Oracle (ORCL) 10-K risk factor changes: FY2019 vs FY2018

[removed: _Our Oracle Cloud strategy, including our Oracle Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Data as a Service (DaaS) offerings, may adversely affect our revenues and profitability._] We provide our cloud and other offerings to customers worldwide via deployment models that best suit their needs, including via our cloud-based [removed: SaaS, PaaS, IaaS] [added: SaaS] and [removed: DaaS] [added: IaaS] offerings.

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

[added: As these business] models continue to evolve, we may not be able to compete effectively, generate significant revenues or maintain the profitability of our cloud offerings.

As customer demand for our cloud offerings increases, we experience volatility in our reported revenues and operating results due to the differences in timing of revenue recognition between our cloud license and on-premise license, and hardware [added: product] arrangements relative to our cloud offering arrangements.

This is in contrast to revenues associated with our [removed: cloud] license and [removed: on-premise license arrangements] [added: hardware product arrangements,] which are generally recognized in full at the time of delivery of the related [removed: licenses.][added: licenses and hardware products.]

[removed: _Our success depends upon our ability to develop new products and services, integrate acquired products and services and enhance our existing products and services._] Rapid technological advances, [added: intense competition,] changing delivery models and evolving standards in computer hardware and software development and communications infrastructure, changing and increasingly sophisticated customer needs and frequent new product introductions and enhancements characterize the industries in which we compete.

If we are unable to develop new or sufficiently differentiated products and services, enhance and improve our product offerings and support services in a timely manner or position and price our products and services to meet demand, customers may not purchase or subscribe to our [removed: software,] [added: license,] hardware or cloud offerings or renew [removed: software] [added: license] support, hardware support or cloud subscriptions contracts.

We have continued to refresh and release new offerings of our cloud products and services, including the launch of the Oracle Autonomous Data Warehouse Cloud [removed: Service in fiscal 2018.][added: Service.]

Machine learning and artificial intelligence are increasingly driving innovations in technology but if they fail to operate as anticipated or the Oracle Autonomous [added: Data] Warehouse Cloud Service or our other products do not perform as promised, our business and reputation may be harmed.

| | • | [removed: |] we do not continue to develop and release new or enhanced products and services within the anticipated time frames; |

| | • | [removed: |] there is a delay in market acceptance of [added: and difficulty in transitioning new and existing customers to] new, enhanced or acquired product lines or services; |

| | • | [removed: |] there are changes in information technology (IT) trends that we do not adequately anticipate or address with our product development efforts; |

| | • | [removed: |] we do not [removed: timely] optimize complementary product lines and [removed: services;] [added: services in a timely manner;] or |

| | • | [removed: |] we fail to adequately integrate, support or enhance acquired product lines or services. |

[removed: _We] [added: We] might experience significant coding, manufacturing or configuration errors in our cloud, license and hardware [removed: offerings._ Despite testing prior to the release and throughout the lifecycle of a product or service,][added: offerings.]

[added: Despite testing prior to the release and throughout the lifecycle of a product or service,] our cloud, license and hardware offerings sometimes contain coding or manufacturing errors that can impact their function, performance and security, and result in other negative consequences.

Errors in our cloud, license or hardware offerings could affect their ability to properly [removed: function] [added: function, integrate] or operate with other cloud, license or hardware offerings, could delay the development or release of new products or services or new versions of products or services, could create security vulnerabilities in our products or services, and could adversely affect market acceptance of our products or services.

If we experience errors or delays in releasing our cloud, license or hardware offerings or new versions [removed: thereof,] [added: of these offerings,] our sales could be affected and revenues could decline.

Therefore, any flaws could affect our [removed: ability] [added: and our customers’ abilities] to conduct [removed: our] business operations and [removed: the operations of our customers.][added: to ensure accuracy in financial processes and reporting, and may result in unanticipated costs.]

[removed: _If] [added: If] our security measures for our products and services are compromised and as a result, our data, our customers’ data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable, our brand and reputation could be damaged, the IT services we provide to our customers could be disrupted, and customers may stop using our products and services, all of which could reduce our revenue and earnings, increase our expenses and expose us to legal claims and regulatory [removed: actions._ We are in the IT business, and our products and services, including our Oracle Cloud Services, store, retrieve, manipulate and manage our customers’ information and data, external data, as well as our own data.][added: actions.]

[removed: Data] [added: Our products and services, including our Oracle Cloud Services] may also be accessed or modified improperly as a result of customer, partner, employee or supplier error or malfeasance and third parties may attempt to fraudulently induce customers, partners, employees or suppliers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data, our customers’, suppliers’ or partners’ data or the IT systems of Oracle, our customers, suppliers or partners.

These risks will increase as we continue to grow our cloud offerings and store and process increasingly large amounts of data, including personal information and our customers’ confidential information and [removed: data and other external] data, and host or manage parts of our customers’ businesses in cloud-based IT environments, especially in customer sectors involving particularly sensitive data such as health sciences, financial services, retail, hospitality and the government.

We could suffer significant damage to our brand and reputation if a cyber-attack or other security incident were to allow unauthorized access to or modification of our customers’ or suppliers’ data, other external data, or our own data or our IT systems or if the services we provide to our customers were disrupted, or if our products or services are [added: reported to have or are] perceived as having security vulnerabilities.

Customers could lose confidence in the security and reliability of our products and services, including our cloud offerings, and perceive them to [removed: be] not [added: be] secure.

This could lead to fewer customers using our products and services and result in reduced [removed: revenue] [added: revenues] and earnings.

[removed: As illustrated by the Spectre and Meltdown threats, our] [added: Our] products operate in conjunction with and are dependent on products and components across a broad ecosystem.

[removed: _Our business practices with respect to data could give rise to operational interruption, liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection._] As regulatory focus on privacy issues continues to increase and worldwide laws and regulations concerning the handling of personal information expand and become more complex, potential risks related to data collection and use within our business will intensify.

[removed: The Privacy Shield and other] [added: For example, certain] data transfer mechanisms are currently subject to challenges in European courts, which may lead to uncertainty about the legal basis for data transfers to the U.S. or interruption of such transfers.

This [added: impact] could [removed: be true particularly] [added: also occur] in those jurisdictions where privacy laws or regulators take a broader view of how personal information is defined, therefore subjecting the handling of such data to heightened restrictions that may be obstructive to our operations and the operations of our customers, partners and data providers.

This impact [removed: may] [added: could] be acute in countries that have passed or are considering passing legislation that requires data to remain localized “in country,” as this imposes financial costs on any service provider that is required to store data in jurisdictions not of its choosing and nonstandard operational processes that are difficult and costly to integrate with global processes.

[removed: The GDPR and other] [added: Taken together, the] changes in laws or regulations associated with the enhanced protection of personal and other types of data could greatly increase [added: the size of potential fines related to data protection, and our cost of providing our products and services could result in changes to our business practices or even prevent us from offering certain services in jurisdictions in which we operate.]

[removed: _Economic,] [added: Economic,] political and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock [removed: price._ Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting.][added: price.]

| | • | [removed: |] general economic and business conditions; |

| | • | [removed: |] overall demand for enterprise cloud, license and hardware products and services; |

| | • | [removed: |] governmental budgetary constraints or shifts in government spending priorities; and |

| | • | [removed: |] general legal, regulatory and political developments. |

Macroeconomic developments like the developments associated with the United Kingdom’s vote to exit the EU [added: (Brexit), evolving trade policies between the U.S. and international trade partners,] or the occurrence of similar events in other countries that lead to uncertainty or instability in economic, political or market conditions could negatively affect our business, operating results, financial condition and outlook, which, in turn, could adversely affect our stock price.

[removed: _If] [added: If] we are unable to compete effectively, the results of operations and prospects for our business could be [removed: harmed._ We face intense competition in all aspects of our business.][added: harmed.]

Many vendors spend amounts in excess of what Oracle spends to develop and market [removed: applications, platform] [added: applications] and infrastructure technologies including databases, middleware products, application development tools, business applications, collaboration products and business [removed: intelligence] [added: intelligence, compute, storage and networking] products, among others, which compete with Oracle [removed: applications, platform] [added: applications] and infrastructure offerings.

Use of our competitors’ technologies may influence a customer’s purchasing decision or create an environment that makes it less efficient to utilize [added: or migrate to] Oracle products and services.

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Our success depends upon our ability to develop new products and services, integrate acquired products and services and enhance our existing products and services.

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| | • | infrastructure costs to deliver new or enhanced products and services take longer or result in greater costs than anticipated; |

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Our Oracle Cloud strategy, including our Oracle Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS) offerings, may adversely affect our revenues and profitability.

We are in the IT business, and our products and services, including our Oracle Cloud Services, store, retrieve, manipulate and manage our customers’ information and data, external data, as well as our own data.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

Our business practices with respect to data could give rise to operational interruption, liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

In the wake of the European Union General Data Protection Regulation (GDPR), the rate of global consideration and adoption of privacy laws has increased, giving rise to more global jurisdictions in which regulatory inquiries and audits may be requested of Oracle, and if not deemed to be in compliance, could result in enforcement actions and/or fines.

This is true in the U.S. where California recently enacted the California Consumer Privacy Act (CCPA) effective in January 2020, Congress is considering several privacy bills at the federal level, and other state legislatures are considering privacy laws.

The GDPR, which became effective in May 2018, provides for monetary penalties of up to 4% of an organization’s worldwide revenue.

One European data protection regulator has fined a major U.S. technology company EUR 50 million for its data handling practices.

The U.S. Federal Trade Commission continues to fine companies on a regular basis for unfair and deceptive data protection practices, and these fines may increase in size.

The CCPA provides for statutory damages on a per violation basis that could be very large in the event of a significant data security breach or other CCPA violation.

Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting.

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[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

We face intense competition in all aspects of our business.

We may need to change our pricing models to compete successfully.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

Our international sales and operations subject us to additional risks that can adversely affect our operating results.

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As these business

##### [Table of Contents](#toc)

In addition, we incur certain expenses associated with the infrastructure and marketing of our cloud offerings in advance of our ability to recognize the revenues associated with these offerings.

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For example, the European Union (EU) and the United States (U.S.) formally entered into a new framework in July 2016 that provides a mechanism for companies to transfer data from EU member states to the U.S. This new framework, called the Privacy Shield, is intended to address shortcomings identified by the Court of Justice of the EU in the previous EU-U.S. Safe Harbor Framework, which the Court of Justice invalidated in October 2015.

For example, in 2016, the EU adopted the General Data Protection Regulation (GDPR), which became effective in May 2018.

The law establishes new requirements regarding the handling of personal data.

Non-compliance with the GDPR may result in monetary penalties of up to 4% of worldwide revenue.

the size of potential fines related to data protection and our cost of providing our products and services could result in changes to our business practices or even prevent us from offering certain services in jurisdictions in which we operate.

We could lose

Our hardware business competes with, among others, (1) systems manufacturers and resellers of systems based on our own microprocessors and operating systems and those of our competitors, (2) microprocessor/chip manufacturers, (3) providers of storage products, (4) certain industry-specific hardware manufacturers including those serving communications, hospitality and retail industries and (5) certain cloud providers that build their own IT infrastructures.

Our hardware business causes us to compete with certain companies that historically have been partners.

Some of these competitors may have more experience than we do in managing a hardware business.

Certain of these competitors also compete very aggressively on price.

A loss in our competitive position could result in lower revenues or profitability, which could adversely impact our ability to realize the revenue and profitability forecasts for our hardware business.

reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results.

The development process for our hardware products is uncertain and requires a high level of innovation.

After the development phase, we must be able to forecast customer demand and manufacture new hardware products in sufficient volumes to meet this demand and do so in a cost-effective manner.

Our “build-to-order” manufacturing model, in which our hardware products generally are not built until after customers place orders, may from time to time experience delays in delivering our hardware products to customers in a timely manner.

These delays could cause our customers to purchase hardware products and services from our competitors.

We must also manage new hardware product introductions and transitions to minimize the impact of customer delayed purchases of existing hardware products in anticipation of new hardware product releases.

It is also possible that we could experience design or manufacturing flaws, which could delay or prevent the production of the components for which we have previously committed to pay or need to fulfill orders from customers and could also prevent the production of our hardware products or cause our hardware products to be returned, recalled or rejected resulting in lost revenues, increases in warranty costs or costs related to remediation efforts, damage to our reputation, penalties and litigation.

If we had to find a new supplier for these technologies, parts and components, hardware product shipments could be delayed, which would adversely affect our hardware revenues.

We could also experience fluctuations in component prices, which, if unanticipated, could negatively affect our hardware business cost structure.

Additionally, we could experience changes in shipping and logistics of our hardware products, which could result in fluctuations in prices and negatively impact our hardware margins.

These factors may make it difficult for us to plan and procure appropriate component inventory levels in a timely fashion to meet customer demand for our hardware products.

Therefore, we may experience component inventory

shortages, which may result in production delays or customers choosing to purchase fewer hardware products from us or hardware products from our competitors.

We negotiate supply commitments with vendors early in the manufacturing process to ensure we have sufficient technologies and components for our hardware products to meet anticipated customer demand.

We must also manage our levels of older component inventories used in our hardware products to minimize inventory write-offs or write-downs.

If we have excess inventory, it may be necessary to write-down the inventory, which would adversely affect our operating results.

_We are susceptible to third-party manufacturing and logistics delays, which could result in the loss of sales and customers._ We outsource the design, manufacturing, assembly and delivery of certain of our hardware products to a variety of companies, many of which are located outside the U.S. Our reliance on these third parties reduces our control over the manufacturing and delivery process, exposing us to risks, including reduced control over quality assurance, product costs, product supply and delivery delays as well as the political and economic uncertainties and natural disasters of the international locations where certain of these third-party manufacturers have facilities and operations.

Some countries may raise national security concerns or impose market access restrictions based on location of manufacturing or sourcing.

Any manufacturing disruption or logistics delays by these third parties could impair our ability to fulfill orders for these hardware products for extended periods of time.

If we are unable to manage our relationships with these third parties effectively, or if these third parties experience delays, disruptions, capacity constraints, regulatory issues or quality control problems in their operations, or fail to meet our future requirements for timely delivery, our ability to ship and deliver certain of our hardware products to our customers could be impaired and our hardware business could be harmed.

We endeavor to continue simplifying our supply chain processes by reducing the number of third-party manufacturing partners and the number of locations where these third-party manufacturers build our hardware products.

We therefore have become more dependent on a fewer number of these manufacturing partners and locations.

Any

As we complete our analyses, and interpret any additional guidance, we may adjust the provisional amounts we have recorded, and those adjustments may materially impact our provision for income taxes in the period in which the adjustments are made.

In addition, changes by any rating agency to our outlook or credit rating

[removed: Business Overview][added: Business Overview]

Oracle [removed: Corporation] provides products and services that address [removed: all aspects of corporate] [added: enterprise] information technology (IT) [removed: environments—applications, platform and infrastructure.][added: environments.]

Our [removed: applications, platform] [added: products] and [added: services include applications and] infrastructure offerings [added: that] are delivered [removed: to customers] worldwide through a variety of flexible and interoperable IT deployment [removed: models, including cloud-based, on-premise, or hybrid, which enable customer choice and flexibility.][added: models.]

[removed: We market and sell our offerings globally to] [added: Our customers include] businesses of many sizes, government agencies, educational institutions and resellers [removed: with a] [added: that we market and sell to directly through our] worldwide sales force [removed: that is employed by our domestic] and [removed: international subsidiaries and is positioned to offer] [added: indirectly through] the [removed: combinations that best meet customer needs.][added: Oracle Partner Network.]

[removed: _Cloud] [added: Cloud] and License [removed: Business_][added: Business]

Our cloud and license line of business, which represented [removed: 82%, 80%] [added: 83%, 81%] and [removed: 78%] [added: 80%] of our total revenues in fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively, markets, sells and delivers a broad spectrum of [removed: applications, platform] [added: applications] and infrastructure technologies through our cloud and license offerings.

| | • | [removed: |] license support revenues, which [removed: is our largest revenues stream.] [added: are earned by providing] Oracle license support [removed: grants rights] [added: services] to [removed: unspecified product upgrades and maintenance releases and patches released during the term of the support period, as well as technical support assistance. Substantially all of our] customers [removed: opt] [added: that have elected] to purchase [removed: license] support [removed: contracts when they] [added: services in connection with the] purchase [added: of] Oracle [removed: applications, platform and/or] [added: applications and] infrastructure [added: software] licenses [added: for use in cloud, on-premise] and [removed: substantially] [added: other IT environments. Substantially] all [added: license support] customers renew their [removed: license] support contracts [removed: annually] [added: with us upon expiration] in order to continue to benefit from [removed: Oracle’s research] [added: technical support services] and [removed: development investments that are utilized as a part] [added: the periodic issuance] of unspecified [removed: periodic license] updates [removed: that may be released] and [removed: that customers with] [added: enhancements, which] current license support [removed: contracts] [added: customers] are entitled [removed: to. Our license] [added: to receive. License] support contracts are generally priced as a percentage of the net fees paid by the customer to [removed: access the license,] [added: purchase a cloud license and/or on-premise license;] are generally billed in advance of the support services being [removed: performed] [added: performed; are generally renewed at the customer’s option;] and are generally recognized as revenues ratably [removed: as] [added: over] the [added: contractual period that the] support services are [removed: delivered over the contractual terms;] [added: provided, which is generally one year;] and |

| | • | [removed: |] cloud services revenues, which [removed: includes revenues from Oracle Cloud Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) offerings (collectively,] [added: provide customers access to] Oracle Cloud [removed: Services), which deliver applications, platform] [added: applications] and infrastructure [removed: technologies, respectively,] [added: technologies] via cloud-based deployment models that [removed: we develop functionality] [added: Oracle develops, provides unspecified updates and enhancements] for, [removed: host, manage] [added: hosts, manages] and [removed: support] [added: supports] and that customers access by entering into a subscription agreement with us for a stated period. [removed: Our IaaS offerings also include Oracle Managed Cloud Services, which are designed to provide comprehensive software and hardware management, maintenance and security services for customer cloud-based, hybrid IT or other IT infrastructure for a fee for a stated term.] The majority of our Oracle Cloud Services arrangements [added: are generally billed in advance of the cloud services being performed;] have durations of [removed: 12] [added: one] to [removed: 36 months] [added: three years; are generally renewed at the customer’s option;] and are generally recognized as revenues ratably over the contractual period of the [added: cloud] contract or, in the case of usage model contracts, as the cloud services are [removed: consumed. We strive to renew these cloud services contracts when they are eligible for renewal.] [added: consumed over time.] |

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

Cloud license and on-premise license revenues include revenues from the licensing of our software products including Oracle Applications, Oracle Database, Oracle [removed: Fusion] Middleware and Java, among [removed: others] [added: others,] which our customers [removed: use for] [added: deploy within] cloud-based, on-premise and other IT environments.

Our cloud license and on-premise license transactions are generally perpetual in nature and are generally recognized [added: upfront at the point in time] when [removed: unrestricted access to] the [removed: license] [added: software] is [removed: granted] [added: made available] to the customer [removed: provided all other revenue recognition criteria are met.][added: to download and use.]

The timing of a few large license transactions can substantially affect our quarterly license [removed: revenues,] [added: revenues due to the point in time for revenue recognition of license transactions,] which is different than the typical revenue recognition pattern for our cloud services and license support revenues in which revenues are generally recognized ratably over the contractual [removed: periods.][added: terms.]

Cloud license and on-premise license customers have the option to purchase [added: and renew] license support contracts, as described above.

Providing choice and flexibility to our customers as to when and how they deploy our [removed: applications, platform] [added: applications] and infrastructure technologies is an important element of our corporate strategy.

In recent periods, customer demand [removed: has increased] for our [added: applications and infrastructure technologies delivered through our] Oracle Cloud [removed: Services.][added: Services has increased.]

To address customer demand and enable customer choice, we have introduced certain programs for customers to pivot their [removed: applications, platform] [added: applications] and infrastructure licenses and [added: the related] license support to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads.

Our cloud [removed: services revenues growth] and [removed: our cloud] license [removed: and on-premise license revenues] [added: business’ revenue] growth [removed: are] [added: is] affected by [added: many factors, including] the strength of general economic and business [removed: conditions,] [added: conditions;] governmental budgetary [removed: constraints,] [added: constraints;] the strategy for and competitive position of our [removed: offerings, our acquisitions,] [added: offerings;] our [removed: ability to deliver and renew] [added: acquisitions; the continued renewal of] our cloud services [added: and license support customer] contracts [removed: with our existing] [added: by the customer contract base; substantially all] customers [added: continuing to purchase license support contracts in connection with their license purchases; the pricing of license support contracts sold in connection with the sales of licenses; the pricing, amounts] and [added: volumes of licenses and cloud services sold; and] foreign currency rate fluctuations.

| | • | [removed: |] expected growth in our cloud services and license support [removed: offerings, including the high percentage of customers that purchase and renew their license support contracts;] [added: offerings;] |

| | • | [removed: |] continued demand for our cloud license and on-premise license offerings; and |

| | • | [removed: |] contributions from our acquisitions. |

Our cloud and license business’ margin has historically trended upward over the course of the four quarters within a particular fiscal year due to the historical upward trend of our cloud [removed: license] and [removed: on-premise] license [added: business’] revenues over those quarterly periods and because the majority of our costs for this business are generally fixed in the short term.

[removed: _Hardware Business_][added: Hardware Business]

Our hardware business, which represented [removed: 10%, 11%] [added: 9%, 10%] and [removed: 13%] [added: 11%] of our total revenues in fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively, provides a broad selection of hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, industry-specific hardware, operating systems, virtualization, [removed: management and other hardware related software, and related hardware support.]

The majority of our hardware products are sold through indirect channels, [added: including independent distributors and value-added resellers.]

Hardware support contracts are entered into [added: and renewed] at the option of the customer, are generally priced as a percentage of the net hardware products fees and are generally recognized as revenues ratably as the hardware support services are delivered over the contractual terms.

Our hardware revenues, cost of hardware and hardware operating margins that we report are affected by, among others: our ability to timely manufacture or deliver a few large hardware transactions; our strategy for and the position of our hardware products relative to competitor offerings; customer demand for competing [removed: offerings such as PaaS and] [added: offerings, including] IaaS; the strength of general economic and business conditions; governmental budgetary constraints; whether customers decide to purchase hardware support contracts at or in close proximity to the time of hardware product sale; the percentage of our hardware support contract customer base that renews its support contracts and the close association between hardware products, which have a finite life, and customer demand for related hardware support as hardware products age; customer decisions to either maintain or upgrade their existing hardware infrastructure to newly developed technologies that are available; certain of our acquisitions; and foreign currency rate fluctuations.

[removed: _Services Business_][added: Services Business]

[removed: Our] [added: We offer] services [removed: business helps] [added: to] customers and partners [added: to help to] maximize the performance of their investments in Oracle [removed: applications, platform] [added: applications] and infrastructure technologies.

We believe that our services are differentiated based on our focus on Oracle technologies, extensive [removed: experience and] [added: experience,] broad sets of intellectual [removed: property] [added: property,] and best practices.

Our services offerings include consulting services, advanced [added: customer] support services and education [removed: services and represented 8% of our total revenues in fiscal 2018 and 9% of our total revenues in each of fiscal 2017 and 2016.][added: services.]

Our services revenues are impacted by, among others: our strategy for, and the competitive position of, our services; customer demand for our cloud and license and hardware offerings and the associated services for these offerings; [removed: our strategic emphasis on growing our cloud revenues;] certain of our acquisitions; general economic conditions; governmental budgetary constraints; personnel reductions in our customers’ IT departments; and tighter controls over [added: customer] discretionary spending.

[removed: _Acquisitions_][added: Acquisitions]

We believe that we can fund our future acquisitions with our internally available cash, cash equivalents and marketable securities, cash generated from operations, additional borrowings or from the issuance of additional [removed: securities.]

[removed: Critical] [added: Critical] Accounting Policies and [removed: Estimates][added: Estimates]

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) as set forth in the Financial Accounting Standards Board’s [removed: (FASB) Accounting Standards][added: (FASB), ASC, and we consider the various staff accounting bulletins and other applicable guidance issued by the SEC.]

GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and [removed: assumptions.][added: assumptions as we apply our significant accounting policies.]

The accounting policies that reflect [removed: our more significant] estimates, judgments and assumptions [removed: and which] [added: that] we believe are the most critical to aid in fully understanding and evaluating our reported financial results [removed: include:][added: and for which we include additional discussion below are:]

| | • | [removed: |] Revenue Recognition; |

| | • | [removed: |] Business Combinations; |

| | • | [removed: |] Goodwill and Intangible Assets—Impairment Assessments; |

These models include on-premise deployments, cloud-based deployments, and hybrid deployments (an approach that combines both on-premise and cloud-based deployment) such as our Oracle Cloud at Customer offering (an instance of Oracle Cloud in a customer’s own data center).

Accordingly, we offer choice and flexibility to our customers and facilitate the product, service and deployment combinations that best suit our customers’ needs.

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Revenues from usage-based royalty arrangements for distinct cloud licenses and on-premise licenses are recognized at the point in time when the software end user usage occurs.

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The historical upward trend of our cloud and license business’ revenues over the course of the four quarters within a particular fiscal year is primarily due to the addition of new cloud services and license support contracts to the customer contract base that we generally recognize as revenues ratably; the renewal of existing customers’ cloud services and license support contracts over the course of each fiscal year that we generally recognize as revenues ratably; and the historical upward trend of our cloud license and on-premise license revenues, which we generally recognize at a point in time upon delivery, over those four quarterly periods.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

management and other hardware related software, and related hardware support.

Each hardware product and its related software, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a combined performance obligation.

The revenues for this combined performance obligation are generally recognized at the point in time that the hardware product and its related software are delivered to the customer and ownership is transferred to the customer.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

securities.

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The most critical judgments required in applying Topic 606 and our revenue recognition policy relate to the determination of distinct performance obligations and the evaluation of the standalone selling price (SSP) for each performance obligation.

Many of our customer contracts include multiple performance obligations.

Judgment is required in determining whether each performance obligation within a customer contract is distinct.

Oracle products and services generally do not require a significant amount of integration or interdependency.

Therefore, multiple products and services contained within a customer contract are generally considered to be distinct and are not combined for revenue recognition purposes.

We allocate the transaction price for each customer contract to each performance obligation based on the relative SSP (the determination of SSP is discussed below) for each performance obligation within each contract.

We recognize the amount of transaction price allocated to each performance obligation within a customer contract as revenue as each performance obligation is delivered.

We use judgment in determining the SSP for products and services.

For substantially all performance obligations except cloud licenses and on-premise licenses, we are able to establish the SSP based on the observable prices of products or services sold separately in comparable circumstances to similar customers.

We typically establish an SSP range for our products and services, which is reassessed on a periodic basis or when facts and circumstances change.

SSP for our products and services can evolve over time due to changes in our pricing practices that are influenced by intense competition, changes in demand for our products and services, and economic factors, among others.

Our cloud licenses and on-premise licenses have not historically been sold on a standalone basis, as substantially all customers elect to purchase license support contracts at the time of a cloud license and on-premise license purchase.

We are unable to establish the SSP for our cloud licenses and on-premise licenses based on observable prices given the same products are sold for a broad range of amounts (that is, the selling price is highly variable) and a representative SSP is not discernible from past transactions or other observable evidence.

As a result, the SSP for a cloud license and an on-premise license included in a contract with multiple performance obligations is determined by applying a residual approach whereby all other performance

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

obligations within a contract are first allocated a portion of the transaction price based upon their respective SSPs, with any residual amount of transaction price allocated to cloud license and on-premise license revenues.

ASC 805 requires that we evaluate whether a transaction pertains to an acquisition of assets, or to an acquisition of a business.

A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return to investors.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

In such situations, we are required to evaluate whether the net book values of our finite lived intangible assets are recoverable.

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##### [Table of Contents](#toc)

Our license support revenues growth is primarily influenced by three factors: (1) the continuity of substantially all of our license support customer contract base renewing their license support contracts and substantially all customers continuing to purchase license support contracts in connection with their purchase of a new license; (2) the pricing of license support contracts sold in connection with the sale of new licenses; and (3) the pricing of new licenses sold.

Customers do so in order to benefit from Oracle’s research and development investments that are utilized as a part of unspecified periodic license updates that may be released and that customers with current license support contracts are entitled to.

Hardware transactions are generally recognized as revenues upon delivery to the customer provided all other revenue recognition criteria are met.

Our hardware business also offers related hardware support.

including independent distributors and value-added resellers.

Codification (ASC), and we consider the various staff accounting bulletins and other applicable guidance issued by the U.S. Securities and Exchange Commission (SEC).

We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.

These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented.

To the extent that there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application.

There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.

Our sources of revenues include:

| | • | | cloud and license revenues, which include the sale of: cloud services and license support; and cloud license and on-premise licenses, which represent licenses purchased by customers for use in both cloud and on-premise deployments; |

| | • | | services revenues, which are earned from providing cloud-, license- and hardware-related services including consulting, advanced customer support and education services. |

Revenue Recognition for Cloud Services Offerings, Hardware Products, Hardware Support and Related Services (Non-software Elements)

Our revenue recognition policy for non-software deliverables including our cloud services offerings, hardware products, hardware support and related services is based upon the accounting guidance contained in ASC 605-25, _Revenue Recognition, Multiple-Element Arrangements_, and we exercise judgment and use estimates in connection with the determination of the amount of cloud services revenues, hardware products revenues, hardware support and related services revenues to be recognized in each accounting period.

Revenues from the sales of our non-software elements are recognized when: (1) persuasive evidence of an arrangement exists; (2) we deliver the products or services; (3) the sale price is fixed or determinable; and (4) collection is reasonably assured.

Revenues that are not recognized at the time of sale because the foregoing conditions are not met are recognized when those conditions are subsequently met.

Revenues for our cloud services offerings sold on a subscription basis are generally recognized ratably over the contract term commencing with the date the service is made available to customers.

Revenues for cloud services offerings sold on a usage basis are generally recognized as the customer consumes the service, provided all other revenue recognition criteria have been satisfied.

Revenues from the sale of hardware products are generally recognized upon delivery of the hardware product to the customer provided all other revenue recognition criteria are satisfied.

Hardware support contracts are entered into at the customer’s option and are recognized ratably over the contractual term of the arrangements, which is typically one year, provided all other revenue recognition criteria have been satisfied.

_Revenue Recognition for Multiple-Element Arrangements—Cloud Services Offerings, Hardware Products, Hardware Support and Related Services (Non-software Arrangements)_

We enter into arrangements with customers that purchase non-software related products and services from us at the same time, or within close proximity of one another (referred to as non-software multiple-element arrangements).

Each element within a non-software multiple-element arrangement is accounted for as a separate unit of accounting provided the following criteria are met: the delivered products or services have value to the customer on a standalone basis; and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by us.

We consider a deliverable to have standalone value if the product or service is sold separately by us or another vendor or could be resold by the customer.

Further, our revenue arrangements generally do not include a general right of return relative to the delivered products.

Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition.

For those units of accounting that include more than one deliverable but are treated as a single unit of accounting, we generally recognize revenues over the contractual period of the arrangement, or in the case of our cloud services offerings, we generally recognize revenues over the contractual term of the cloud services subscription.

For the purposes of revenue classification of the elements that are accounted for as a single unit of accounting, we allocate revenue to the respective revenue line items within our consolidated statements of operations based on a rational and consistent methodology utilizing our best estimate of relative selling prices of such elements.

For our non-software multiple-element arrangements, we allocate revenue to each element based on a selling price hierarchy at the arrangement’s inception.

The selling price for each element is based upon the following selling price hierarchy: vendor-specific objective evidence (VSOE) if available, third-party evidence (TPE) if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor TPE are available (a description as to how we determine VSOE, TPE and ESP is provided below).

If a tangible hardware product includes software, we determine whether the tangible hardware product and the software work together to deliver the product’s essential functionality and, if so, the entire product is treated as a non-software deliverable.

The total arrangement consideration is allocated to each separate unit of accounting for each of the non-software deliverables using the relative selling prices of each unit based on the selling price hierarchy.

We limit the amount of revenue recognized for delivered elements to an amount that is not contingent upon future delivery of additional products or services or meeting of any specified performance conditions.

When possible, we establish VSOE of selling price for deliverables in software and non-software multiple-element arrangements using the price charged for a deliverable when sold separately.

TPE is established by evaluating similar and interchangeable competitor products or services in standalone arrangements with similarly situated customers.

If we are unable to determine the selling price because VSOE or TPE does not exist, we determine ESP for the purposes of allocating the arrangement by reviewing historical transactions, including transactions whereby the deliverable was sold on a standalone basis and considering several other external and internal factors.

[removed: Cash,] [added: Cash,] Cash Equivalents, Marketable Securities and Interest Income [removed: Risk][added: Risk]

Cash, cash equivalents, and marketable securities were [removed: $67.3] [added: $37.8] billion and [removed: $66.1] [added: $67.3] billion as of May 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

In addition, as of May 31, [removed: 2018,] [added: 2019,] substantially all of our marketable securities were high quality with approximately [removed: 26%] [added: 33%] having maturity dates within one year and [removed: 74%] [added: 67%] having maturity dates within one to [removed: five] [added: four] years (a description of our marketable securities held is included in Notes 3 and 4 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report and “Liquidity and Capital Resources” above).

Fixed rate securities may have their market [removed: value] [added: values] adversely impacted as interest rates increase, [added: while floating rate securities may produce less income than expected if interest rates fall.]

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

[removed: However] [added: However,] because we classify our debt securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.

The fair values of our fixed-rate debt securities are impacted by interest rate movements and if interest rates would have been higher by 50 basis points as of [added: each of] May 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] we estimate the change would have decreased the fair values of our marketable securities holdings by [removed: $308] [added: $128] million and [removed: $348] [added: $308] million, respectively.

For fiscal [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] total interest income was [removed: $1.2] [added: $1.1] billion and [removed: $802 million,] [added: $1.2 billion,] respectively, with our cash, cash equivalents and marketable securities investments yielding an average [removed: 1.73%] [added: 2.08%] and [removed: 1.47%,] [added: 1.73%,] respectively, on a worldwide basis.

[removed: Interest] [added: Interest] Expense [removed: Risk][added: Risk]

[removed: _Interest] [added: Interest] Expense [removed: Risk_—_Interest] [added: Risk—Interest] Rate Swap Agreements and Cross-Currency Interest Rate Swap [removed: Agreements_][added: Agreements]

Our total borrowings were [removed: $60.9] [added: $56.3] billion as of May 31, [removed: 2018,] [added: 2019,] consisting of [removed: $56.9] [added: $55.4] billion of fixed-rate borrowings, [removed: $1.2 billion] [added: $750 million] of floating-rate borrowings (Floating-Rate Notes) and [removed: $2.8 billion] [added: $113 million] of other [removed: borrowings, primarily under the 2018 Credit Agreements.][added: borrowings.]

[removed: We have entered into] [added: As of May 31, 2019, we held] certain interest rate swap agreements that have the economic effect of modifying the fixed-interest obligations associated with our [removed: $1.5 billion of 2.375% senior notes due January 2019 (January 2019 Notes), our] $2.0 billion of 2.25% [added: fixed-rate] senior notes due October 2019 (October 2019 [removed: Notes),] [added: Notes) and] our $1.5 billion of 2.80% [added: fixed-rate] senior notes due July 2021 (July 2021 Notes), [removed: and our April 2038 Notes,] so that the [added: fixed-rate] interest payable on these senior notes effectively became variable based on LIBOR.

We have also entered into cross-currency interest rate swap agreements to manage the foreign currency exchange rate risk associated with our [added: €750 million of 3.125% fixed-rate senior notes due] July 2025 Notes [added: (July 2025 Notes)] by effectively converting the fixed-rate, Euro denominated debt, including the annual interest payments and the payment of principal at maturity, to variable-rate, U.S. Dollar denominated debt based on LIBOR.

The critical terms of the swap agreements match the critical terms of the [removed: January 2019 Notes,] October 2019 Notes, July 2021 [removed: Notes, April 2038] Notes and July 2025 Notes that the swap agreements pertain to, including the notional amounts and maturity dates.

We are accounting for these swap agreements as fair value hedges pursuant to ASC 815, [removed: _Derivatives] [added: Derivatives] and [removed: Hedging_] [added: Hedging] (ASC 815).

The fair values of [removed: these] [added: our outstanding] fixed to variable interest rate swap agreements as of May 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] were a [removed: $26] [added: $17] million net loss and a [removed: $40] [added: $26] million [removed: gain,] [added: net loss,] respectively.

We estimate that the changes in the fair values of these swap agreements during fiscal [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] were primarily attributable to an increase in forward interest rate prices.

If LIBOR-based interest rates would have been higher by 100 basis points as of May 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the change would have decreased the [added: collective] fair values of the fixed to variable swap agreements by [removed: $315] [added: $90] million and [removed: $153] [added: $315] million, respectively.

As of May 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] if LIBOR-based interest rates would have been higher by 100 basis points, the change would have increased our interest expense annually by approximately [removed: $86] [added: $52] million and [removed: $73] [added: $86] million, respectively, as it relates to our fixed to variable interest rate swap agreements and floating-rate borrowings.

[removed: Currency Risk][added: Currency Risk]

[removed: _Foreign] [added: Foreign] Currency Transaction Risk—Foreign Currency Forward [removed: Contracts_][added: Contracts]

[removed: Neither do we] [added: We neither] use these foreign currency forward contracts for trading purposes nor do we designate these forward contracts as hedging instruments pursuant to ASC 815.

The notional amounts of the forward contracts we held to purchase U.S. Dollars in exchange for other major international currencies were [added: $3.8 billion and] $3.4 billion as of [removed: each of] May 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018, respectively,] and the notional amounts of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were [added: $3.3 billion and] $1.4 billion as of [removed: each of] May 31, [removed: 2018] [added: 2019] and [removed: 2017.][added: 2018, respectively.]

The fair values of our outstanding foreign currency forward contracts were nominal at May 31, [removed: 2018] [added: 2019] and [removed: 2017.][added: 2018.]

Net foreign exchange transaction losses included in non-operating income, net in the accompanying consolidated statements of operations were [removed: $74] [added: $111] million, [removed: $152] [added: $74] million and [removed: $110] [added: $152] million in fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

[removed: _Foreign] [added: Foreign] Currency Translation Risk—Impact on Cash, Cash Equivalents and Marketable [removed: Securities_][added: Securities]

In particular, the amount of cash, cash equivalents and marketable securities that we report in U.S. Dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each respective reporting period (the offset to which is substantially recorded to accumulated other [removed: comprehensive loss on our consolidated balance sheets and is also presented as a line item in our consolidated statements of comprehensive income included elsewhere in this Annual Report).]

As the U.S. Dollar fluctuated against certain international currencies as of the end of fiscal [removed: 2018,] [added: 2019,] the amount of cash, cash equivalents and marketable securities that we reported in U.S. Dollars for foreign subsidiaries that hold international currencies as of May 31, [removed: 2018 increased] [added: 2019 decreased] relative to what we would have reported using a constant currency rate from May 31, [removed: 2017.][added: 2018.]

As reported in our consolidated statements of cash flows, the estimated effects of exchange rate changes on our reported cash and cash equivalents balances in U.S. Dollars was [added: a decrease of $158 million for fiscal 2019,] an increase of $57 million for fiscal [removed: 2018,] [added: 2018] and [removed: decreases] [added: a decrease] of $86 million [removed: and $115 million] in fiscal [removed: 2017 and 2016, respectively.][added: 2017.]

If overall foreign currency exchange rates in comparison to the U.S. Dollar uniformly would have been weaker by 10% as of May 31, [removed: 2018] [added: 2019] and May 31, [removed: 2017] [added: 2018] the amount of cash, cash equivalents and marketable securities we would report in U.S. Dollars would have decreased by approximately [removed: $555] [added: $434] million and [removed: $518] [added: $555] million, respectively, assuming constant foreign currency cash, cash equivalents and marketable securities balances.

| --- | --- |

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

comprehensive loss on our consolidated balance sheets and is also presented as a line item in our consolidated statements of comprehensive income included elsewhere in this Annual Report).

##### [Table of Contents](#toc)

while floating rate securities may produce less income than expected if interest rates fall.

Substantially all of our marketable securities are designated as available-for-sale.

Oracle [removed: Corporation] provides products and services that address [removed: all aspects of corporate] [added: enterprise] information technology (IT) [removed: environments—applications, platform and infrastructure.][added: environments.]

Our [removed: applications, platform] [added: products] and [added: services include applications and] infrastructure offerings [added: that] are delivered [removed: to customers] worldwide through a variety of flexible and interoperable IT deployment [removed: models, including cloud-based, on-premise, or hybrid, which enable customer choice and flexibility.][added: models.]

[removed: We market and sell our offerings globally to] [added: Our customers include] businesses of many sizes, government agencies, educational institutions and resellers [removed: with a] [added: that we market and sell to directly through our] worldwide sales force [removed: positioned to offer] [added: and indirectly through] the [removed: combinations that best meet customer needs.][added: Oracle Partner Network.]

[removed: Our] Oracle Cloud [added: Software-as-a-Service and Infrastructure-as-a-Service (SaaS and IaaS, respectively, and collectively, Oracle Cloud Services)] offerings provide a comprehensive and [removed: fully] integrated stack of [removed: applications, platform, compute, storage] [added: applications] and [removed: networking] [added: infrastructure] services [removed: in all three primary layers of the cloud: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as] [added: delivered via] a [removed: Service (IaaS).][added: cloud-based deployment model.]

[removed: Our] Oracle Cloud [removed: SaaS, PaaS and IaaS offerings (collectively, “Oracle Cloud Services”)] [added: Services] integrate the software, hardware and services on [removed: customers’] [added: a customer’s] behalf in [added: a cloud-based] IT [removed: environments] [added: environment] that [removed: we deploy, support] [added: Oracle deploys, upgrades, supports] and [removed: manage] [added: manages] for the customer.

[removed: Our integrated] Oracle Cloud Services are designed to be rapidly deployable to enable customers shorter time to innovation; [added: intuitive for casual and experienced users;] easily maintainable to reduce [added: upgrade,] integration and testing work; connectable among differing deployment models to enable interchangeability and extendibility between IT environments; compatible to easily move workloads between the Oracle Cloud and other IT environments; cost-effective by requiring lower upfront customer investment; and secure, standards-based and reliable.

[removed: We are a leader in the core] [added: Oracle applications and infrastructure] technologies [removed: of cloud IT environments,] including database and middleware software as well as enterprise applications, virtualization, clustering, large-scale systems management and related [removed: infrastructure.][added: infrastructure products and services are the building blocks of Oracle Cloud Services, our partners’ cloud services, and our customers’ cloud IT environments.]

[removed: Our] [added: Oracle] cloud license and on-premise license deployment [removed: model includes] [added: offerings include] Oracle Applications, Oracle Database and Oracle [removed: Fusion] Middleware software offerings, among others, which customers deploy [removed: utilizing] [added: using] IT infrastructure from the Oracle Cloud or their own cloud-based or on-premise IT environments.

Substantially all customers, at their option, purchase license support contracts when they purchase [removed: a] [added: an Oracle] license.

[removed: Our] [added: Oracle] hardware [removed: products] [added: product offerings] include Oracle Engineered Systems, servers, storage and industry-specific products, among others, and customers generally opt to purchase hardware support contracts when they [removed: make a hardware purchase.][added: purchase Oracle hardware.]

[removed: We] [added: Oracle] also [removed: offer] [added: offers] services to assist our customers and partners to maximize the performance of their Oracle purchases.

Providing choice and flexibility to [removed: our] [added: Oracle] customers as to when and how they deploy [removed: our applications, platform] [added: Oracle applications] and infrastructure technologies is an important element of our corporate strategy.

We believe that offering customers broad, comprehensive, flexible and interoperable deployment models for [removed: our applications, platform] [added: Oracle applications] and infrastructure technologies is important to our growth strategy and better addresses customer needs relative to our competitors, many of whom provide fewer offerings and more restrictive deployment models.

Our investments in, and innovation with respect to, [removed: our] [added: Oracle] products and services that we offer through our cloud and license, hardware and services businesses [added: (described further below)] are another important element of our corporate strategy.

In fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] we invested [removed: $6.1] [added: $6.0] billion, [removed: $6.2] [added: $6.1] billion and [removed: $5.8] [added: $6.2] billion, respectively, in research and development to enhance our existing portfolio of offerings and products and to develop new technologies and services.

We have a deep understanding as to how [removed: applications, platform] [added: applications] and infrastructure technologies interact and function with one another.

We focus our development efforts on improving the performance, security, operation and integration of our technologies to [removed: make them more cost-effective and easier to deploy, manage and maintain for our customers and to] improve [removed: their] [added: the] computing performance [added: of our products and services] relative to our competitors’ [removed: products.][added: offerings, to be more cost-effective, and to be easier for customers to deploy, manage and maintain.]

For example, we believe that Oracle applications and platform technologies, such as the Oracle Database, when combined with [added: other] Oracle infrastructure technologies deliver improved performance at a lower cost relative to competing infrastructure [removed: technologies.][added: technologies and provide customers flexibility through a choice of cloud-based and on-premise deployment models.]

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

In recent years, we have [added: collectively] invested billions of dollars to acquire a number of companies, products, services and technologies that add to, are complementary to, or have otherwise enhanced our existing offerings.

| | • | [removed: |] our cloud and license business, which is comprised of a single operating segment and includes our Oracle Cloud Services offerings, cloud license and on-premise license offerings, and license support offerings, represented [removed: 82%, 80%] [added: 83%, 81%] and [removed: 78%] [added: 80%] of our total revenues in fiscal [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively; |

| | • | [removed: |] our hardware business, which is comprised of a single operating segment and includes our hardware products and related hardware support services offerings, represented [removed: 10%, 11%] [added: 9%, 10%] and [removed: 13%] [added: 11%] of our total revenues in fiscal [removed: 2018, 2017,] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively; and |

| | • | [removed: |] our services business, which is comprised of a single operating segment, represented 8% of our total revenues in fiscal [removed: 2018] [added: 2019] and 9% of our total revenues in each of fiscal [removed: 2017] [added: 2018] and [removed: 2016.] [added: 2017.] |

[removed: Applications, Platform] [added: Applications] and Infrastructure [removed: Technologies][added: Technologies]

Oracle’s comprehensive portfolio of [removed: applications, platform] [added: applications] and infrastructure technologies is designed to address an organization’s IT environment needs including business process, infrastructure and applications development requirements, among others.

Oracle [removed: applications, platform and infrastructure] technologies are based upon industry standards and are designed to be enterprise-grade, reliable, scalable and secure.

[removed: We offer our applications, platform] [added: Oracle applications] and infrastructure offerings [added: are marketed and sold] through our cloud and license, [removed: hardware] [added: hardware,] and services businesses and [removed: deliver them] [added: are delivered] through the Oracle Cloud, or through [removed: customer use of] other IT [removed: environments] [added: deployment models] including cloud-based, hybrid and on-premise.

We believe [removed: our applications, platform] [added: Oracle applications] and infrastructure offerings enable flexibility, [removed: interoperability,] [added: interoperability] and choice to best meet customer IT needs.

[removed: Oracle] [added: Oracle] License [removed: Support][added: Support]

Oracle license support offerings [removed: represent our largest revenue stream and] are [added: marketed and sold as] a part of our cloud and license business.

Substantially all of our customers opt to purchase license support contracts when they purchase Oracle [removed: applications, platform and/or] [added: applications and] infrastructure licenses to run within the Oracle Cloud or other cloud-based and on-premise IT environments.

We believe our license support offerings protect and enhance our customers’ [removed: current] investments in Oracle [removed: applications, platform] [added: applications] and infrastructure technologies because they provide proactive and personalized support [removed: services,] [added: services] including Oracle Lifetime Support and unspecified license enhancements and upgrades during the term of the support period.

In recent periods, customer demand [removed: has increased] for our [added: applications and infrastructure technologies delivered through our] Oracle Cloud [removed: Services.][added: Services deployment models has increased.]

To address customer demand and enable customer choice, we have introduced certain programs for customers to pivot their [removed: applications, platform] [added: applications] and infrastructure licenses and license support contracts to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads.

[removed: Applications Technologies][added: Applications Technologies]

Oracle [removed: applications] [added: infrastructure] technologies are marketed, sold and delivered through our cloud and license [added: business and through our hardware] business.

[removed: Our] [added: Oracle] applications technologies consist of comprehensive cloud-based [removed: and license] offerings including our Oracle Cloud SaaS offerings, which are available for customers as a subscription, and Oracle Applications [added: license] offerings, which are available for customers to purchase [removed: as a license] for use in [removed: cloud-based] [added: Oracle Cloud IaaS, other cloud-based,] and on-premise IT environments with the option to purchase related license support.

Our applications technologies are generally designed using industry [removed: standards-based] [added: standard] architectures to manage and automate core business functions across the enterprise, as well as to help customers differentiate and innovate in those processes unique to their industries or organizations.

We also offer industry-specific applications through a focused strategy of investments in internal development and strategic acquisitions, which provide solutions to customers in communications, construction and engineering, financial services, health sciences, hospitality, manufacturing, public [removed: sectors,] [added: sector,] retail and utilities, among [removed: others.][added: other industries.]

[removed: _Oracle] [added: Oracle] Cloud Software as a Service [removed: (SaaS)_][added: (SaaS)]

| --- | --- |

These models include on-premise deployments, cloud-based deployments, and hybrid deployments (an approach that combines both on-premise and cloud-based deployment) such as our Oracle Cloud at Customer offering (an instance of Oracle Cloud in a customer’s own data center).

Accordingly, we offer choice and flexibility to our customers and facilitate the product, service and deployment combinations that best suit our customers’ needs.

| --- | --- | --- |

| --- | --- | --- |

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

Substantially all license support customers renew their support contracts with us upon expiration in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements, which current license support customers are entitled to receive.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

We believe our cloud ERP offerings drive adoption of our other SaaS offerings as our customers realize benefits of a common data model utilized across our SaaS offerings.

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| --- | --- | --- |

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

These technologies are available through subscription to our Oracle Cloud IaaS offerings or with the purchase of a license to run within the Oracle Cloud or other cloud-based and on-premise IT environments and related license support at the customer’s option.

In addition to utilizing our cloud and license business’ infrastructure technologies to modernize approaches to their IT environments, customer interest is increasing for emerging technologies such as IoT, chatbots and AI/ML to automate business processes, reduce human error and provide a platform to build new and innovative applications.

We deliver emerging technologies through certain of our applications and infrastructure technologies, including as a part of Oracle Autonomous Data Warehouse Cloud Service, which is described further below.

Oracle infrastructure technologies are marketed, sold and delivered through our cloud and license business and represented 65%, 66% and 67% of our cloud and license business’ total revenues in fiscal 2019, 2018 and 2017, respectively.

Oracle Generation 2 Cloud infrastructure technology is designed to be differentiated from other cloud vendors to provide better security by separating control code from customer data on separate

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

computers with a different architecture.

Oracle customers and partners also utilize Oracle Cloud IaaS for enterprise-grade compute, storage and networking services.

Our Oracle Cloud IaaS offerings’ compute services range from virtual machines to GPU-based offerings to bare metal servers and include options for dense I/O workloads and high performance computing.

Oracle Cloud IaaS also includes a range of storage offerings including block, object and archive storage services, as well as containers, networking and edge services to help mitigate denial of service attacks on customer networks.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

Oracle Autonomous Database

Oracle Autonomous Database is an Oracle Cloud IaaS offering that utilizes Oracle’s Generation 2 Cloud infrastructure and is designed to deliver performance and scale with automated database operations and policy-driven optimization implemented with machine learning to lower labor costs and reduce human error for routine database administration tasks including maintenance, tuning, patching, security and backup, among others.

Oracle Autonomous Database uses self-driving diagnostics for fault prediction and error handling.

We believe Oracle Autonomous Database can deliver rapid insights and innovation by enabling organizations to quickly provision a data warehouse that automatically and elastically scales to millions of transactions per second while enabling organizations to pay only for the capacity used.

Oracle Autonomous Database offerings include:

| | • | Oracle Autonomous Data Warehouse Cloud Service (ADW), which is designed to be a fully managed, high-performance and elastic service optimized for data warehouse workloads. ADW’s self-patching and self-tuning capabilities are designed to enable upgrades while the database is running, eliminating human error. Oracle ADW automates manual IT tasks such as storing, securing, scaling and backing-up. In addition, the machine learning based technology of ADW is designed to enable customers to deploy new or move existing data marts and data warehouses to the cloud; and |

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| | • | Oracle Autonomous Transaction Processing Cloud Service (ATP), which is designed to enable businesses to safely run a complex mix of high-performance transactions, reporting and batch processing using instant, elastic compute and storage through an Oracle Database running on an Oracle Exadata cloud-based instance. Oracle ATP is designed to enable organizations to conduct real-time transactional data analysis for faster results and lower administration costs, and to eliminate cyber-attacks on unpatched or unencrypted databases. Oracle ATP is designed to be simple and agile to develop and deploy new applications because no complex management or tuning is required. The integration of Oracle ATP with other Oracle Cloud services, such as Java Cloud and Oracle APEX, and the open interfaces and integrations of Oracle ATP provide developers with a modern, open platform to develop new innovative applications. |

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[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

Oracle Infrastructure Technologies – Hardware Business Offerings

Oracle Engineered Systems are pre-integrated products, combining multiple unique Oracle technology components, including database, storage, operating system or middleware software with server, storage and networking hardware and other technologies.

For example, Oracle Exadata Database Machine is a computing platform that is designed to be optimized for running Oracle Database to achieve higher performance and availability at a lower cost by combining Oracle Database, storage and operating system software with Oracle server, storage and networking hardware.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

Our products and services are the building blocks of our Oracle Cloud Services, our partners’ cloud services and our customers’ cloud IT environments.

##### [Table of Contents](#toc)

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Substantially all customers renew their license support contracts annually.

Our comprehensive platform technologies including database, middleware and development tools are available through subscription to our Oracle Cloud PaaS offerings or by the purchase of a license.

Our platform technologies are designed to accommodate demanding, mission-critical business environments using elastic clusters of middleware, database servers and storage.

These elastic clusters are designed to scale incrementally as required to address our customers’ IT capacity requirements, satisfy their planning and procurement needs, support their business applications with a standardized platform architecture, reduce their risk of data loss and IT infrastructure downtime and efficiently utilize available IT resources to meet quality of service expectations.

In addition to utilizing these tools for modernizing their businesses, our customers are looking to build new and innovative applications leveraging emerging technologies such as IoT chatbots and AI/ML.

Today, Oracle delivers applied AI functionality as a part of its Autonomous Data Warehouse Cloud Service, which is designed to deliver simplified, fast and highly elastic support for data warehousing in the Oracle Cloud, eliminating manual configuration, tuning, and scaling tasks and allowing for streamlined operations, more efficient consumption of resources, and higher security and reliability.

Our Cloud Platform technologies are designed with built-in automation at all levels to perform maintenance tasks so our customers can utilize their IT resources to focus on extracting more value from the data they currently manage.

For example, we believe that Oracle applications and platform technologies when combined with Oracle infrastructure technologies deliver improved performance at a lower cost relative to competing infrastructure technologies.

As another example,

These same Oracle technology components are tested together and supported together to streamline the Oracle Engineered System deployment and maintenance cycles.

We also engineer our hardware products with virtualization and management capabilities to enable the rapid deployment and efficient management of cloud and other IT infrastructures.

Oracle Cloud PaaS is designed to provide a broad suite of services to rapidly build, deploy, integrate, analyze, secure and manage all enterprise applications (customer facilities-based and cloud deployed) using a cloud-based IT model that we run, manage, and support on the behalf of the customer for a fee for a stated time period.

Our Oracle Cloud PaaS offerings include, among others, Data Management, Application Development, Integration, Business Analytics, Management and Security Cloud solutions.

_Oracle Cloud Infrastructure as a Service (IaaS)_

Oracle Cloud IaaS offerings are substantially marketed, sold and delivered through our cloud and license business and include our Oracle Cloud Infrastructure and Oracle Managed Cloud Services offerings.

Our Oracle Cloud IaaS offerings include compute offerings such as bare metal servers and virtual machines, among others; storage offerings including block, object and archive storage, among others; and networking cloud offerings.

Oracle Cloud at Customer

_Other Oracle Platform and Infrastructure Offerings_

_Hardware Business_

competitors’ storage products.

Certain of our storage products are offered as a cloud service and cloud at customer service.

Our services business offers the following:

Research and development expenditures were $6.1 billion, $6.2 billion and $5.8 billion in fiscal 2018, 2017 and 2016, respectively, or 15% of total revenues in fiscal 2018 and 16% of total revenues in each of fiscal 2017 and 2016.

Executive Officers of the Registrant

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| Thomas Kurian | | President, Product Development |

Mr. Kurian, 51, has been our President, Product Development since January 2015.

He served as our Executive Vice President, Product Development from July 2009 until January 2015.

He served as our Senior Vice President of Development from February 2001 until July 2009.

Mr. Kurian worked in Oracle Server Technologies as Vice President of Development from March 1999 until February 2001.

He also held various other positions with us since joining Oracle in 1996.

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[removed: ##### [Table of Contents](#toc)][added: TABLE OF CONTENTS]

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[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: | ☒ | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE] [added: THE] SECURITIES EXCHANGE ACT OF [removed: 1934 | | |][added: 1934]

[removed: For] [added: For] the fiscal year ended May 31, [removed: 2018][added: 2019]

[removed: | ☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE] [added: THE] SECURITIES EXCHANGE ACT OF [removed: 1934 | | |][added: 1934]

[removed: For] [added: For] the transition period from [removed: to][added: to]

[removed: Commission] [added: Commission] File Number: [removed: 001-35992][added: 001-35992]

[removed: Oracle Corporation][added: Oracle Corporation]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Delaware |] [added: Delaware] | [removed: 54-2185193] [added: 54-2185193] |

| [removed: (State] [added: (State] or other jurisdiction [removed: of incorporation] [added: of incorporation] or [removed: organization) |] [added: organization)] | [removed: (I.R.S. Employer Identification No.)] [added: (I.R.S. Employer Identification No.)] |

| [removed: 500] [added: 500] Oracle [removed: Parkway |] [added: Parkway] | |

| [removed: Redwood] [added: Redwood] City, [removed: California |] [added: California (Address of principal executive offices)] | [removed: 94065] [added: 94065 (Zip Code)] |

[removed: (650) 506-7000][added: (650) 506-7000]

[removed: (Registrant’s] [added: (Registrant’s] telephone number, including area [removed: code)][added: code)]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [added: Trading Symbol(s)] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| Common Stock, par value $0.01 per share 2.25% senior notes due January 2021 3.125% senior notes due July 2025 | [added: ORCL] | New York Stock Exchange New York Stock Exchange New York Stock Exchange |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:][added: Act:]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Website, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

| Large accelerated filer ☒ | [removed: |] Accelerated filer ☐ |

| Non-accelerated filer ☐ [removed: (Do not check if a smaller reporting company)] | [removed: |] Smaller reporting company ☐ |

| Emerging growth company ☐ | | [removed: |]

The aggregate market value of the voting stock held by non-affiliates of the registrant was [removed: $142,975,778,000] [added: $107,968,269,000] based on the number of shares held by non-affiliates of the registrant as of May 31, [removed: 2018,] [added: 2019,] and based on the closing sale price of common stock as reported by the New York Stock Exchange on November 30, [removed: 2017,] [added: 2018,] which is the last business day of the registrant’s most recently completed second fiscal quarter.

Number of shares of common stock outstanding as of June [removed: 15, 2018: 3,981,155,000.][added: 17, 2019: 3,335,819,000.]

[removed: Documents] [added: Documents] Incorporated by [removed: Reference:][added: Reference:]

Portions of the [removed: registrant’s] [added: registrant's] definitive proxy statement relating to its [removed: 2018] [added: 2019] annual [removed: stockholders’] [added: stockholders'] meeting are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

[removed: FISCAL] [added: FISCAL] YEAR [removed: 2018][added: 2019]

[removed: ANNUAL REPORT][added: ANNUAL REPORT]

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| Item 1. | | [removed: [Business](#toc568983_1) |] [added: [Business](#ITEM_1_BUSINESS)] | | 3 | [removed: |]

| Item 1A. | | [Risk [removed: Factors](#toc568983_2) | |] [added: Factors](#ITEM_1A_RISK_FACTORS)] | [removed: 14] | [added: 16] |

| Item 1B. | | [Unresolved Staff [removed: Comments](#toc568983_3) | |] [added: Comments](#ITEM_1B_UNRESOLVED_STAFF_COMMENTS)] | [removed: 31] | [added: 32] |

| Item 2. | | [removed: [Properties](#toc568983_4) | |] [added: [Properties](#ITEM_2_PROPERTIES)] | [removed: 31] | [added: 32] |

| Item 3. | | [Legal [removed: Proceedings](#toc568983_5) | |] [added: Proceedings](#ITEM_3_LEGAL_PROCEEDINGS)] | [removed: 31] | [added: 32] |

10-K 1 orcl-10k_20190531.htm 10-K

| | ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF |

OR

| | ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF |

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[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

ORACLE CORPORATION

FORM 10-K

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| | | [Signatures](#SIGNATURES) | | 124 |

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[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

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10-K 1 d568983d10k.htm 10-K

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OR

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| (Address of principal executive offices) | | (Zip Code) |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

TABLE OF CONTENTS

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| | | [Signatures](#toc568983_22) | | | 128 | |

| | • | | our expectations regarding the effects of the U.S. Tax Cuts and Jobs Act of 2017 on our tax position and ability to access and use cash and other balances held by certain of our foreign subsidiaries; |

| --- | --- | --- | --- |

| | • | | our beliefs regarding the marketing of our PaaS and IaaS offerings; |

| | • | | our expectation that we will continue to place significant strategic emphasis on growing our cloud offerings; |

| | • | | our intention that we will renew our cloud software as a service (SaaS) and cloud platform as a service (PaaS) and infrastructure as a service (IaaS) contracts and hardware contracts when they are eligible for renewal; |

| | • | | our expectation that we will continue paying comparable cash dividends on a quarterly basis; |

| | • | | our expectation that seasonal trends will continue in the future; |

| --- | --- |

We also own or lease other facilities for current use consisting of approximately [removed: 26.8] [added: 27.7] million square feet in various other locations in the [removed: United States] [added: U.S.] and abroad.

Approximately [removed: 3.0] [added: 3.1] million square feet, or 10%, of our total owned and leased space is sublet or is being actively marketed for sublease or disposition.

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[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

[removed: PART II][added: PART II]

| --- | --- |

##### [Table of Contents](#toc)

Our common stock is traded on the New York Stock Exchange under the symbol “ORCL.” According to the records of our transfer agent, we had [removed: 9,575] [added: 8,970] stockholders of record as of May 31, [removed: 2018.][added: 2019.]

[removed: _Stock] [added: Stock] Repurchase [removed: Program_][added: Program]

On [removed: December 14, 2017] [added: September 17, 2018] and February [removed: 2, 2018,] [added: 15, 2019,] we announced that our Board of Directors approved expansions of our stock repurchase program totaling $24.0 billion.

As of May 31, [removed: 2018,] [added: 2019,] approximately [removed: $17.8] [added: $5.8] billion remained available for stock repurchases pursuant to our stock repurchase program.

The following table summarizes the stock repurchase activity for the three months ended May 31, [removed: 2018] [added: 2019] and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:

| [removed: (in] [added: (in] millions, except per share [removed: amounts)] [added: amounts)] | | [removed: Total] [added: Total] Number [removed: of Shares Purchased] [added: of Shares Purchased] | | | | [removed: Average Price Paid per Share] [added: Average Price Paid per Share] | | | | [removed: Total] [added: Total] Number [removed: of Shares] [added: of Shares] Purchased [removed: as Part] [added: as Part] of [removed: Publicly Announced Program] [added: Publicly Announced Program] | | | | [removed: Approximate Dollar Value] [added: Approximate Dollar Value] of Shares [removed: that May] [added: that May] Yet [removed: Be Purchased Under] [added: Be Purchased Under] the [removed: Program] [added: Program] | | |

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

[removed: _Stock] [added: Stock] Performance Graph and Cumulative Total [removed: Return_][added: Return]

The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Index and the S&P Information Technology Index for each of the last five fiscal years ended May 31, [removed: 2018,] [added: 2019,] assuming an investment of $100 at the beginning of such period and the reinvestment of any dividends.

[removed: ][added: ]

*$100 INVESTED ON MAY 31, [removed: 2013] [added: 2014] IN STOCK OR

| March 1, 2019—March 31, 2019 | | | 58.0 | | | $ | 52.93 | | | | 58.0 | | | $ | 8,780.5 | |

| April 1, 2019—April 30, 2019 | | | 29.1 | | | $ | 54.41 | | | | 29.1 | | | $ | 7,198.4 | |

| May 1, 2019—May 31, 2019 | | | 24.9 | | | $ | 54.11 | | | | 24.9 | | | $ | 5,848.4 | |

| Total | | | 112.0 | | | $ | 53.57 | | | | 112.0 | | | | | |

| | | 5/14 | | | | 5/15 | | | | 5/16 | | | | 5/17 | | | | 5/18 | | | | 5/19 | | |

| Oracle Corporation | | | 100.0 | | | | 104.8 | | | | 98.4 | | | | 112.8 | | | | 118.0 | | | | 129.9 | |

| S&P 500 Index | | | 100.0 | | | | 111.8 | | | | 113.7 | | | | 133.6 | | | | 152.8 | | | | 158.6 | |

| S&P Information Technology Index | | | 100.0 | | | | 118.8 | | | | 122.5 | | | | 163.9 | | | | 210.2 | | | | 219.4 | |

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

The following table sets forth the low and high sale prices per share of our common stock, based on the last daily sale, in each of our last eight fiscal quarters.

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| | | Fiscal 2018 | | | | | | | | Fiscal 2017 | | | | | | |

| | | Low Sale Price | | | | High Sale Price | | | | Low Sale Price | | | | High Sale Price | | |

| Fourth Quarter | | $ | 44.79 | | | $ | 52.97 | | | $ | 42.44 | | | $ | 45.73 | |

| Third Quarter | | $ | 46.63 | | | $ | 52.75 | | | $ | 38.45 | | | $ | 43.17 | |

| Second Quarter | | $ | 47.92 | | | $ | 52.80 | | | $ | 37.93 | | | $ | 41.25 | |

| First Quarter | | $ | 44.68 | | | $ | 51.17 | | | $ | 38.44 | | | $ | 41.77 | |

We declared and paid cash dividends totaling $0.76 and $0.64 per outstanding common share over the course of fiscal 2018 and fiscal 2017, respectively.

In June 2018, our Board of Directors declared a quarterly cash dividend of $0.19 per share of our outstanding common stock payable on July 31, 2018 to stockholders of record as of the close of business on July 17, 2018.

We currently expect to continue paying comparable cash dividends on a quarterly basis; however, future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.

| March 1, 2018—March 31, 2018 | | | 35.5 | | | $ | 48.68 | | | | 35.5 | | | $ | 21,120.5 | |

| April 1, 2018—April 30, 2018 | | | 33.8 | | | $ | 45.72 | | | | 33.8 | | | $ | 19,576.4 | |

| May 1, 2018—May 31, 2018 | | | 37.2 | | | $ | 46.46 | | | | 37.2 | | | $ | 17,848.4 | |

| Total | | | 106.5 | | | $ | 46.97 | | | | 106.5 | | | | | |

##### [Table of Contents](#toc)

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| | | 5/13 | | | | 5/14 | | | | 5/15 | | | | 5/16 | | | | 5/17 | | | | 5/18 | | |

| Oracle Corporation | | | 100.0 | | | | 126.1 | | | | 132.1 | | | | 124.0 | | | | 142.3 | | | | 148.8 | |

| S&P 500 Index | | | 100.0 | | | | 120.5 | | | | 134.7 | | | | 137.0 | | | | 160.9 | | | | 184.1 | |

| S&P Information Technology Index | | | 100.0 | | | | 123.9 | | | | 147.2 | | | | 151.8 | | | | 203.1 | | | | 260.4 | |

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN” Among Oracle Corporation, the S&P 500 Index and the S&P Information Technology Index

Over our last five fiscal years, we have acquired a number of companies, including NetSuite Inc. (NetSuite) in fiscal [removed: 2017 and MICROS Systems, Inc. in fiscal 2015, among others.][added: 2017.]

| | | [removed: As] [added: As] of and for the Year Ended May [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | |

| [removed: (in] [added: (in] millions, except per share [removed: amounts)] [added: amounts)] | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018(4)] | | | | [removed: 2016] [added: 2017(4)] | | | | [removed: 2015] [added: 2016(4)] | | | | [removed: 2014] [added: 2015(4)] | | |

| [removed: Consolidated] [added: Consolidated] Statements of Operations [removed: Data:] [added: Data:] | | | | | | | | | | | | | | | | | | | | |

| Total revenues | | $ | [removed: 39,831] [added: 39,506] | | | $ | [removed: 37,728] [added: 39,383] | | | $ | [removed: 37,047] [added: 37,792] | | | $ | [removed: 38,226] [added: 37,047] | | | $ | [removed: 38,275] [added: 38,226] | |

| Operating income | | $ | [removed: 13,679] [added: 13,535] | | | $ | [removed: 12,710] [added: 13,264] | | | $ | [removed: 12,604] [added: 12,913] | | | $ | [removed: 13,871] [added: 12,604] | | | $ | [removed: 14,759] [added: 13,871] | |

| Net income(1) | | $ | [removed: 3,825] [added: 11,083] | | | $ | [removed: 9,335] [added: 3,587] | | | $ | [removed: 8,901] [added: 9,452] | | | $ | [removed: 9,938] [added: 8,901] | | | $ | [removed: 10,955] [added: 9,938] | |

| Earnings per share—diluted(1) | | $ | [removed: 0.90] [added: 2.97] | | | $ | [removed: 2.21] [added: 0.85] | | | $ | [removed: 2.07] [added: 2.24] | | | $ | [removed: 2.21] [added: 2.07] | | | $ | [removed: 2.38] [added: 2.21] | |

| Diluted weighted average common shares outstanding | | | [removed: 4,238] [added: 3,732] | | | | [removed: 4,217] [added: 4,238] | | | | [removed: 4,305] [added: 4,217] | | | | [removed: 4,503] [added: 4,305] | | | | [removed: 4,604] [added: 4,503] | |

| Cash dividends declared per common share | | $ | [removed: 0.76] [added: 0.81] | | | $ | [removed: 0.64] [added: 0.76] | | | $ | [removed: 0.60] [added: 0.64] | | | $ | [removed: 0.51] [added: 0.60] | | | $ | [removed: 0.48] [added: 0.51] | |

| [removed: Consolidated] [added: Consolidated] Balance Sheets [removed: Data:] [added: Data:] | | | | | | | | | | | | | | | | | | | | |

| Working capital(2) | | $ | [removed: 56,769] [added: 27,756] | | | $ | [removed: 50,337] [added: 57,035] | | | $ | [removed: 47,105] [added: 50,995] | | | $ | [removed: 47,314] [added: 47,105] | | | $ | [removed: 32,954] [added: 47,314] | |

| Total assets(2) | | $ | [removed: 137,264] [added: 108,709] | | | $ | [removed: 134,991] [added: 137,851] | | | $ | [removed: 112,180] [added: 136,003] | | | $ | [removed: 110,903] [added: 112,180] | | | $ | [removed: 90,266] [added: 110,903] | |

| Notes payable and other borrowings(3) | | $ | [removed: 60,619] [added: 56,167] | | | $ | [removed: 57,909] [added: 60,619] | | | $ | [removed: 43,855] [added: 57,909] | | | $ | [removed: 41,958] [added: 43,855] | | | $ | [removed: 24,097] [added: 41,958] | |

| (1) | Our net income and diluted earnings per share were [removed: unfavorably] impacted [removed: by a net charge of $7.0 billion during] [added: in] fiscal [added: 2019 and] 2018 [removed: due to our preliminary assessment of] [added: by] the [removed: one-time] effects of the U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act). The more significant provisions of the Tax Act as applicable to us are described below under “Impacts of the U.S. Tax Cuts and Jobs Act of 2017”. |

| (2) | [removed: Total working] [added: Working] capital and total assets [added: decreased in fiscal 2019 primarily due to $36.1 billion of cash used for repurchases of our common stock during fiscal 2019 and also due to dividend payments, partially offset by the favorable impacts to our net current assets resulting from our fiscal 2019 net income. Working capital and total assets] sequentially increased in nearly all [added: of the fiscal 2015 to 2018] periods presented primarily due to the favorable impacts to our net current assets resulting from our net income generated during [removed: all] [added: the] periods presented and the issuances of long-term senior notes of $10.0 billion in fiscal 2018, [added: and] $14.0 billion in fiscal [removed: 2017, $20.0 billion in fiscal 2015, and €2.0 billion] [added: 2017. These working capital] and [removed: $3.0 billion in fiscal 2014. Our] total assets [removed: were also favorably impacted by the issuance of $2.5 billion of short-term borrowings in fiscal 2018, and $3.8 billion of short-term borrowings in each of fiscal 2017 and 2016. These] increases were partially offset by cash used for acquisitions, repurchases of our common stock and dividend payments [removed: made] in [added: the fiscal 2015 to 2018 periods presented. In addition, our total assets were also affected in] all periods [removed: presented,] [added: presented by the] repayments of [removed: certain of our senior] notes [removed: in fiscal 2018, 2017, 2016 and 2015,] [added: payable] and [removed: the repayment of $3.8 billion of short-term] [added: other] borrowings [removed: in each of fiscal 2018 and 2017.] [added: as discussed further below.] |

| (3) | Our notes payable and other borrowings, which represented the summation of our notes payable and other borrowings, current, and notes payable and other borrowings, non-current, as reported per our consolidated balance sheets as of the dates listed in the table above, [added: decreased during fiscal 2019 primarily due to repayments of certain short-term borrowings and senior notes. Notes payable and other borrowings] increased between fiscal [removed: 2014] [added: 2015] and [removed: fiscal] 2018 primarily due to the fiscal 2018 issuance of long-term senior notes of $10.0 billion and short-term borrowings of $2.5 billion, the fiscal 2017 issuance of long-term senior notes of $14.0 billion and short-term borrowings of $3.8 billion, [added: and] the fiscal 2016 [removed: issuance of $3.8 billion of] short-term [removed: borrowings, the issuances of long-term senior notes] [added: borrowings] of [removed: $20.0 billion in fiscal 2015, and €2.0 billion and $3.0 billion in fiscal 2014.] [added: $3.8 billion.] See Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional information regarding our notes payable and other borrowings. |

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

| --- | --- |

| (4) | The summary consolidated financial data for the fiscal years ended and as of May 31, 2018 and 2017 have been retrospectively restated to reflect the adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers: Topic 606 and subsequent amendments to the initial guidance: ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20, ASU 2017-10, ASU 2017-13 and ASU 2017-14 (collectively, Topic 606), and ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the presentation of Net Periodic Pension Costs and Net Periodic Postretirement Benefit Costs (ASU 2017-07). See Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for a summary of adjustments related to Topic 606 and ASU 2017-07. The summary consolidated financial data for the fiscal years ended and as of May 31, 2016 and 2015 have not been updated to reflect the adoption of Topic 606 or ASU 2017-07. |

| --- | --- |

| | | | | | | | | | | | | | | | | | | | | |

##### [Table of Contents](#toc)

| --- | --- |

| --- | --- |

[removed: _Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures_][added: Procedures]

Based on our management’s evaluation (with the participation of our Principal Executive Officers, one of whom is our Principal Financial Officer), as of the end of the period covered by this report, our Principal Executive Officers have concluded that our disclosure controls and procedures were effective as of May 31, [removed: 2018] [added: 2019] to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our Principal Executive Officers (one of whom is our Principal Financial Officer) as appropriate to allow timely decisions regarding required disclosure.

[removed: _Management’s] [added: Management’s] Report on Internal Control over Financial [removed: Reporting_][added: Reporting]

Under the supervision and with the participation of our management, including our Principal Executive Officers (one of whom is our Principal Financial Officer), we conducted an evaluation of the effectiveness of our internal control over financial reporting as of May 31, [removed: 2018] [added: 2019] based on the guidelines established in [removed: _Internal] [added: Internal] Control—Integrated [removed: Framework_] [added: Framework] issued by the Committee of Sponsoring Organizations of the Treadway Commission’s 2013 framework.

Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of May 31, [removed: 2018.][added: 2019.]

The effectiveness of our internal control over financial reporting as of May 31, [removed: 2018] [added: 2019] has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Part IV, Item 15 of this Annual Report.

[removed: _Changes] [added: Changes] in Internal Control over Financial [removed: Reporting_][added: Reporting]

[removed: _Inherent] [added: Inherent] Limitations on Effectiveness of [removed: Controls_][added: Controls]

Our management, including our Principal Executive Officers (one of whom is our Principal Financial Officer), believes that our disclosure controls and procedures and internal control over financial reporting are designed [added: to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level.]

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

| --- | --- |

We implemented internal controls to ensure we adequately evaluated our contracts and properly assessed the impact of the new accounting standard related to revenue recognition on our financial statements to facilitate its adoption on June 1, 2018.

There were no significant changes to our internal control over financial reporting due to the adoption of the new standard.

##### [Table of Contents](#toc)

to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level.

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

[removed: PART III][added: PART III]

| --- | --- |

##### [Table of Contents](#toc)

The other information required by this Item 10 is incorporated by reference from the information contained in our Proxy Statement to be filed with the U.S. Securities and Exchange Commission in connection with the solicitation of proxies for our [removed: 2018] [added: 2019] Annual Meeting of Stockholders [removed: (2018] [added: (2019] Proxy Statement) under the sections entitled “Board of Directors—Nominees for Directors,” “Board of Directors—Committees, Membership and Meetings,” “Board of Directors—Committees, Membership and Meetings—The Finance and Audit Committee,” “Corporate Governance—Employee Matters—Code of Conduct,” and [removed: “Section] [added: “Delinquent Section] 16(a) [removed: Beneficial Ownership Reporting Compliance.”][added: Reports.”]

The information required by this Item 11 is incorporated by reference from the information to be contained in our [removed: 2018] [added: 2019] Proxy Statement under the sections entitled “Board of Directors—Committees, Membership and Meetings—The Compensation Committee—Compensation Committee Interlocks and Insider Participation,” “Board of Directors—Director Compensation,” and “Executive Compensation.”

The information required by this Item 12 is incorporated herein by reference from the information to be contained in our [removed: 2018] [added: 2019] Proxy Statement under the sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation—Equity Compensation Plan Information.”

The information required by this Item 13 is incorporated herein by reference from the information to be contained in our [removed: 2018] [added: 2019] Proxy Statement under the sections entitled “Corporate Governance—Board of Directors and Director Independence” and “Transactions with Related Persons.”

The information required by this Item 14 is incorporated herein by reference from the information to be contained in our [removed: 2018] [added: 2019] Proxy Statement under the section entitled “Ratification of Selection of Independent Registered Public Accounting Firm.”

[removed: #####] [Index to Financial [removed: Statements](#INDEX)][added: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)]

[removed: PART IV][added: PART IV]

##### [Table of Contents](#toc)

[added: | (a) | 1.] Financial [removed: Statements][added: Statements |]

| | | [removed: Page | |] [added: Page] |

| [Reports of Independent Registered Public Accounting [removed: Firm](#tx568983_1) | |] [added: Firm](#REPORT_INDEPENDENT_REGISTERED_PUBLIC_ACC)] | [removed: 72] | [added: 65] |

| Consolidated Financial Statements: | | | [removed: | |]

| [Balance Sheets as of May 31, [removed: 2018] [added: 2019] and [removed: 2017](#tx568983_2) | |] [added: 2018](#CONSOLIDATED_BALANCE_SHEETS)] | [removed: 74] | [added: 67] |

| [Statements of Operations for the years ended May 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#tx568983_3) | |] [added: 2017](#CONSOLIDATED_STATEMENTS_OPERATIONS)] | [removed: 75] | [added: 68] |

| [Statements of Comprehensive Income for the years ended May 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#tx568983_4) | |] [added: 2017](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] | [removed: 76] | [added: 69] |

| [Statements of Equity for the years ended May 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#tx568983_5) | |] [added: 2017](#CONSOLIDATED_STATEMENTS_EQUITY)] | [removed: 77] | [added: 70] |

| [Statements of Cash Flows for the years ended May 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016](#tx568983_6) | |] [added: 2017](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] | [removed: 78] | [added: 71] |

[removed: | [Notes to Consolidated Financial Statements](#tx568983_7) | | | 79 | |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

[removed: | 2.] Financial Statement [removed: Schedules | | | | |][added: Schedules]

[removed: |] The following financial statement schedule is filed as a part of this report: [removed: | | | | |]

| [Schedule II. Valuation and Qualifying [removed: Accounts](#tx568983_8) | |] [added: Accounts](#SCHEDULE_II)] | [removed: 124] | [added: 118] |

[removed: (b) Exhibits][added: (b) Exhibits]

[removed: ##### [Index to] [added: Basis of] Financial [removed: Statements](#INDEX)][added: Statements]

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the accompanying consolidated balance sheets of Oracle Corporation (the Company) as of May 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended May 31, [removed: 2018,] [added: 2019,] and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company at May 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the consolidated results of its operations and its cash flows for each of the three years in the period ended May 31, [removed: 2018,] [added: 2019,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the [removed: Company’s] [added: Company's] internal control over financial reporting as of May 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated June [removed: 22, 2018] [added: 21, 2019] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Opinion] [added: Opinion] on Internal Control [removed: over] [added: Over] Financial [removed: Reporting][added: Reporting]

We have audited Oracle Corporation’s internal control over financial reporting as of May 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal [removed: Control—Integrated] [added: Control— Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway [added: Commission] (2013 framework)(the COSO criteria).

In our opinion, Oracle Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of May 31, [removed: 2018,] [added: 2019,] based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of [removed: the Company] [added: Oracle Corporation] as of May 31, [removed: 2018 and 2017,] [added: 2019] and [added: 2018,] the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended May 31, [removed: 2018,] [added: 2019,] and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 and our report June [removed: 22, 2018] [added: 21, 2019] expressed an unqualified opinion thereon.

[removed: Definition] [added: Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting]

[removed: ORACLE CORPORATION][added: ORACLE CORPORATION]

[removed: CONSOLIDATED] [added: CONSOLIDATED] BALANCE [removed: SHEETS][added: SHEETS]

[removed: As] [added: As] of May 31, [removed: 2018] [added: 2019] and [removed: 2017][added: 2018]

| | | [removed: May 31,] [added: May 31,] | | | | | | |

| [removed: (in] [added: (in] millions, except per share [removed: data)] [added: data)] | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | [added: | 2017 | | |]

| [removed: ASSETS] [added: ASSETS] | | | | | | | | |

| Cash and cash equivalents | | $ | [removed: 21,620] [added: 20,514] | | | $ | [removed: 21,784] [added: 21,620] | |

| Marketable securities | | | [removed: 45,641] [added: 17,313] | | | | [removed: 44,294] [added: 45,641] | |