Oracle Q4 2022 Earnings Report

Oracle EPS Results

• Actual EPS: $1.31
• Consensus EPS: $1.17
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: $1.40

Oracle Revenue Results

• Actual Revenue: $11.84 billion
• Expected Revenue: $11.65 billion
• Beat/Miss: Beat by +$190.03 million
• YoY Revenue Growth: +5.50%

Oracle Announcement Details

• Quarter: Q4 2022
• Date: 6/13/2022
• Time: After Market Closes
• Conference Call Date: Monday, June 13, 2022
• Conference Call Time: 9:56AM ET

Oracle (NYSE:ORCL) is a multinational technology company that develops and sells database software, cloud engineered systems, enterprise software applications and related services. The company is widely known for its flagship Oracle Database and a portfolio of enterprise-grade software products that support data management, application development, analytics and middleware. Over recent years Oracle has expanded its focus to include cloud infrastructure and cloud applications, positioning itself as a provider of both platform and software-as-a-service solutions for large organizations.

Oracle’s product and service offerings include Oracle Database and the Autonomous Database, Oracle Cloud Infrastructure (OCI), enterprise resource planning (ERP), human capital management (HCM) and supply chain management (SCM) cloud applications (often grouped under Oracle Fusion Cloud Applications), middleware such as WebLogic, and developer technologies including Java and MySQL. The company also provides hardware and engineered systems—partly the result of its acquisition of Sun Microsystems—and offers consulting, implementation, managed cloud and support services to help customers deploy and operate its technology in on-premises, hybrid and cloud environments.

Founded in 1977 by Larry Ellison, Bob Miner and Ed Oates, Oracle has grown through organic product development and a series of strategic acquisitions. Headquartered in Redwood Shores, California, the company serves a global customer base across North America, Europe, Asia-Pacific and other regions. Oracle is publicly traded on the New York Stock Exchange under the symbol ORCL. Current senior leadership includes Chief Executive Officer Safra Catz and co-founder Larry Ellison, who serves as executive chairman and chief technology officer; together they have guided Oracle’s transition into cloud computing while continuing to support its core database and enterprise software franchises.

Oracle Q4 2022 Earnings Call Transcript

Key Takeaways

• Oracle reported Q4 revenue up 10% in constant currency, the highest organic growth since 2011, and non-GAAP EPS beat the high end of guidance by $0.20.
• Cloud services and license support revenue reached $7.6 billion, up 7% CC, with OCI consumption up 83% and Autonomous Database revenue up 29%, driving total cloud revenue to $2.5 billion (up 22% CC).
• Oracle expects its cloud business to grow organically by more than 30% in constant currency in fiscal 2023 and plans to add six new cloud regions to meet accelerating demand for Fusion, NetSuite, and OCI.
• The Cerner acquisition closed, adding $15.8 billion of debt; Oracle plans to integrate Cerner onto OCI to boost healthcare offerings while maintaining its investment-grade rating and dividend.
• GAAP EPS for Q4 declined 15% in USD to $1.16 due to acquisition and investment costs, and Q1 non-GAAP EPS guidance of $1.04–$1.08 (+1%–5%) factors in a 3%–4% currency headwind.

Presentation

[Operator]

Good afternoon. Thank you for standing by. Welcome to Oracle's fourth quarter 2022 conference call. It's now my pleasure to hand today's conference over to Oracle Senior Vice President, Ken Bond.

[Ken Bond, SVP of Investor Relations at Oracle]

Great. Thank you, David. Good afternoon, everyone, and welcome to Oracle's fourth quarter and fiscal year 2022 earnings conference call. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information, can be viewed and downloaded from our investor relations website. Additionally, a list of many customers who purchased Oracle Cloud services or went live on Oracle Cloud recently will be available from the investor relations website. On the call today are Chairman and Chief Technology Officer, Larry Ellison, and Chief Executive Officer, Safra Catz. As a reminder, today's discussion will include forward-looking statements, including predictions, expectations, estimates, or other information that might be considered forward-looking. Throughout today's discussion, we will present some important factors relating to our business which may potentially affect these forward-looking statements.

[Ken Bond, SVP of Investor Relations at Oracle]

These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today. As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. Finally, we are not obligating ourselves to revise our results or these statements based on new information or future events. Before taking questions, we'll begin with a few prepared remarks. With that, I'd like to turn the call over to Safra.

[Safra Catz, CEO at Oracle]

Thanks, Ken, and good afternoon, everyone. As you can see, we had an excellent quarter across the board, with total revenue growing 10% in constant currency, the highest organic growth we've seen since 2011, and $240 million above the high end of my constant currency guidance. Earnings were equally strong as EPS was $0.20 above the high end of guidance. What Q4 demonstrates is that our business is accelerating. A growing list of customers, many new to Oracle, are choosing us for more products and services as they understand the benefits of Oracle technology. Our technology helps make our customers modern, efficient, and more productive, and they got to see that during the pandemic, and now it's very clear. Those customers are then becoming larger Oracle customers. Fusion customers are buying OCI. OCI customers are buying Fusion and NetSuite.

[Safra Catz, CEO at Oracle]

Database customers are moving to Autonomous on OCI. Industry vertical customers are going all in on Fusion. We have real momentum all around. Going forward, and despite the macro environment, we continue to expect the revenue growth in our cloud business will accelerate substantially in fiscal year 2023. We're also excited about completing the Cerner acquisition. Larry spoke at our Oracle Health Strategy session last week, and he'll give you more details today, and I'll fill in with some numbers. As you can see in the financial statements, the currency headwind this past quarter was 5%, which was considerably higher than the 2%-3% it was during our last earnings call. Following my regular custom, I'll be reviewing our non-GAAP USD results using constant currency growth rates so you have a clear view of the business as we manage it. Now for Q4.

[Safra Catz, CEO at Oracle]

Total cloud services and license support revenue for the quarter was $7.6 billion, up 7% in constant currency, again, driven by Fusion, NetSuite, Autonomous Database, and of course, Gen 2 OCI. Total cloud revenues, that's IaaS plus SaaS, was $2.5 billion in USD, up 22% in constant currency. Application subscription revenues were $3.2 billion, up 9% in constant currency. Our strategic back office cloud applications now have an annualized revenue of $5.4 billion and grew 24% in constant currency this quarter, including Fusion ERP up 23% and NetSuite ERP up 30%. Infrastructure subscription revenues were $4.4 billion, up 5% in constant currency. Infrastructure cloud services now have an annualized revenue of more than $3.2 billion.

[Safra Catz, CEO at Oracle]

Excluding our legacy hosting services, infrastructure cloud services grew 49%, including OCI consumption revenue, which was up 83%, Cloud@Customer consumption revenue, which was up 108%, and Autonomous Database, which was up 29%. License revenues were $2.5 billion, up 25% in constant currency, led by database sales for use in the cloud by major application cloud SaaS companies. As a result, our database business had an exceptional quarter with total database revenue up double digits. All in, total revenue for the quarter was $11.8 billion, up 10% in constant currency. Operating expenses were up 11% as we continued to invest to meet growing demand for our cloud services. For the quarter, the gross margin for cloud services and license support was 82%, and the gross profit dollars grew 4%.

[Safra Catz, CEO at Oracle]

The full year growth of this gross profit was 4%, higher than the 2% we saw last year, and I expect it will be significantly higher in FY 2023. Though we will continue to invest in growth, we should benefit from economies of scale of running our cloud business as it gets larger. You should keep in mind that our fundamental principle going forward is to grow non-GAAP EPS while accelerating cloud revenue growth. Non-GAAP operating income was $5.6 billion, up 8% from last year, and the operating margin was 47%, once again higher than all of our competitors. Even while we've been investing aggressively for growth, we've maintained our financial discipline.

[Safra Catz, CEO at Oracle]

The non-GAAP tax rate for the quarter was 10.1% and below our base tax rate of 19% as we received a benefit from the resolution of some tax matters in Q4. EPS was $1.54 in U.S. dollars, up 7% in constant currency, unchanged in USD. GAAP EPS was $1.16, down 8% in constant currency, down 15% in USD. Let me go through the full fiscal year, though I've given you some full year numbers so far every once in a while. For the full fiscal year, total company revenues were $42.4 billion, up 7% in constant currency and our highest annual growth rate in more than 10 years.

[Safra Catz, CEO at Oracle]

Total applications revenue grew 8% compared to 5% last year, and total infrastructure revenue grew 7% compared to 2% growth last year. Clearly, our revenue growth accelerated this year as investments into our cloud businesses are paying off. Total cloud services and license support revenue for the year was $30.2 billion, up 6%. Total cloud services were up 22% to $10.8 billion. Non-GAAP EPS was $4.90 in USD, up 5% in USD, up 8% in constant currency. The full-year operating margin percentage was 46%, up 2% from pre-pandemic levels and down a little bit, down 1% from last year.

[Safra Catz, CEO at Oracle]

Operating cash flow over the last four quarters was $9.5 billion, and free cash flow was $5 billion, with capital expenditures of $4.5 billion during the year. For the quarter, operating cash flow was $4 billion, and free cash flow was $2.6 billion. At quarter end, we had nearly $22 billion in cash and marketable securities, but that's lower now that Cerner has closed. The short-term deferred revenue balance was $8.4 billion, up slightly in constant currency. The remaining performance obligation or RPO balance is $46.6 billion, up 17% in constant currency due to strong bookings. Approximately 57% is expected to be recognized as revenue over the next 12 months. As we've said before, we're committed to returning value to our shareholders through technical innovations, strategic acquisitions, stock repurchases, prudent use of debt, and a dividend.

[Safra Catz, CEO at Oracle]

This quarter, we repurchased 8 million shares for a total of $600 million. In addition, we paid out dividends of $3.5 billion over the last 12 months, and the board of directors declared a quarterly dividend of $0.32 per share. With the completion of the Cerner acquisition, which happened after the end of Q4, actually, I guess last week, we've added about $15.8 billion of debt, and we anticipate retaining our investment-grade credit rating, meaning that for the time being, we're gonna focus on reducing our debt balance while continuing our share repurchases at current levels. In addition, I don't believe the dividend will be impacted at all. Once the debt level has declined, we'll reexamine share repurchase levels. Now to the guidance.

[Safra Catz, CEO at Oracle]

We feel very optimistic about our business momentum, and we also recognize that there is increasing macro uncertainty right now. In addition, since we ceased operations in Russia in March and made other adjustments in the region, we have factored out around $100 million per quarter from guidance that we used to receive from these customers. Taking all that into account. I do expect our cloud business, which grew 22% this year, will organically grow more than 30% in constant currency in FY 2023. Cloud service and license support will also see growth acceleration and could well see double-digit organic growth. As I said earlier, our fundamental principle is to grow EPS while accelerating cloud revenue growth. Given our increasing confidence in organic revenue growth, we will continue to prudently invest back in the business, and you can already see the returns in our performance.

[Safra Catz, CEO at Oracle]

Revenue growth accelerated from 2% in FY 2021 to 7% this year. Clearly, there's strong demand for our cloud services, and we intend to capitalize on it. As such, I expect our CapEx spend will be higher in FY 2023 to meet the demand. We expect to add another six regions in fiscal 2023 in addition to the 38 cloud regions across 20 countries that we already have serving our customers. I also want to share how we will be running Cerner since it will impact their contribution to Oracle going forward. We are already working actively to build and implement world-class healthcare cloud capabilities. Larry will go over that. This means that we are reviewing their entire product portfolio to identify areas where we can include Oracle technology rather than third-party products, as well as moving them to OCI.

[Safra Catz, CEO at Oracle]

These efforts will deliver a more stable, secure, and innovative product portfolio for customers while using less third-party products. We remain confident in our ability to grow Cerner's top line and bottom line faster than they were able to do so on their own as these changes are implemented. Now let me turn to my guidance. I'll review Q1 on a non-GAAP basis, and if currency exchange rates remain the same as they are now, currency should have a 3%-4% negative impact on total revenue and maybe $0.05-$0.06 negative effect on EPS in Q1. However, actual currency impact may be different. Total revenues for Q1, including Cerner, are expected to grow 20%-22% in constant currency and are expected to grow 17%-19% in USD at today's exchange rate.

[Safra Catz, CEO at Oracle]

As with past acquisitions, I've added conservatism for the Cerner revenue contribution to account for the transition. For Q1, total cloud excluding Cerner is expected to grow from 25%-28% in constant currency and is expected to grow from 22%-25% in USD. As I mentioned above, for fiscal year 2023, total cloud excluding Cerner is expected to grow over 30% in constant currency. Total cloud growth in Q1, including Cerner, is expected to grow from 47%-50% in constant currency, 44%-47% in USD. Non-GAAP EPS is expected to grow between 6%-10% and be between $1.09 and $1.13 in constant currency. Non-GAAP EPS is expected to grow between 1%-5% and be between $1.04 and $1.08 in USD.

[Safra Catz, CEO at Oracle]

As I've said before, Cerner will be accretive to earnings this year, including Q1. My EPS guidance for Q1 assumes a base tax rate of 19%. However, one-time tax events could cause actual tax rates for any given quarter to vary. With that, I'll turn it over to Larry for his comments.

[Larry Ellison, Chairman and CTO at Oracle]

Thank you, Safra. As Safra said, our plan is to accelerate cloud revenue growth while continuing to grow earnings per share. First, let me provide some detail on how we plan to accelerate cloud revenue growth. It all starts with our two most important verticals, healthcare and financial services. In healthcare, we're in the process of building a complete suite of applications for the entire healthcare ecosystem, starting with healthcare providers like hospitals and clinics. We're modernizing Cerner's clinical systems by adding capabilities like a voice user interface and applications like disease-specific AI models for cancer and other diseases. We're including an IoT device network to improve patient diagnostics and monitoring.

[Larry Ellison, Chairman and CTO at Oracle]

We're adding administrative systems, including managing the incredibly complex contract workforce that hospitals have, as doctors are not full-time employees, nor are nurses. We are going to help recruiting, scheduling, and paying those contract workers according to their contracts. Inventory at hospitals is enormously complicated. Inventories aren't in a central location. You find inventory in nurses' stations, outside operating rooms, outside the intensive care unit. There's inventory everywhere. Managing that inventory is very complicated. We're adding RFID tags and maps on handheld phones to help people find what they're looking for quickly. For payers, including insurance companies and governments, we're automating payment authorization and billing systems. For pharmaceutical companies, we're integrating our clinical trial system directly into the hospital clinical system, making clinical trials easier to start and faster to complete.

[Larry Ellison, Chairman and CTO at Oracle]

We can do all of this and more because we're building these healthcare applications using the latest, most productive technologies in the cloud, namely the Oracle Autonomous Database and the Oracle APEX low-code programming language. Using these tools, security and reliability are built into the technology platform, not the application. In our financial services vertical, we're working with major money center banks and leading logistics companies to automate B2B commerce from directly within the Oracle ERP cloud. For example, when a hospital wants to buy an X-ray machine, that hospital simply enters a purchase request for the X-ray machine into their Oracle ERP procurement system. That procurement system then sends that order directly to the selling company's Oracle ERP order management system and automatically originates a corresponding loan request from that hospital's preferred bank.

[Larry Ellison, Chairman and CTO at Oracle]

The company selling the X-ray machine uses their Oracle ERP order management system to check product availability and submit a shipping request to their preferred logistics provider to automatically quote a delivery date to the buyer. The entire B2B commerce process is automated within the Oracle Cloud. Purchasing, selling, loan origination, shipping, billing, and payments. Automating B2B commerce is yet another huge opportunity for Oracle. We already have over 30,000 cloud ERP customers, including many of the world's most important banks and leading logistics companies. Let's take a moment to look at the progress we continue to make in our Oracle ERP cloud, starting with healthcare. We've got a very strong position in healthcare with the providers, including Kaiser, Mayo Clinic, Cleveland Clinic, Mount Sinai, Northwell Health, Tenet, Atrium Health, Highmark Health, Humana, Cigna, and many others.

[Larry Ellison, Chairman and CTO at Oracle]

In Q4 we closed UnitedHealthcare, a win over SAP. We won the NHS, U.K.'s second major move to the cloud. We won NSW Ministry of Health in Australia for ERP and SCM. We won WellSpan Health, a regional provider in Pennsylvania with 8 hospitals. We won Abcam, a U.K. life sciences company, increasing their footprint in ERP and SCM. Going live in Q4 were the Cleveland Clinic with ERP and SCM, UC Health for ERP and SCM, Pfizer on Enterprise Performance Management. U.K. Health went live. Atrium Health went live, all in Q4. In financial services, our other really big vertical, as I said earlier, we have a very strong position with the money center banks with ERP.

[Larry Ellison, Chairman and CTO at Oracle]

Bank of America uses Fusion applications. JPMorgan Chase uses Fusion applications. Does Santander, Bank of New York Mellon, HSBC, Lloyds, Macquarie, Credit Suisse, UBS, Crédit Agricole, SMBC, TD Bank, Société Générale, Vanguard, State Street. I can go on and on, but let me go to the results in Q4. In Q4 we won at Citibank, a big ERP win against SAP. We won at Chubb. We won at PNC, the sixth-largest bank in the United States. We won at SMBC, the largest Japanese-owned bank in the United States. We won Oversea-Chinese Banking Corp. We won Mizuho, the third-largest bank in Japan. TIAA, Desjardins, Mitsui Sumitomo, also in Japan. GNP, one of Mexico's largest financial services company. We have a very strong position in financial services.

[Larry Ellison, Chairman and CTO at Oracle]

That's one of the key partner groups of partners that we're working to automate B2B commerce. Along with the logistics companies. In retail, we already have Kohl's, Office Depot, Macy's, Kroger's, Albertsons, Tesco, McDonald's, Chipotle, Tiffany's, Saks, Williams Sonoma, Walmart, CVS. In Q4, we added to that list. We added Lowe's, then Albertsons, and Sherwin-Williams, and Abercrombie & Fitch. We had major go-lives at Macy's, Next, and the Co-op stores, all in retail. In communications, where we're already present at AT&T, Orange, MTN, Bharti Airtel, Rogers, Wind Tre, Telecom Italia, KPN, and stc, we won Virgin Media. We had a major expansion at AT&T, an ERP SCM expansion. We won a major expansion, ERP and EPM at Verizon.

[Larry Ellison, Chairman and CTO at Oracle]

Very strong quarter in telecommunications with a huge go live for at KPN, the Dutch telecom company in ERP and SCM. Service wins, we already have PwC, KPMG, Booz Allen, TrueBlue, Securitas, Waste Management, Skanska, McDermott, Jacobs. We won in Q4, BDO, Verisk Analytics, and the Mubadala Group. Go lives in Q4 in services included PricewaterhouseCoopers, ManpowerGroup, TriNet, and Republic Services. In the public sector, we had a major win at the state of Missouri, wall to wall at the state of Missouri, ERP, SCM, HCM. That was a win over Workday, SAP, and everybody else. We won at the Scottish Government. We won at the UK Home Office. We won a state of Switzerland, Vaud.

[Larry Ellison, Chairman and CTO at Oracle]

We won General Organization for Social Insurance in Saudi Arabia. We won a deal with the police department in the state of Victoria in Australia. We had major go lives in the public sector in the city of St. Louis and Norfolk County, U.K. In hospitality, where we already have Marriott, Hilton, Caesars, MGM, Loews, Royal Caribbean, and Park Hotels, we added Airbnb for ERP expansion, a win over Workday, and InterContinental Hotels & Resorts. Logistics, again, this is our other big group of partners in our major effort to automate B2B commerce from within the Oracle ERP cloud. We have a very strong position globally in logistics. Our customers include UPS, FedEx, DHL, Swift, Schneider, Union Pacific, Yellow. We added An Post, the Postal Service of Ireland.

[Larry Ellison, Chairman and CTO at Oracle]

The go lives included DHL, UPS, and Deutsche Post. In higher ed, where we're already installed at Princeton, Cambridge, Juilliard, Vanderbilt, UCLA, University of Chicago, Edinburgh, Rutgers, Baylor, UCSD, and lots and lots of others, we added the University of Maine, East Tennessee State, Villanova, and the State University of New York at Stony Brook. Other notable wins in the quarter. On high tech, we won Teradata. We won a big win at Toyota Motor, an ERP win, at Denso. Again, let's see, what else have we got? Very global, let's see, Aptean was a win, another ERP win, in energy, Technip Energies. Okay, so it was a very, very strong quarter.

[Larry Ellison, Chairman and CTO at Oracle]

We're very excited about our momentum in ERP and how we can expand ERP from what it was in when it was an on-premise system to what it can be in terms of B2B commerce automation now that it's a cloud system. With that, I'm gonna turn it back to Safra Catz.

[Ken Bond, SVP of Investor Relations at Oracle]

Thank you, Larry. David, if you'd please, poll the audience for questions, we'll go to the Q&A portion of the call.

[Operator]

Absolutely. At this time, I'd like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. We'll take our first question from Mark Murphy with JPMorgan. Your line is now open.

[Mark Murphy, Managing Director and Head of U.S. Enterprise Software Research at JPMorgan]

Yes. Thank you very much, and, congratulations on the double-digit growth in the quarter. Larry, your vision of a national health records database is very compelling. It would be a profound benefit to society. Just considering that several trillion dollars are spent on health care, what do you see as the size of the opportunity for Oracle and Cerner if you solve that particular problem? Well, the National Health Records database, you know, solves two problems, and it allows patients, in the case of an emergency, to have their caregivers get immediate access to all of their health records, which will deliver way better outcomes, you know, for people. The other is public health officials will get much better information about the state of health in their country.

[Larry Ellison, Chairman and CTO at Oracle]

I mean, having this knowledge, we dramatically improve healthcare, but we also save an enormous amount of money by doing that. I don't know if you remember when we sent that hospital ship to New York City because the officials in New York thought they were about to run out of hospital beds. It turns out they were wrong. We didn't run out of hospital beds, but they didn't know. They don't have. Public health officials don't have access to that kind of information. You know, it was very clear they were, in a lot of cases, flying blind during the pandemic. By providing this information, we save a lot of lives and we save a lot of money.

[Larry Ellison, Chairman and CTO at Oracle]

The scale of the opportunity is gigantic because it's not. People think of it as a national opportunity. It's a global opportunity. You know, every country, I mean, if you look at Western Europe, Western Europe's budgets are dominated by healthcare. If they can save lives and save money by putting in modern information systems, they'll do it, and they'll do it quickly. It's clearly going to be our largest business.

[Mark Murphy, Managing Director and Head of U.S. Enterprise Software Research at JPMorgan]

Thank you.

[Operator]

Okay. Next we'll go to Keith Weiss with Morgan Stanley. Your line's open.

[Keith Weiss, Managing Director and Head of U.S. Software Research at Morgan Stanley]

Excellent. Thank you guys for taking the questions and congratulations on a really solid quarter. Safra, you mentioned on the conference call that you guys are putting up this type of result even on a backdrop that's not the most stable kind of macro backdrop, and we're seeing a lot of other software companies seeing slipped deals, seeing issues with some consumer internet companies lowering their spend. You guys seem to be working through this very well. Can you give us some color into how you're doing it? Is it better execution? Is the Oracle value proposition going through more clearly? Can you help us understand where you're able to put up the bigger beats when a lot of guys are working with skinnier beats, if beats at all, during this period?

[Safra Catz, CEO at Oracle]

Okay. Well, first of all, you have to understand we're a very big company. We have thousands, hundreds of thousands of existing customers. Our products also are so compelling that often customers save money by moving to OCI. They also, many of our customers realized during the pandemic that they absolutely had to have modern systems. Those companies that didn't have modern systems barely survived through the pandemic. They have to have a digital connection with their customers, with their employees, with their suppliers. Those are the kinds of products we have, and when customers move, let's say, from Amazon to us, they, the moment they try us, they realize, "Whoa, this is better and more economical." Of course, for Oracle workloads, you can't get anywhere close to what we can do. We have a lot of things working in our favor.

[Safra Catz, CEO at Oracle]

Our products, of course, our Fusion products are superb. I mean, we have so many customers, this call is not long enough to reach them. Of course, NetSuite is, again, industry-leading, like Fusion for a different part of the market. Incredible momentum. By the way, as I mentioned, there's about $100 million a quarter that is just the Russia-Ukraine region that we stopped charging our customers in Ukraine when they were invaded, even though we continue to help them, and of course, we suspended everything in Russia. We are just trying to meet our customers' needs. The biggest issue is having enough to meet demand.

[Safra Catz, CEO at Oracle]

I'm actually very happy with the way we managed the supply chain this past quarter. I'm hoping that it will continue to get better because that will give us more capacity and more capability to deliver to our customers. I mean, we just have so much momentum. We have so many happy customers, and they're just new customers are just buying more. You get into this cycle that's very virtuous and people really build confidence in our capability to execute and also the overall economic message and offering that we're giving. We've always tried to give a compelling financial offering, and I think that's really resonating in these times.

[Keith Weiss, Managing Director and Head of U.S. Software Research at Morgan Stanley]

Excellent. Super helpful. Thank you.

[Safra Catz, CEO at Oracle]

Thanks, Keith.

[Operator]

Next we'll go to Brad Zelnick with Deutsche Bank. Your line is now open.

[Brad Zelnick, Managing Director and Senior U.S. Software Research Analyst at Deutsche Bank]

Great. Thanks very much for taking my questions and congrats on the great results. Larry, we've picked up a meaningful uptick in the number of large enterprise agreements or ULAs that customers are doing with Oracle, and in particular, to satisfy their database needs both on-premise and also in the cloud. Do you have any telemetry or other insights into customer behavior to see where they're deploying these licenses? Can you talk about why BYOL is so important to your strategy and the longevity of Oracle Database? Maybe just for Safra as well, that license number was so strong, and in your prepared remarks, you mentioned license growth was led by database use in the cloud by major app cloud SaaS companies.

[Larry Ellison, Chairman and CTO at Oracle]

Right. Yeah, with the exception of Workday, most of the big application companies, maybe conspicuously, you know, Salesforce.com is a very large Oracle user, and they license our database for use in their cloud. They're not the only ones. There are a lot of SaaS companies that use our database in the cloud, and that keeps our license business very, very strong. Our database license business very, very strong. Don't confuse license for on-premise. Some licenses, you know, classically are used on-premise, but a lot of the new licenses that we're selling allow our customers to take those licenses and run them in the cloud, whether it's our cloud or other people's clouds. In the case of Salesforce, in their own cloud. It's.

[Larry Ellison, Chairman and CTO at Oracle]

The Oracle Database is still the number one database in the world by a significant margin, and it's the number one database in the cloud when you start counting all of the SaaS companies that use the Oracle Database.

[Brad Zelnick, Managing Director and Senior U.S. Software Research Analyst at Deutsche Bank]

Very helpful. Thank you.

[Operator]

Next, we'll go to Mark Moerdler with Bernstein Research. Your line's open.

[Mark Moerdler, Managing Director and Senior Global Software Analyst at Bernstein Research]

Thank you very much, and congratulations on the strong quarter and the very positive commentary and guidance. I'd like to drill a little more on this question of people's concerns. With the increasing concerns of recession by many, can you tell me what you're seeing for the apps part of the business and more specifically for ERP? What I'm trying to understand is, how will the shift of ERP to the cloud be impacted by any economic slowdown or won't it be? How should we think about that? Thank you.

[Larry Ellison, Chairman and CTO at Oracle]

Well, I'm not sure I'd call it counter-

[Safra Catz, CEO at Oracle]

Well-

[Larry Ellison, Chairman and CTO at Oracle]

I'm sorry, Safra. Please go.

[Safra Catz, CEO at Oracle]

No, you go ahead, Larry. You go ahead.

[Larry Ellison, Chairman and CTO at Oracle]

Yeah. Okay, I'm not sure I'd call it counter-cyclical, but the cloud systems cost a lot less than the on-premise systems to run. They give you much better information. They allow you to control expenses better. They don't cost that much to implement because you pay for them over time. What we're seeing is, let's take a good look at NetSuite, which is the low end of the market, and you think those would be the companies to be most affected by the recession. It's not JPMorgan Chase. You know, they'll keep putting in new systems, but some smaller entrepreneur-led companies, you think that the recession would get them.

[Larry Ellison, Chairman and CTO at Oracle]

We got the most revenue we ever got from NetSuite this past quarter, and the highest growth rate that we've ever gotten from NetSuite this past quarter. They are accelerating into the recession because we think, you know, the benefits are enormous and it equips the companies to compete more effectively. Again, we don't see that business slowing down, quite the contrary. We see our ERP business, both Fusion and NetSuite, accelerating even in spite of the macroeconomic situation. Safra?

[Safra Catz, CEO at Oracle]

Yeah. I think people don't realize how exorbitantly expensive it is to run those large SAP systems. They have data centers associated with them. They have hundreds, sometimes thousands of technicians to run them. They're old, they're clunky, and moving to Fusion ERP is. It's just a totally different world and costs so. You know, the costs are tiny in comparison. I think people sort of forget that. You know, this applies really to all on-premise systems, but even more so to those old SAP systems. Our cloud offering in that area really is unrivaled, frankly. Unrivaled. Our win rates just continue and we're very optimistic about it and we've sold a lot.

[Safra Catz, CEO at Oracle]

A lot is still being implemented and we expect that you'll see that in the numbers while our customers end up spending less than what they used to spend with on-premise.

[Mark Moerdler, Managing Director and Senior Global Software Analyst at Bernstein Research]

Perfect. I really appreciate it. Thank you. Again, congratulations.

[Safra Catz, CEO at Oracle]

Thank you.

[Larry Ellison, Chairman and CTO at Oracle]

Thank you.

[Operator]

Okay. Next we'll go to Phil Winslow with Credit Suisse. Your line is now open.

[Phil Winslow, Managing Director and Global Head of the Software Team at Credit Suisse]

Great. Thanks for taking my question. Last quarter, Safra, you expected organic revenue growth to reach double digits next fiscal year. Congratulations on reaching that double-digit milestone this quarter. Now within today's results, two numbers really stood out to us. First was the upside to license revenue, and then second was your commentary about total database revenue growing in the double digits. My question is, Safra and Larry, could you give us more color on what's driving that re-acceleration in license revenue in particular, even as cloud revenue inflected to its highest growth rate in more than four years? Is this BYOL, you're bringing the heat? Is this autonomous database growing, getting big enough and growing fast enough to lift the overall number, et cetera?

[Phil Winslow, Managing Director and Global Head of the Software Team at Credit Suisse]

Is this the broad-based demand that you mentioned on the Q3 call or is this more big deal driven? Thanks.

[Safra Catz, CEO at Oracle]

It's a little of both. You see, first of all, large enterprises understand that having an unlimited agreement for some period of time, an unlimited agreement gives them unbelievable flexibility. Any large customer, large database user that does not have an unlimited agreement with us is really not optimizing for their spend because it gives them incredible flexibility. They can use on-premise for as long as they need it. They can move to the cloud and get a much lower price in the cloud with BYOL, and they can move back and forth, and it just gives them the kind of flexibility. Those agreements are the ultimate sort of the foundation of so much of what goes on. In addition, of course, in technology, we also have our leading Java business, which on-premise is in extensive use and in the cloud is at no charge.

[Safra Catz, CEO at Oracle]

Customers can be motivated to bring their Java to the Oracle Cloud and to use it at no charge, their Java program, and to use it at no charge. We have a lot of things that incent bringing your Oracle databases to our cloud and of course, all your Java work to our cloud. Both of those are absolutely critical for our license numbers to be as strong as they are. The Oracle Database, you know, I've been following Oracle since the eighties, and I always we always hear about some new product that's about to overtake Oracle. The reality is that the Oracle Database is beyond the gold standard.

[Safra Catz, CEO at Oracle]

If you really need work done, and if you want to protect your most critical data, and you want to use large amounts of it is going to be the Oracle Database that is head and shoulders above every other product. Invariably, some folks try other things. When they get bigger, they always come back to the Oracle Database. It is irreplaceable because of its technical capabilities that are so far superior, and that becomes very, very, very clear to customers. More and more of them, you know, license, continue their license, and extend those unlimited agreements, whether for on-premises and in the cloud. It's not either/or, it's both, and that is the best use of it.

[Larry Ellison, Chairman and CTO at Oracle]

I want to add.

[Phil Winslow, Managing Director and Global Head of the Software Team at Credit Suisse]

Awesome. Thanks for the color. Oops, yeah, sorry, go ahead, Larry.

[Safra Catz, CEO at Oracle]

Go ahead, Larry.

[Larry Ellison, Chairman and CTO at Oracle]

I'll add one thing to that, which is, the Oracle Autonomous Database is interesting because it's autonomous. In other words, it doesn't require human beings to run it, like database administrators, things like that. Recently, inside of Oracle, inside of our cloud, virtually every database going up to run our cloud is the autonomous database because people don't want to hire database administrators inside of Oracle Corporation. It's just much cheaper to run. I think, in that sense, the autonomous database is countercyclical. You do save a huge amount of money just by moving from the conventional Oracle Database to the autonomous database. It's actually more secure, more reliable, and costs way less to run. You don't need a bunch of experts running it. You don't need anyone to run it.

[Larry Ellison, Chairman and CTO at Oracle]

There's a programming language called APEX, which is a low-code programming environment, where you use 10% the same amount of programmers that you would use if you were programming in our other programming language called Java. APEX is also becoming very popular inside of Oracle to build applications. I see this as two interesting trends as people using more modern technology to dramatically reduce their labor costs, which I think will play very well in the next couple of years in this economy.

[Phil Winslow, Managing Director and Global Head of the Software Team at Credit Suisse]

Awesome. Thanks for the added color. Appreciate it. Keep up the good work.

[Operator]

Our final question comes from Kirk Materne with Evercore ISI. Your line's open.

[Kirk Materne, Senior Managing Director and Head of Enterprise Software Research at Evercore ISI]

Thanks very much. Thanks for taking the questions, and congrats on a good quarter. Safra, can you just give any additional color on the CapEx outlook for fiscal 2023 relative to what we saw this year? Just to clarify on the buyback, I just want to make sure I heard it correctly, is the pace of buyback that we saw this last quarter still reasonable for the near term, even with the incremental debt from Cerner? Thanks.

[Safra Catz, CEO at Oracle]

Yes. Let me hit the buyback first, because I know I gave you quite a word sandwich there at the end. I was losing steam. We bought back $600 million this past quarter. I think we bought back about $600 million the previous quarter. I expect to do about the same this quarter. Usually, I don't give you the number in advance, but you know, since previous quarter to those two, we did $7 billion and a couple of $8 billions, we're not going to be at that level. We'll be at the $600 million for a few quarters until you know, I see where our debt levels are. Six hundred million a quarter is probably what I'm targeting. It could be a little bit more potentially, but that's kind of where I'm at.

[Safra Catz, CEO at Oracle]

On CapEx. You noticed how I mentioned how many regions we have. We've just put up so many regions over the past year and a half or two. I think we now have more than Amazon. I think we do already have more than Amazon already. We are going to build another six, and we're going to expand the ones that we have because they are being used so extensively in many cases. They are spoken for. I expect CapEx, which was where it was this year. I think it'll be a little bit more than what it was this year, next year.

[Safra Catz, CEO at Oracle]

I'll be, you know, giving a little bit more detailed guidance as I see it playing out over the year, but we have so much cloud demand that I am going to continue to spend in capital expenditure. I do believe that, as a percentage of our revenue growth, I think I'll start really feeling those economies of scale and increasing my gross margins and my operating margins significantly.

[Kirk Materne, Senior Managing Director and Head of Enterprise Software Research at Evercore ISI]

Great. Thank you all.

[Operator]

A telephonic replay of this conference call will be available for 24 hours on the investor relations website. Thanks for joining us today. With that, I'll turn it back to David for closing.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• Ken Bond, SVP of Investor Relations
• Larry Ellison, Chairman and CTO
• Safra Catz, CEO

Analysts

• Brad Zelnick, Managing Director and Senior U.S. Software Research Analyst at Deutsche Bank
• Keith Weiss, Managing Director and Head of U.S. Software Research at Morgan Stanley
• Kirk Materne, Senior Managing Director and Head of Enterprise Software Research at Evercore ISI
• Mark Moerdler, Managing Director and Senior Global Software Analyst at Bernstein Research
• Mark Murphy, Managing Director and Head of U.S. Enterprise Software Research at JPMorgan
• Phil Winslow, Managing Director and Global Head of the Software Team at Credit Suisse