). Services revenues are generally recognized over time as the services are performed. The cost of providing our services consists primarily of personnel-related expenses, technology infrastructure expenditures, facilities expenses and external contractor expenses. Our services business has lower margins than our cloud and software and hardware businesses. Our services revenues are affected by many factors including our strategy for, and the competitive position of, our services; customer demand for our cloud and software and hardware offerings and the related services that we may market and sell in connection with these offerings; general economic conditions; governmental budgetary constraints; personnel reductions in our customers’ IT departments; tighter controls over customer discretionary spending; and foreign currency rate fluctuations.

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. As compelling opportunities become available, we may acquire companies, products, services and technologies in furtherance of our corporate strategy.

Current wording

Our selective acquisition program is another 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. We estimate the financial impact of any potential acquisition with regard to earnings, operating margin, cash flows and return on invested capital targets, among others, before deciding to move forward with an acquisition.

Previous 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 disclosures. 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 income taxes and non-marketable investments. Refer to Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for more discussion of our significant accounting policies.

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 disclosures. 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 area of income taxes. Refer to Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for more discussion of our significant accounting policies.

Previous wording

In addition, we discuss below the results of each of our three businesses—cloud and license, hardware and services—which are our operating segments as defined pursuant to ASC 280, Segment Reporting. The financial reporting for our three businesses that is presented below is presented in a manner that is consistent with that used by our CODMs. Our operating segment presentation below reflects revenues, direct costs and sales and marketing expenses that correspond to and are directly attributable to each of our three businesses. We also utilize these inputs to calculate and present a segment margin for each of our three businesses in the discussion below.

Current wording

In addition, we discuss below the results of each of our three businesses—cloud and software, hardware and services—which are our operating segments as defined pursuant to ASC 280, Segment Reporting. The financial reporting for our three businesses that is presented below is presented in a manner that is consistent with that used by our CODMs. Our operating segment presentation below reflects revenues, direct costs and sales and marketing expenses that correspond to and are directly attributable to each of our three businesses. We also utilize these inputs to calculate and present a segment margin for each of our three businesses in the discussion below.

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 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 13 of Notes to Consolidated Financial Statements included elsewhere in this Annual 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 consolidated statements of operations for fiscal 2025 and 2024.

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, restructuring and other expenses, interest expense, non-operating income, 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 13 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for more information about our operating segments and 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 consolidated statements of operations for fiscal 2026 and 2025.

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 Annual 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 May 31, 2025 and 2024, our financial statements would reflect reported revenues of $1.13 million in fiscal 2025 (using 1.13 as the applicable average exchange rate for the period) and $1.09 million in fiscal 2024 (using 1.09 as the applicable average exchange rate for the period). The constant currency presentation, however, would translate the fiscal 2025 results using the fiscal 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.

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 Annual 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, 2025, 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 May 31, 2026 and 2025, our financial statements would reflect reported revenues of $1.16 million in fiscal 2026 (using 1.16 as the applicable average exchange rate for the period) and $1.13 million in fiscal 2025 (using 1.13 as the applicable average exchange rate for the period). The constant currency presentation, however, would translate the fiscal 2026 results using the fiscal 2025 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

Comprised of Europe, the Middle East and Africa

Current wording

Comprises Europe, the Middle East and Africa

Previous wording

Total revenues increased by $4.4 billion in reported currency in fiscal 2025 relative to fiscal 2024 due to a $4.8 billion increase in cloud and license revenues, partially offset by a $198 million decrease in services revenues and a $130 million decrease in hardware revenues, in each case during fiscal 2025 relative to fiscal 2024. Excluding the unfavorable effects of foreign currency rate fluctuations of 1% in fiscal 2025 on total revenues, the constant currency 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. In constant currency, applications cloud services and license support and infrastructure cloud services and license support contributed 26% and 74%, respectively, of the growth in cloud services and license support revenues in fiscal 2025. In our hardware business, the constant currency decrease in revenues in 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 fiscal 2025 was attributable to a decrease in revenues from each of our primary services offerings. The Americas, the EMEA and the Asia Pacific regions contributed 74%, 19% and 7%, respectively, to the constant currency total revenue growth during fiscal 2025.

Current wording

Total revenues increased by $10.0 billion in reported currency in fiscal 2026 relative to fiscal 2025 due to a $9.3 billion increase in cloud and software revenues, a $510 million increase in services revenues and a $148 million increase in hardware revenues, in each case during fiscal 2026 relative to fiscal 2025. The increase in our cloud and software business revenues was primarily due to growth in our cloud revenues as customers purchased our applications and infrastructure technologies and also renewed their related cloud contracts. In constant currency, cloud applications and cloud infrastructure contributed 16% and 84%, respectively, to the growth in cloud revenues in fiscal 2026. In our hardware business, the increase in revenues was primarily due to the growth in revenues from our Oracle Exadata and certain other strategic hardware product offerings. In our services business, the increase in revenues was attributable to an increase in our consulting services revenues. The Americas, the EMEA and the Asia Pacific regions contributed 88%, 5% and 7%, respectively, to the constant currency total revenue growth during fiscal 2026.

Previous wording

Total GAAP operating expenses increased by $2.1 billion in reported currency in fiscal 2025 relative to fiscal 2024. The increase in GAAP operating expenses in reported currency during fiscal 2025 relative to fiscal 2024 was primarily due to a $2.1 billion 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 $945 million increase in research and development expenses primarily due to an $813 million increase in employee-related expenses, including higher stock-based compensation expenses, and a $112 million increase in infrastructure expenses; a $377 million increase in sales and marketing expenses; and a $54 million increase in general and administrative expenses primarily due to higher employee-related expenses, including higher stock-based compensation expenses. These increases in GAAP operating expenses in reported currency during fiscal 2025 relative to fiscal 2024 were partially offset by a $703 million decrease in expenses for the amortization of intangible assets as certain of our assets were fully amortized; a $249 million decrease in services expenses primarily due to decreases in external contractor and employee-related expenses; a $239 million decrease in acquisition related and other expenses due to lower asset impairment and litigation-related charges; a $109 million decrease in hardware expenses due to lower hardware product and support costs; and a $105 million decrease in restructuring expenses.

Current wording

Total GAAP operating expenses increased by $7.0 billion in reported currency in fiscal 2026 relative to fiscal 2025. The increase in GAAP operating expenses in reported currency was primarily due to a $6.0 billion increase in cloud and software expenses primarily due to higher infrastructure expenses; a $1.5 billion increase in restructuring and other expenses primarily due to higher restructuring expenses; a $412 million increase in research and development expenses primarily due to an increase in employee-related expenses and an increase in computer equipment expenses; an $86 million increase in hardware expenses; and a $16 million increase in general and administrative expenses, in each case during fiscal 2026 relative to fiscal 2025. These increases in GAAP operating expenses in reported currency were partially offset by a $636 million decrease in expenses for the amortization of intangible assets as certain of our assets were fully amortized; a $320 million decrease in sales and marketing expenses primarily due to lower employee related expenses; and a $20 million decrease in services expenses.

Previous wording

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

Current wording

Our total operating margin increased in fiscal 2026 relative to fiscal 2025 due to higher revenues as discussed above. Total margin as a percentage of revenues remained flat in fiscal 2026 relative to fiscal 2025.

Previous 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:

Current wording

Our operating results reported pursuant to GAAP included the following items that affected our GAAP net income:

Previous wording

Restructuring expenses in 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,” and in Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Current wording

Restructuring and other expenses in fiscal 2026 consist of employee severance costs in connection with the Fiscal 2026 Oracle Restructuring Plan (2026 Restructuring Plan) and certain other operating expenses, net. Restructuring and other expenses in fiscal 2025 consist of employee severance in connection with the Fiscal 2024 Oracle Restructuring Plan (2024 Restructuring Plan) and certain other operating expenses, net. Additional information regarding certain of our restructuring plans is provided in management’s discussion below under “Restructuring and Other Expenses,” and in Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Previous wording

For fiscal 2025 and 2024, 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 an effective tax rate of 19.7%, instead of 12.1%, for fiscal 2025 and 19.2%, instead of 10.9%, for fiscal 2024, which in each case represented our effective tax rates as derived per our consolidated statements of operations.

Current wording

For fiscal 2026 and 2025, the applicable jurisdictional tax rates were 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 other expenses, 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; and for fiscal 2026, after excluding the impact of the U.S. One, Big, Beautiful Bill Act related to the remeasurement of a deferred tax liability. These adjustments resulted in an effective tax rate of 19.9%, instead of 12.6%, for fiscal 2026 and 19.7%, instead of 12.1%, for fiscal 2025, which in each case represented our effective tax rates as derived per our consolidated statements of operations.

Previous wording

Our cloud and license business’ total revenues increased by $4.8 billion in reported currency in fiscal 2025 relative to fiscal 2024 primarily due to a $4.7 billion increase in cloud services revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts and a $120 million increase in cloud license and on-premise license revenues. These increases were partially offset by an $86 million decrease in license support revenues in fiscal 2025 relative to fiscal 2024. In constant currency, applications cloud services and license support and infrastructure cloud services and license support contributed 26% and 74%, respectively, of the growth in cloud services and license support revenues in fiscal 2025. The Americas, the EMEA and the Asia Pacific regions contributed 75%, 19% and 6%, respectively, to the constant currency revenue growth for this business during fiscal 2025.

Current wording

Our cloud and software business’ total revenues increased by $9.3 billion in reported currency in fiscal 2026 relative to fiscal 2025 primarily due to an increase in cloud revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts. Excluding the favorable impact of currency rate fluctuations of 2% in fiscal 2026, cloud applications and cloud infrastructure contributed 16% and 84%, respectively, to the constant currency growth in cloud revenues in fiscal 2026. The Americas, the EMEA and the Asia Pacific regions contributed 87%, 6% and 7%, respectively, to the constant currency revenue growth for this business during fiscal 2026.

Previous wording

Total cloud and license business’ expenses increased by $2.4 billion in reported currency in fiscal 2025 relative to fiscal 2024. Excluding the favorable effects of currency rate fluctuations of less than 1% in fiscal 2025, the constant currency increase in expenses in fiscal 2025 relative to fiscal 2024 was primarily due to a $1.6 billion increase in infrastructure expenses; a $359 million increase in employee-related expenses for employees engaged in cloud services delivery; and a $350 million increase in sales and marketing 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 2026 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

Our cloud and software business’ total expenses increased by $5.8 billion in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the unfavorable effects of currency rate fluctuations of 1% in fiscal 2026, the constant currency increase in expenses was primarily due to a $5.7 billion increase in infrastructure expenses in fiscal 2026 relative to fiscal 2025. Our cloud and software expenses have grown in recent periods, and we expect this trend to continue during fiscal 2027 and in the next few fiscal years 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 fiscal 2025 relative to fiscal 2024 due to increases in total revenues for this business. Total margin as a percentage of revenues in constant currency decreased in fiscal 2025 relative to fiscal 2024 due to an increase in total expenses for this business.

Current wording

Excluding the effects of currency rate fluctuations, our cloud and software business’ total margin increased in fiscal 2026 relative to fiscal 2025 due to increases in total revenues for this business as discussed above. Total margin as a percentage of revenues in constant currency decreased in fiscal 2026 relative to fiscal 2025 due to an increase in total expenses driven by higher infrastructure expenses to support growth in our cloud infrastructure offering.

Previous wording

Total hardware expenses decreased by $133 million in reported currency in fiscal 2025 relative to fiscal 2024. The decrease in hardware expenses aligned with lower hardware revenues. Excluding the favorable currency rate fluctuations effect of 1% in fiscal 2025, the constant currency decrease in hardware expenses during fiscal 2025 relative to fiscal 2024 was due to a $106 million decrease in hardware product and support costs and an $18 million decrease in sales and marketing expenses.

Current wording

Total hardware expenses increased by $49 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the unfavorable currency rate fluctuations effect of 3% in fiscal 2026, the constant currency increase in hardware expenses during fiscal 2026 relative to fiscal 2025 was due to a $69 million increase in hardware product and support costs, partially offset by a $47 million decrease in sales and marketing expenses.

Previous wording

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

Current wording

In constant currency, our hardware business’ total margin and total margin as a percentage of revenues increased in fiscal 2026 relative to fiscal 2025 due to higher total revenues for this business as described above.

Previous wording

Excludes stock-based compensation and certain allocations. 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.

Current wording

Excludes stock-based compensation and certain allocations. 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.

Previous wording

Total services revenues decreased by $198 million in reported currency in fiscal 2025 relative to fiscal 2024. Excluding the effects of unfavorable currency rate fluctuations of 1% in fiscal 2025, the decrease in total services revenues in fiscal 2025 relative to fiscal 2024 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 a constant currency increase in services revenues in the EMEA and the Asia Pacific regions in fiscal 2025.

Current wording

Total services revenues increased by $510 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the favorable impact of currency rate fluctuations of 2% in fiscal 2026, the increase in services revenues was primarily due to increases in our consulting services revenues in fiscal 2026 relative to fiscal 2025. The constant currency increase in services revenues in the Americas region was partially offset by a constant currency decrease in services revenues in the EMEA and the Asia Pacific regions in fiscal 2026.

Previous wording

Total services expenses decreased by $275 million in reported currency in fiscal 2025 relative to fiscal 2024. Excluding the favorable effects of currency rate fluctuations of less than 1% in fiscal 2025, the constant currency decrease in services expenses in fiscal 2025 relative to fiscal 2024 was primarily due to a $158 million decrease in external contractor expenses and an $81 million decrease in employee-related expenses.

Current wording

Total services expenses decreased by $30 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the unfavorable effects of currency rate fluctuations of 1% in fiscal 2026, the constant currency decrease in services expenses was primarily due to a $54 million decrease in employee-related expenses and a $53 million decrease in bad debt expenses, partially offset by a $37 million increase in external contractor expenses, in each case during fiscal 2026 relative to fiscal 2025.

Previous wording

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

Current wording

In constant currency, our services business’ total margin and total margin as a percentage of revenues increased in fiscal 2026 relative to fiscal 2025 due to higher total revenues and lower total expenses for this business as described above.

Previous wording

Total research and development expenses increased by $945 million in reported currency in fiscal 2025 relative to fiscal 2024. Excluding the favorable effects of currency rate fluctuations of less than 1% in fiscal 2025, the increase in research and development expenses was primarily due to an increase in employee-related expenses, including higher stock-based compensation expenses.

Current wording

Total research and development expenses increased by $412 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the favorable effects of currency rate fluctuations of less than 1% in fiscal 2026, the constant currency increase in research and development expenses was primarily due to a $234 million increase in employee-related expenses, including stock-based compensation, and a $132 million increase in computer equipment expenses in fiscal 2026 relative to fiscal 2025.

Previous wording

Total general and administrative expenses increased by $54 million in reported currency in fiscal 2025 relative to fiscal 2024. Excluding the favorable effects of currency rate fluctuations of 1% in fiscal 2025, the increase in general and administrative expenses was primarily due to higher stock-based compensation expenses.

Current wording

Total general and administrative expenses increased by $16 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the unfavorable effects of currency rate fluctuations of 1% in fiscal 2026, general and administrative expenses in constant currency remained flat in fiscal 2026 relative to fiscal 2025.

Previous wording

Amortization of intangible assets decreased by $703 million in reported currency in fiscal 2025 relative to fiscal 2024 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 $636 million in reported currency in fiscal 2026 relative to fiscal 2025 due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.

Previous wording

Restructuring Expenses: Restructuring expenses resulted from the execution of management-approved restructuring plans that were generally developed to improve our cost structure and/or operations, often in conjunction with our acquisition integration strategies and/or other strategic initiatives. Restructuring expenses consist of employee severance costs, contract termination costs and certain other exit costs to improve our cost structure prospectively. For additional information regarding our restructuring plans, see Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Current wording

Restructuring and Other Expenses: Restructuring and other expenses consist of restructuring expenses for employee severance costs, contract termination costs and certain other exit costs to improve our cost structure prospectively resulted from the execution of management-approved restructuring plans that were developed for certain strategic initiatives and/or to improve operational efficiencies; and other operating expenses, net. For additional information regarding our restructuring plans, see Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.