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    ORCL
    Earnings call· Feb 2025(Q3 FY25)

    ORACLE CORP ORCL

    Mar 10, 2025 Source

    Executive summary

    Oracle Q3 FY25 — Record Bookings and Strong Cloud Growth Driven by AI Demand

    Oracle delivered a record-breaking quarter for bookings, significantly expanding its remaining performance obligations, driven by robust demand for its cloud services, particularly in AI training and inferencing. The company is strategically expanding its cloud infrastructure globally, including multi-cloud partnerships, and sees AI as a major catalyst for future growth and application modernization. Management expressed increased confidence in its long-term revenue targets, anticipating accelerated growth in the coming fiscal years.

    Highlights

    5

    • Achieved strongest booking quarter ever, adding $48 billion to backlog, bringing total RPO to $130 billion, up 63% year-over-year.

    • Total cloud revenue (SaaS and IaaS) grew 25% in constant currency to $6.2 billion.

    • IaaS revenue surged 51% in constant currency to $2.7 billion, with OCI revenue up 51% and OCI consumption revenue up 57%.

    • Cloud Database services revenue increased 28% in constant currency, with Autonomous Database consumption revenue up 42%.

    • Board of Directors increased the quarterly dividend by 25% from $0.40 to $0.50 per share.

    Concerns

    4

    • Non-GAAP tax rate for the quarter was 19.9%, higher than the 19% guidance, lowering EPS by $0.02.

    • Experienced a currency headwind of $0.04 on EPS, more than anticipated.

    • Q4 EPS guidance is negatively impacted by over $0.03 due to losses recognized from an investment in another company.

    • Component delays have slowed cloud capacity expansion this year, though expected to ease in Q1 FY26.

    Guidance & targets

    14
    CategoryTargetConfidence
    Total Cloud Infrastructure Revenue Growth
    faster than 50%
    high materiality
    High
    Total Cloud Infrastructure Revenue Growth
    even faster than FY25, likely a lot faster
    high materiality
    High
    Total Revenue
    $66 billion
    high materiality
    High
    Total Revenue Growth Rate
    around 20%
    high materiality
    High
    Total Revenue Growth (constant currency)
    9% to 11%
    high materiality
    High
    Total Revenue Growth (USD)
    8% to 10%
    high materiality
    High
    Total Cloud Revenue Growth (constant currency)
    24% to 28%
    high materiality
    High
    Total Cloud Revenue Growth (USD)
    25% to 27%
    high materiality
    High
    Non-GAAP EPS Growth (constant currency)
    0% to 2%
    high materiality
    High
    Non-GAAP EPS Growth (USD)
    -1% to +1%
    high materiality
    High
    Q4 FY25 Non-GAAP Tax Rate
    19%
    medium materiality
    High
    Available Power Capacity
    double
    high materiality
    High
    Available Power Capacity
    triple
    high materiality
    High
    Fiscal Year 2025 CapEx
    around $16 billion
    high materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Total Cloud Revenue (SaaS and IaaS)
    Growth in constant currency. Exit from advertising business lowered total cloud revenue growth by 2% this quarter.
    		$6.2 billion25%——
    SaaS Revenue
    Growth in constant currency.
    		$3.6 billion10%——
    IaaS Revenue
    Growth in constant currency, on top of 49% reported last year.
    		$2.7 billion51%——
    Total Cloud Services and License Support
    Driven by OCI, strategic cloud applications, and cloud database services. Growth in constant currency.
    		$11 billion12%——
    Infrastructure Subscription (includes license support)
    Growth in constant currency.
    		$6.2 billion18%——
    Cloud Database Services
    Growth in constant currency. Expected to be the third driver of revenue growth alongside OCI and strategic SaaS.
    Annualized Revenue: $2.3 billion
    		—28%——
    Application Subscription (includes product support)
    Growth in constant currency.
    		$4.8 billion6%——
    Strategic Back-Office SaaS Applications
    Growth in constant currency.
    Annualized Revenue: $8.6 billion
    		—18%——

    Operational metrics

    19
    OCI Revenue Growth (excluding legacy hosting)
    54%
    Q3 FY25

    Growth in constant currency.

    OCI Consumption Revenue Growth
    57%
    Q3 FY25

    Growth in constant currency.

    GPU Consumption Revenue Growth
    nearly 3.5xvs last year
    Q3 FY25

    Extraordinary growth in the AI segment of infrastructure business.

    Autonomous Database Consumption Revenue Growth
    42%on top of 32% last year
    Q3 FY25

    Growth in constant currency, showing acceleration.

    Software License Revenues
    $1.1 billiondown 8%
    Q3 FY25

    Reported in USD.

    Gross Profit (Cloud Services and License Support) Growth
    10%
    Q3 FY25

    Growth in constant currency.

    Operating Income Growth
    9%
    Q3 FY25

    Growth in constant currency.

    Operating Margin
    44%up slightly from last year
    Q3 FY25

    Non-GAAP operating margin.

    Non-GAAP Tax Rate
    19.9%higher than 19% guidance
    Q3 FY25

    Lowered EPS by $0.02.

    Non-GAAP EPS
    $1.47up 4% in USD, up 7% in constant currency
    Q3 FY25

    Reported in USD, with constant currency comparison.

    GAAP EPS
    $1.02up 20% in USD, up 25% in constant currency
    Q3 FY25

    Reported in USD, with constant currency comparison.

    Cash and investments balance
    $17.8 billion
    Q3 FY25

    Cash and marketable securities at quarter end.

    Short-term Deferred Revenue Balance
    $9 billionup 3%
    Q3 FY25

    Reported in USD.

    Capital Expenditure
    $5.9 billion
    Q3 FY25

    Front-loaded purchases into the quarter.

    Shares Repurchased
    nearly 1 million
    Q3 FY25

    Part of ongoing share repurchase program.

    Shares Outstanding Reduction
    more than 1/3
    last 10 years

    Reflects long-term capital return strategy.

    Dividends Paid
    $4.4 billion
    last 12 months

    Total dividends paid over the last 12 months.

    Quarterly Dividend Increase
    25%
    Q3 FY25

    Board of Directors approved the increase.

    Cloud Regions
    101
    Q3 FY25

    Crossed into triple digits with the 101st cloud region coming online.

    Industry KPIs

    9
    MetricValueDetails
    Capacity CAPEX$5.9 billionUSD
    Revenue growth$14.1 billionUSD
    Arr net new arr$10.6 billionUSD
    Rpo current rpo$130 billionUSD
    Bookings billings$48 billionUSD
    Customer account count101cloud regions
    Large deal new logo metricsmultibillion dollarUSD
    Operating FCF margin rule of 4044%%
    Ai product adoption monetizationnearly 3.5x

    Orderbook & backlog

    3
    Remaining Performance Obligations (RPO)$130 billionQ3 FY25

    up 63% year-over-year

    Up from $97 billion last quarter and $80 billion last year. Does not include any contracts with Project Stargate.

    Cloud RPO>80%Q3 FY25

    up over 90%

    Represents more than 80% of total RPO. Approximately 31% of total RPO is expected to be recognized as revenue over the next 12 months.

    Bookings added to backlog$48 billionQ3 FY25

    Strongest booking quarter ever by a huge margin.

    Product announcements

    2
    ProductTypeDetails
    AI data platformlaunch
    Oracle Version 23ai's vector capabilitiesupdate

    Deals & partnerships

    7
    AMDMultibillion dollar contract to build a cluster of 30,000 of their latest MI355x GPUs.multibillion dollar

    Contract for AI infrastructure.

    CrowdStrikeMove to Oracle Cloud.

    One of the four leading cloud security companies moving to Oracle Cloud.

    CybereasonMove to Oracle Cloud.

    One of the four leading cloud security companies moving to Oracle Cloud.

    Newfold DigitalMove to Oracle Cloud.

    One of the four leading cloud security companies moving to Oracle Cloud.

    Palo AltoMove to Oracle Cloud.

    One of the four leading cloud security companies moving to Oracle Cloud.

    Azure, Google, AWSDatabase at Cloud Services with partners.

    Currently live in 18 cloud regions with partners, with another 40 planned. Oracle embeds OCI data centers inside these hyperscalers.

    OpenAI, xAI, MetaIntegration with Oracle's AI data platform.

    Oracle's AI data platform enables customers to use AI models from these companies to analyze data in Oracle databases.

    Risks & headwinds

    4
    Component delays for cloud capacity expansionQ1 FY26

    slowed cloud capacity expansion this year

    Mitigation: Expected to ease in Q1 FY26.

    Higher non-GAAP tax rateQ3 FY25

    19.9% vs 19% guidance, lowered EPS by $0.02

    Currency headwind on EPSQ3 FY25

    $0.04

    Losses from investment in another companyQ4 FY25

    negatively impacted Q4 EPS guide by $0.03+

    What to watch in Q4 FY25

    5

    Easing of cloud capacity component delays

    Q1 FY26
    CurrentComponent delays slowing expansion
    TargetEasing of delays

    Why it matters

    Resolution of delays is crucial for accelerating revenue conversion from the record RPO and meeting cloud growth targets.

    Demand continues to dramatically outstrip supply. Now we do expect that the component delays that have slowed cloud capacity expansion this year, should ease📎 in Q1 FY '26. So pretty soon.

    Q&A highlights

    5

    What is Oracle's unique value proposition for Project Stargate, and what can Oracle do that others cannot, given its scale and partners like OpenAI and NVIDIA?

    Larry Ellison explained that Oracle's unique value lies in its technology to build huge AI clusters that run faster and more economically than competitors. This technological advantage translates to an economic advantage, allowing them to win large deals. He noted that the $130 billion RPO does not yet include Stargate contracts, which are expected soon.

    “The capability we have is to build these huge AI clusters with technology that actually runs faster and more economically than our competitors. So it really is a technology advantage we have over them. If you run faster and you pay by the hour, you cost less.”

    asked by Brad Zelnick · answered by Lawrence Ellison

    3 min read6 chapters

    Detailed Narrative

    01

    Record Bookings and RPO Growth

    Oracle achieved its strongest booking quarter ever, adding $48 billion to its backlog, bringing the total Remaining Performance Obligations (RPO) to $130 billion. This represents a 63% year-over-year increase from $80 billion last year and a significant jump from $97 billion last quarter. Cloud RPO grew over 90% and now constitutes more than 80% of the total RPO, with approximately 31% expected to be recognized as revenue over the next 12 months. This growth does not yet include any contracts related to Project Stargate.

    02

    Cloud Infrastructure (OCI) Momentum

    Oracle Cloud Infrastructure (OCI) revenue grew 51% in constant currency, or 54% excluding legacy hosting, outpacing hyperscaler competitors. OCI consumption revenue increased by 57%. The annualized revenue run rate for Infrastructure Cloud services reached $10.6 billion. Demand continues to exceed supply, with component delays for cloud capacity expansion expected to ease📎 in Q1 FY26. The company also marked a milestone with its 101st cloud region coming online, emphasizing the strategic advantage of its Gen 2 architecture for AI workloads.

    03

    AI Training and Inferencing Leadership

    Oracle is positioning itself as a destination of choice for AI training and inferencing due to its faster and more economical Gen 2 cloud and ultra-high-speed networking. The company is building a massive 64,000 GPU, liquid-cooled NVIDIA GB200 cluster for AI training. Larry Ellison highlighted the new AI data platform and Oracle Version 23ai's vector capabilities, which enable customers to use leading AI models to analyze data in their existing Oracle databases, unlocking value while maintaining data privacy and security. This inferencing capability is seen as a much larger market opportunity than AI training.

    04

    Multi-Cloud and Database Strategy

    Oracle's multi-cloud database business with Amazon, Google, and Microsoft grew 200% in the last three months. The company is live in 18 cloud regions with Database at Cloud Services with partners and has another 40 planned. This strategy allows customers to access Oracle's database capabilities across various cloud environments, driving significant migration of on-premise databases to the cloud. The autonomous version of the database and the AI data platform are key drivers for this migration.

    05

    Application Modernization with Embedded AI Agents

    Oracle's strategic SaaS applications, including Fusion, are increasingly embedding AI agents to enhance productivity and provide deeper insights. Examples include AI agents in healthcare systems for automating doctor's notes and prior authorizations, and dozens of agents within supply chain, financials, and HCM applications. Management emphasized that applications are evolving to be primarily composed of AI agents, making it difficult to separate the financial impact of AI agents from the overall application value.

    06

    Capital Allocation and Shareholder Returns

    Oracle remains committed to returning value to shareholders through innovation, acquisitions, repurchases, prudent debt use, and dividends. In Q3, the company repurchased nearly 1 million shares for $150 million. Over the past decade, shares outstanding have been reduced by over one-third at an average price of $54 per share. The Board increased the quarterly dividend by 25% to $0.50 per share, and $4.4 billion in dividends were paid over the last 12 months.

    AI-generated summary of the company’s earnings call. Not investment advice.