Oracle (ORCL) Q1 2027 earnings call transcript

I would now like to hand the conference over to Mr. Ken Bond head of investor relations Please go ahead, sir Thank you, Maryam and good afternoon everyone and welcome to Oracle's first quarter fiscal year 2027 earnings conference call on the call today are chief executive officer Mike Cecilia chief executive officer Clay McGurk and chief financial officer Hilary Maxson a copy of the press release including financial results tables and supplemental Financial metrics and guidance is now available on our investor relations website Also available on our website is the slide deck that will be used in this call and a gap to non-gap Reconciliation as a reminder today's discussion will include forward-looking statements and we will discuss some important factors relating to our business These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially From the statements being made today as a result We caution you from placing undue reliance on these forward-looking statements and we encourage you to review our most recent reports Including our 10k and 10q and any applicable amendments And finally we are not obligating ourselves to revise our results or these forward-looking statements in light of new information or future events Before taking questions, we'll begin with a few prepared remarks and with that.

I'll turn the call over to Hilary Thanks Ken.

Hi, everyone. Great to be here with you all today and like Ken said You can follow along with our remarks and the earnings slide deck on our website and via the webcast If I had to describe this quarter in one word I think it would be Acceleration as we're seeing an acceleration and execution across the company Translating into our top and bottom line results Q1 was another record quarter driven by strength in both our cloud infrastructure and cloud apps businesses Total revenue was a record 19.3 billion up 30 percent year over year in u. s. Dollars and for the first time Q1 total revenue grew sequentially an important sign of our continued progress in building scaled infrastructure Historically a record Q4 was followed by a lighter q1 But as we accelerate across the full technology stack from infrastructure to database to software That's no longer the case cloud infrastructure revenue for q1 was $7.4 billion up a hundred and twenty one percent Reflecting strong execution as we brought record levels of new megawatt capacity online supported by a continued strong demand environment for compute and our database services Cloud apps were up 10 percent with fusion and our industry apps tracking well above that and Mike and clay will give more details on those businesses in just a moment Our non-gap operating income increased 31 in u. s. Dollars to 8.2 billion driven by strong revenue progression Boosted by operating leverage our gross margin did decline as expected driven by impacts from ramping up our data centers and the Acceleration of infrastructure revenue However, this was offset in the quarter by lower operating costs and strong operating leverage tied to Simplification and efficiency actions net net our operating margin remained around flat for the quarter at 42 percent on a non-gap basis This all translated to a strong increase in our non-gap eps of plus 30 percent in u. s. Dollars Reaching a dollar 92 for the quarter The last point i'll make on our financial highlights is that our remaining performance obligations or rpo increased $26 billion from q4 There are two things happening here First we continued to grow our rpo during the quarter to support future revenues And the vast majority of those new contracts were via prepay or bring your own hardware or similar mechanic So won't require incremental capital from oracle Also that new rpo won't impact our capex or revenues until fiscal 28 or beyond Second we started to see a strong conversion of our rpo into revenues this quarter driving our cloud infrastructure results We've added a few slides here where you can see that strong inflection point in our rpo converting into revenues and operating profits First in cloud infrastructure revenues.

I already mentioned the plus 121 growth for this quarter and that's after a q4 of plus 93 And we'd expect acceleration to continue in the remainder of fiscal 27 As we convert more rpo into revenues We now expect around half of our rpo to convert into sales over the next 36 months Next not surprisingly you can see the acceleration in our total company revenues Here shown on a trailing 12 month basis Driving growth in q1 to five points higher than our q4 as cloud infrastructure Accelerates and becomes a larger and larger contributor Lastly our growth in operating income also on a trailing 12 month basis shows a similar strong Acceleration from 16 percent to 21 percent between q4 and q1 Now to our balance sheet and cash flows We drove record cash flow from operations of 23 billion dollars in q1 Again reflecting our strong execution against a backdrop of strong demands as well as collection of customer prepayments Our capex for the quarter was 28 billion dollars leading to negative free cash flow of five billion And our net cash capex so net of prepayments was 18 billion dollars for the quarter To note our capex will not be linear throughout the year We continue to anticipate 90 to 95 billion in capex for the full year with not more than 70 billion in net cash capex Lastly, we're quite pleased to announce that we completed our previously disclosed 20 billion dollar at the market equity issuance in entirety during the q1 With that let me turn the call over to mike and then clay to get into more details on our cloud apps and infrastructure businesses Thanks hillary.

I'll start with some additional color on the applications business We continue to see the power of application suites in the minds of our customers They are investing in trusted complete solutions That now seamlessly blend agents and applications together to run their businesses The introduction of AI is an accelerator not a replacement for packaged applications As such are decades of experience and expertise running business processes across every industry in every geography for organizations of any size Gives us the understanding of how to help them succeed Before AI came along application suites had already proven their effectiveness Companies had been able to increase their profit margins because end-to-end automation Was standardized and efficient business processes Proved to be much more effective than one-off custom solutions But that did require organizations to follow workflows and processes As designed in the system something that many struggle to achieve consistently across functions teams and regions AI changes this dynamic Rather than asking every employee to navigate and execute a process Exactly as the system expects AI agents can perform tasks using the organization's established workflows and business rules Employees then shift to overseeing agents resolving exceptions and applying human judgment where it matters most By combining applied AI with decades of sophisticated business rules Regulatory compliance security models data models and customer configurations We enable customers to continuously realize AI's value while keeping their data secure and their operational guardrails intact This allows organizations to harness the power of our application suites more easily than ever before We are incredibly confident in the potential for this new paradigm to deliver much more rapid ROI for our customers At AI world in October, we will unveil a new agentic AI accelerator poised to redefine how customers deploy Oracle applications faster simpler and at a dramatically lower cost Working alongside Oracle and customer teams AI agents will automate and orchestrate implementation at an unprecedented scale Compressing SaaS deployments from years to months and months to weeks It's really the power of these things together that reinforce my belief that the growth of our applications business Is only going up from here In Q1 we had a strong quarter and many of our SaaS offerings driven by the demand environment that I just described In total our SaaS business grew 10% with fusion growing at 14% Our Oracle health business can continue to accelerate and although we don't specifically call it out Our industry applications grew at greater than 20% in Q1 As I mentioned last quarter, next we saw some slower decision cycles last fiscal year and therefore the growth is a little lower than the rest but we have an exciting new product generally available That I'll speak about in just a bit Now a few customer callouts from a much longer list in the quarter Uber Technologies Stanford University And Mitsubishi UFG Bank and Japan all went live and or accelerated their usage of fusion Pivarker Fire and Safety chose Oracle's complete application suite from industry apps to fusion Including fusion agentic applications Johnson Controls the Saudi National Bank Guidewell Mutual Holding Corporation a health solutions company serving more than 45 million people And Petronos, Malaysia's national energy company Each added fusion agentic applications this quarter To drive better outcomes and let me share just a few stats Around our embedded AI usage and progress in the quarter Customers use our embedded AI capabilities More than 150 million times during the quarter With usage growing 42% sequentially Our AI agents executed more than 3.5 million times in production during the quarter Nearly doubling quarter over quarter Customers have over 2,300 AI agents in production and that's up 90 percent Quarter over quarter Overall AI production usage across fusion alone Consumed 900 billion Tokens during the quarter I think it's fair to say that customers are using our AI built into our fusion applications and our application stack Every day Now turning the next suite we're announcing the general general availability of our new AI powered offering called net suite next This presents An agentic experience that is simpler more powerful and it's infused with AI across the workflows that customers rely on every day It's easier to adopt it's more productive from day one and it's more valuable as customers grow Additionally the net suite AI connector service which lets customers securely connect their net suite data to leading AI assistance of their choice Including jet GPT and claud is already One of the fastest adopted capabilities in the whole the entire history of net suite with more than 10,000 customers already using it Personal care company every man jack estimates that the service alone will save $350,000 annually and nearly 5,000 hours of work This month at our our Oracle health and life sciences customer event We will debut our all new agentic care management system alongside a world-class lineup of external speakers More than the EHR this system connects clinical research and care delivery reduces the burden of records management for patients and enables providers to practice the top of their license with AI as the user interface There are a few AI missions that matter more Helping deliver better care while freeing providers to focus on what matters most their patients non-computer systems The proof points around ais oracles AI offerings are definitive And we remain confident in the opportunity ahead and with that i'll turn it over to clay All right, thanks mike OCI continues to grow quickly by delivering the capacity our customers need We delivered 850 megawatts of AI capacity containing more than 300,000 GPUs to customers since the end of q4 Delivery and q1 is almost three times what we delivered in all of q4 And 73% of the total capacity we delivered last fiscal year This reflects years of investment in every aspect of infrastructure from data center design through supply chain and manufacturing to installation and operations Customer demand continues to support this investment We closed more than 30 billion dollars of additional AI contracts in q1 without requiring additional capital from Oracle Our ability to operate a large multi-tenant fleet remains a significant advantage GPU utilization remains extremely high at 97.9 percent in q1 GPU longevity and value continue to impress of all the GPUs that came up for renewal in q1 That capacity was renewed or resold at a 20 premium to prior contracts The majority of those GPUs are four years or older We see a long useful life with increasing value for the AI capacity we're deploying Abilene continues to deliver at an extraordinary pace We delivered 131,000 GPUs there in q1 1.9 times the volume delivered in q4 Six of the eight campus buildings representing 618 megawatts And 75 of total capacity have now been delivered to the customer Customer acceptance has compressed to only 24 hours showing that the systems arrived ready for customer workloads The recently released GPT-6 Astra was trained at our site in Abilene Shackleford is our next giggle watt scale campus and is progressing well NVIDIA vera reuben systems are performing better than expected across hardware quality Manufacturing yield and performance.

We will deliver our first vera reuben systems to customers in q2 Our database cloud business is also growing quickly Multi-cloud database revenue grew 353 percent year over year and multi-cloud customers grew 180 percent year over year We completed our planned azure and AWS regional footprint expansion Reaching 70 multi-cloud database regions and 119 availability zones This gives customers a consistent way to run oracle AI database next to their applications and data in the cloud they choose We also made oracle interconnect for AWS generally available With this launch OCI now has private high-speed connections to all hyperscalers with no data transfer charges That makes it easier for customers to build distributed applications and migrate workloads across clouds The pace of AI innovation is increasing across the ecosystem We expanded our open AI relationship to offer open AI API access chat GPT for work and codecs through oracle marketplace Including GPT-6 Astra We are bringing Gemini models to oracles enterprise applications and we released new grok reasoning multi-modal and texas speech models We also continued to expand the open-source model catalog including new models from NVIDIA, quin, google, deep-seeking others We announced a multi-year partnership with quantinuum to offer its helios quantum computer through OCI Helios will operate in a us-based OCI AI data center enabling hybrid quantum and AI workloads for enterprise research and AI customers Oracle Apex 26.1 brings these infrastructure database and model capabilities together for application developers Apex already runs more than two million active applications with thousands more added every day Apex laying is a new technology that represents an apex application as structured human-readable application definitions that can be stored in source control validated and governed AI coding agents generate and modify those definitions while the apex engine continues to provide the security Reliability and operational controls required for enterprise applications Developers gain the speed of generative development without the downsides of difficult to maintain opaque application code We are taking the same approach with the oracle AI data platform AI data platform is now integrated with codecs and cloud code allowing developers to work with AI data platform data knowledge and capabilities from the coding environments They already prefer We are also adding advanced ML ops capabilities and working with early launch customers on business knowledge models semantic region engine and deep inside agents These capabilities ground AI in the meaning of an enterprise with context semantics and governance They also bring AI driven analysis into date fusion data intelligence and oracle analytics cloud where many customers already manage their most important business data Taken together q1 shows how the pieces reinforce one another We are delivering data center and GPU capacity at a pace that would have seemed impossible only a year ago Customers were signing new contracts renewing capacity at higher prices and keeping the fleet almost fully utilized We are placing oracle AI database in every major cloud and making more proprietary and open models available on OCI We are then connecting those models to enterprise data Applications and developer workflows That combination is why demand continues to grow and while we remain confident in the long-term value of the technology we are building And with that i'll hand it back to hillary Thanks clay i'll finish with our guidance for q2 2027 and the full year In q2 we would expect growth in total revenues of between 30 and 34 percent in us dollars Of that we'd expect growth in cloud revenues in us dollars of between 65 and 71 1% In non-gap EPS we expect between $1.85 and 193 Up between 21 and 25 percent in us dollars and that excludes the gains from ampere we booked in q2 of last year For the full year reflecting the strong execution and acceleration you see in our q1 We're upgrading our guidance to at least 90 billion in total revenues That's a year over year increase of plus 34 And to eight dollars and 10 cents for our non-gap EPS Lastly a small note from my side to please make sure to mark your calendars for our investor day coming up in october With that i'll turn the call back to ken for the q&a Thank you If you would like to ask a question, please press star one to raise your hand To withdraw your question press star one again Please limit yourself to one question We ask that you pick up your handset when asking a question to allow for optimum sound quality If you're muted locally, please remember to unmute your device Please stand by while we compile the q&a roster Your first question comes from the line of brad zelnik of joichia bank.

Thanks Thanks, brett as is clay I like I think I think there's like four questions in there So i'm going to answer the parts that I want to answer and then i'll make halo redo the hard work um, so Look, I think you've heard us talking about you know for the past several quarters We're constantly finding interesting ways to fund the business and one of the mechanisms that we have to fund our business is obviously that that we go out and we spend our own capital but we've invested very heavily in uh relationships with different suppliers and vendors invented new business models including bring your own hardware all of which have uh different ways of spreading out that capital and so I I think that we have to separate out in our minds what oracle spends is cap x Directly you know uncouple that directly from how we think about how the business can grow because from our perspective.

I think we see ways that We see ways that clearly, uh, you know capital is still required to do this work Um, but it doesn't all have to flow from uh, you know oracle side doesn't have to be oracle cap x So I don't see it as a limitation to the growth of our business I think it just you know represents the continued evolution of the business model that we're we're developing as kind of this ai Uh expansion continues hillary.

Yeah, sure.

Um, so the other question I think you asked was about free cash flow. We haven't given a particular time frame on that Um, yet and and we don't expect to give that today What I would say though is that each of these projects that we're doing by nature is a strong free cash flow generating project So as soon as they ramp up very shortly thereafter they're delivering a free cash flow, uh, conversion ratio of something like a hundred Percent to post tax ebita So in fact the business by nature is somewhat quote self funding at some point In terms of throwing off a lot of free cash flow So we haven't given the time frame on that but you know, you'll see as we continue to ramp over the next quarters Um, what uh, what that could look like again We expect it to be a reasonably quick time frame Past the big ramp up that we have going on today The only decision there and you pointed it out would be, um About more growth capex and that is something that we want to continue to deploy at the right levels to grow the business Thank you so much.

Thank you Yeah, thanks. Thanks city, uh, okay, so I'll I'll answer the specific, you know pieces of that But I think it's important to to have some context before we go forward You know new mexico and wisconsin are very important large sites for us But I think it's important to have some context, you know We talk about these sites kind of as as being around a gigawatt apiece We just delivered 850 megawatts in q1 And what that means is that and as you can see Neither shackleford nor new mexico or wisconsin or michigan were delivered in q1 So we have a large diverse broad set of data center developments going on throughout the us and around the world to deliver capacity to customers Um, now some of these sites like new mexico and wisconsin Obviously garner a lot of attention is a lot of discussion about them But I think it's important people realize that All of our eggs are not in a single basket The next thing I would make sure everybody understands is that when these large sites are built They don't all come online at once.

Let's say that you have a gigawatt site It doesn't and it's supposed to start delivering. Let's say in uh in january of a year It's not like in january. You get a gigawatt of capacity. It's phased over many quarters um, so Uh, it's not as though if you have a a delay Compared to a plan in one site that you have some massive thing that hits in a single quarter Uh, so and then the other thing I would say is is that anyone it's been in the business of doing construction or large scale infrastructure development Uh, if if they if their plan relies on a hundred percent achievement of every one of their deliverables Um, we have a term for that.

It's called a bad plan Um, and so we we try real hard not to make bad plans So we obviously know the difficulty and the complexity of what we're doing And we don't assume a hundred percent of everything is going to work all the time And we have backup options for those things as well as Uh, you know, we don't we don't count that everything is going to get done exactly on time all the time So now moving specifically to the question around in mexico and bisconsin um new mexico Uh, is an interesting location. We're making very good progress Uh, you know in terms of construction data centers is definitely on track Uh, we're going through the process of acquiring our air permit Um, and you know, we've got Uh, the technology that will be deploying there is bloom fuel cells Which is by far the most environmentally friendly way that we can do on site power generation Has extremely low water consumption as extremely low emissions compared to Uh, really any other way to kind of do on site generation And so we're very confident that as we continue through this process we'll work with You know, the local regulators and Community citizens in donia and a county Uh, and with everybody else in new mexico Um, but we're just going through the process and I don't think that's rare for large projects like this one Um in wisconsin.

We're not doing on site generation. We're really working with our partners Uh, uh, across the across the board to to design and deliver that Energy capability through the grid Um, but again, uh, you know working through the processes are complex projects and Uh, again in wisconsin data center delivery is actually very much on track and going well Um, you know working with the public service commission and and atc and we energies Uh, we're constantly evolving different aspects of the energy design and delivery plan Um, but we feel very confident in both of those sites To the question about impact on fy 27 revenue. Um, but Neither of these sites will have any impact Uh, uh, into our fy, you know, our previously stated fy 27 revenue or earnings guidance Um, so I would say is you know, we have some sites that are ahead of schedule some sites that are more difficult than others We work through all of them And, uh, we we have a plan in place both in terms of risk management as well as you know We take that into account and we do our forecasting Um for how we go about setting expectations for ourselves and then communicating those expectations for you Oh, and then the last one and the last question of like, okay.

I I think we feel very excited about it. Um, both in the you know, obviously the the environment continually changes It used to be that the constraints were gpu's and fab's Then constraints move to power generation there's data center constraints Uh, but the world's a big place there's a lot of demand for this capacity and we're pursuing all the different avenues to bring that capacity online So we remain, uh, very excited and very confident in our ability to keep meeting both Current rpo as well as the future rpo growth that we are expecting to see That's great color.

Yeah, um, but definitely prices In a world where demand exceeds supply. We typically prices don't go down. They do go up um, and so You know, I think the the net effect is that obviously things cost more but then we have to Uh, we have to charge more money for them so that we we get compensated Uh, and we we're doing that across all of these different businesses. Um, no, we don't we don't Expect this to have an impact on our gross margins. Um, so I think the previous guidance that we've given you there is Uh still remains true. Um, I will say is that you know, as I mentioned in my prepared remarks Uh, I think there's a lot of people have been very concerned about you know, what is the useful life of the different hardware assets What is the useful?

What is the demand going to be for data centers and the power capabilities that come with it? Um, you know, I've been in the infrastructure business for you know, pretty much all of my professional career. I've been doing it now for 12 years at oracle Uh, one invariant that has been true so far is that uh, the demand for server side computing and data centers has only gone up And it turns out so far that Everything we see about the ai Uh, use case is the same way but only more so Um, right the fact that When we go out and we have capacity up for renewal, uh, that we actually can can achieve higher prices to the order of 20 All of those are very positive signs for the the both the continued demand the growth and then the profitability of this business Thank you Your next question comes from the line of mark modeller of bernstein Your line is open Please go ahead Thank you very much for taking my question Ken we're going to be sorry to see you go, but i'm sure you have an amazing bucket list ad of trips and things to do So, I'd like to focus in on the rpo Um, can you give us more details on the drivers of the growth of rpo?

Thank you Sure, so, uh, let me make sure we clarify one thing first and then i'll i'll dive into the pieces I didn't say and I don't think myself nor nor hillary said that it doesn't require additional capex We said it doesn't require additional cash from oracle Right. So, uh, you know at the i'm not an accountant, but I get to play one on tv sometimes But the the intention of what we're trying to say is that While there clearly are capital expenditures, it does not require oracle to go out and find additional cash to do it Now the question becomes well, how do you do that? Well, we have a variety of different models Sometimes it's working with our suppliers Uh through different uh financing arrangements that allows us to pay for the capacity as the customers pay us That's one mechanism another mechanism is that a customer says hi.

I'd like to Uh pay for the hardware, but use your operational ability and your cloud infrastructure Technology assets and your data center to go out and actually turn that into an ai cluster It's a different option a third option is that uh the customer has been able to raise money. Maybe it's a startup Maybe it's an established company and says hi. I would like to pay you uh upfront, you know Uh as a prepayment and in return that doesn't require you to front the cash to go out and spend spend those Your dollars on that capital expenditure. So we have different models for achieving that goal Um in terms of the types of customers and and where we see that demand.

It's really broad based Right, uh, it doesn't matter if it's a startup or uh, you know the the most valuable investment grade companies Um, there's an understanding of this model right now that you know that the access the capital in different ways of funding it Uh our constraint and the industry adapts to allocate that the most efficient way possible Um not specific to your sovereign cloud question. Look our our you know, our alloy business is doing well We've got a lot of partners in japan. We've got great partners in the middle east Uh, we've got uh, you know partners that are both uh going after the commercial business and a more, you know Sovereign way as well as kind of more government focused sovereign cloud Uh that continues to expand broadly.

We're seeing lots of demand Uh, and and also it's actually tied to ai as well because many of those customers we we offer GPU capabilities for those customers and they deploy that for those own sovereign workloads Um, obviously we we also have a very large and very rapidly growing general purpose Uh cloud business that we don't talk about quite as much uh but uh That is growing rapidly and uh has you know great growth rates great margins and does require some some capital But uh not not as much as these giant ai clusters Thank you Your next question comes from the line of john tafucci of guggenheim securities Your line is open.

Sure, so for me gross margin Obviously an important thing to follow both internally and externally because particularly actually in both of the business models are all three Of the business models that we have it's really a health indicator of the business Are you pat, you know, can you price? Are you pricing at the right level? Um, are you able to manage your input costs?

So gross margin to me is always an important indicator probably even more important um Internally for us to double check and I think investors obviously want to double check It's something that will change very quickly for example if we don't have the right pricing model um When we talk about driving value though and driving value for the business Um For me operating margin is probably the ultimate um point that we want to follow Um, so gross margin like you mentioned at the moment There's a number of things going on we have both the ramp up and data centers Plus we have an adjustment across the two business models that we have in the business Software being a much higher gross margin business, but with higher rnd and sales costs below gross margin Infrastructure being a lower gross margin business and we've talked about that and we gave the numbers clays given the expectations for quite a bit of that business Not database, obviously, but the the more AI infrastructure and cloud side Um, but that business by nature has much lower rnd and sales associated with it At least in a company like oracle where we can effectively gain from all of the rnd that's already been done And being done across the rest of the company So really how to watch how we're going to drive value out of the business over time I think operating margin is really the key metric that we would look at again Not forgetting about gross margin something to look at but um, but operating margin being very very important tied to value Thank you.

Yes, so we'd mentioned already I mentioned in the q4 that we would expect to step down in gross margins this year You can see the eps guidance that we give though So you can see what we might expect in terms of operating margin Over the next couple of years as we finish the ramp up you can reasonably expect that gross margin would Uh flatten I would say Um, but we haven't given any particular guidance today We'll speak more about some of this stuff on the upcoming investor day though in october Three and thanks for all the detail tonight.

Well, thanks for the question here So I think about our our our our sass business and i'm going to take the liberty of broadening a little bit because I think there are a couple Key adjacent things that's uh are very important in sass First is we have a highly differentiated offering and that we have end-to-end suites that automate complete industries health care retail Telecommunications, uh, you know the construction. There's there's a whole list of these industries where we have horizontal applications uh vertical applications and You know, if you look at there are two two two very big categories in the quarter both fusion and industries our industry applications growing very nicely The fact that customers can get them as a complete suite and a complete package Has been a differentiator for oracle for years now And now you layer in ai embedded into those workflows You know adding adding uh ai as a service as part of the regular application updates that our customers are getting And we think brand it's a it's a really nice way for customers to get value From uh from ai or our wife may have embedded ai very very quickly without having to bolt anything on uh, as a sidecar Now the next layer is our agentic our fusion agentic, uh, ai studio which allows customers and or partners to build Their own ai agents inside Right inside the same platform.

That's not a that's not a different platform It's not a different control plane It is it is the same control plane and the same platform that our applications are running on Which means that agentic studio to allows customers to build their own agents or partners Gets all of the same quarterly updates gets all of the same security patching and it's available as a complete service to our customers And you're allowing customers to to to to position ai as a ui On top of a very complex set of business rules on top of a a top of a highly differentiated security model And of course data models that have evolved for for years and years so put the put the Horizontal suite of so the horizontal applications the vertical applications the agentic studio together um And we think that's very compelling but if that's not enough the next piece that we're we're as I mentioned that we're Unveiling is AI assisted go lives Um, you know, these are in many cases We're taking on very hard work and helping our customers saw very mission critical industry industry specific problems And sometimes those go lives Take can take a long time They're complex there's data migrations.

Well, ai has given us a tremendous ability to accelerate those go lives and we have some some proof points for the The tooling that we've rolled out to date and we'll roll out a bunch more of it at ai world But we've seen like for example complicated go lives in Our health care applications that were in the high double digit months coming down to single single months for go lives In our next suite applications we've seen early customers leveraging these ai tools coming coming down from double digit months Down to single digit weeks in order to be able to go live in production So we think that does two things number one It it helps us It helps customers rather get to value from ai more quickly than ever and certainly at a lower cost So number two in some of these very complex industries There's ramps associated with these with these go lives and it allows us to unlock the ramp and recognize revenue more quickly That we may have what you know, we have in the sort of manual implement implementation piece But I think the other piece that's that's quite important is as we mentioned in the press release Is again part of the same platform that we're running our applications on the ai data platform Which automates the creation of enterprise ontology so while we are we are very honored to serve our customers with a very Very widespread and and very large suite of applications There are other applications as well and being able to take those applications that our customers are running Create an enterprise ontology as an automated service and then layer those ai agentic studios on top of that You know, when you put all that together, right?

I just don't think that's anybody else in the market is delivering all of that as as a cloud service Certainly not in highly regulated industries Certainly not at the at the scale that we are and then one other thing i'll mention about our Our sass business is that our sass business is also a wonderful lead generation business for our iS business sass our sass customers are are also buying oci they're also Um, have other workloads non-workable workloads that they're they're more than happy to to leverage oci I think they get a very good test of the performance and scalability of oci as As a sass customer because they are inherently an oci consumer at that point as well So so we think about it as Really, you know the sass business being part of our overall solution set that we're delivering to customers We continue to invest in that solution set we continue to make it easier to go live And add more and more tooling to allow customers to to configure and leverage ai so for all those reasons We're quite optimistic on the future of our our applications business Thanks.

Thanks I think I think you you sort of clicked on the answer really to the business model is is all the above I mean, you know, certainly we we can run this in a model where we're consuming a hundred percent of you know, non oracle work This is by no means specific to the oracle database for the oracle applications the ai data platform is agnostic And able to pull in and automate the the ontologies from any data source in fact We have hundreds of data sources that we're doing this automation for today So, you know, whether it's just pure consumption of ai data platform whether it's using concert with our applications or whether it's used in, you know in concert with with oci We're we're more focused on allowing the customer to to make the best choice or the partner to make the best choice that suits them So I think it really helps all of our business I would say also, you know that the oracle database still remains the most, you know, probably the most coveted Custodian of mission critical data in the world and certainly as we're able to Automate ontologies and have the oracle database as one of the primary fees at least for the mission critical data for that It also helps us unlock our ever growing multi-cloud database as well Where you know, certainly customers would like to take those those on premises Verses the oracle database and very easily moved into the cloud as we continue to invest in in making that available in every cloud In every region, we think the AI data platform will help drive that growth as well Is I know you guys had a huge services ecosystem, but will you guys be putting, you know, forward deployed engineers around that to try to help customers understand some of the you know opportunities You know, things they can expose perhaps they haven't been able to expose before with the or you know with the database Which is kind of they're a go-to-market angle to it too.

Yep.

Yeah, absolutely And we are already investing in deploying forward deployed engineers at our customers That's true for the idea platform It's also true for our fusion agentic studio as we see them really as a combination platform running running on running on a single control point in OCI So yes, no doubt that that service offering we think is Is is necessary? I actually think what helped get the customers live as quickly as we possible can and as I said We're you know, we're measuring some of the successes now in weeks Which in heavily regulated industries you really would not have dreamed of maybe even even a year ago.

Thank you, Mike for next quarter we expect our Q2 fiscal year 27 earnings results will be announced on December 14th of 27 26 excuse me Any change to the date will be publicly announced a telephonic replay of this conference call will be available for 24 hours on our investor relations website Thank you for joining us today and with that.