Oracle (ORCL) 10-K risk factor changes: FY2021 vs FY2020

The following discussion, as well as our “Critical Accounting Policies and Estimates” discussion in [added: Item 7] Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations (Item 7),] [added: Operations,] highlights some of these risks.

The COVID-19 pandemic has affected how we and our customers are operating our respective businesses, and the duration and extent to which this will impact our future results of operations [removed: and our overall financial performance] remains uncertain.

It is not clear what [removed: the potential] long-term effects [removed: of any such alterations or modifications may] [added: the COVID-19 pandemic will] have on our business, including the effects on our customers and prospects.

The conditions caused by the COVID-19 pandemic [removed: have] [added: initially] adversely affected our customers’ willingness to purchase our [removed: products and] [added: products,] delayed prospective customers’ purchasing [removed: decisions.][added: decisions and in certain cases, resulted in delayed payments by existing customers.]

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

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

Enterprise customers rely on our cloud, license and hardware offerings and related services to run their businesses and errors in our cloud, license and hardware offerings and related services could expose us to product liability, [added: performance and warranty claims as well as significant harm to our brand and reputation, which could impact our future sales.]

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, [removed: all] [added: any] of which could reduce our revenue and earnings, increase our expenses and expose us to legal claims and regulatory actions.

[removed: We are in the IT business, and our] [added: Our] products and services, including [removed: our] Oracle Cloud Services, store, retrieve, manipulate and manage [added: third-party data, such as] our customers’ information and data, [removed: external data,] as well as our own data.

[removed: At times, we encounter] [added: We and our third-party vendors are regularly subject to] attempts by third parties (which may include individuals or groups of hackers and sophisticated organizations, such as state-sponsored organizations, nation states and individuals sponsored by them) to identify and exploit product and service vulnerabilities, penetrate or bypass our security measures, and gain unauthorized access to our or our customers’, partners’ and suppliers’ software, hardware and cloud offerings, networks and [removed: systems, any of which could lead to the compromise of personal information or the confidential information or data of Oracle or our customers.][added: systems.]

[removed: Computer hackers and others may be able to develop and deploy IT related] [added: Attempts of this nature typically involve IT-related] viruses, worms, and other malicious software programs that [removed: could] attack [removed: our] networks, systems, products and services, exploit potential security vulnerabilities of [removed: our] networks, systems, products and services, create system disruptions and cause shutdowns or denials of service.

[removed: 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] [added: 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.

Because the techniques used to obtain unauthorized access to, or sabotage IT [removed: systems] [added: systems,] change frequently, grow more complex over time, and often are not recognized until launched against a target, we may be unable to anticipate or implement adequate measures to prevent such techniques.

However, our business policies and internal security controls may not keep pace with these changes as new threats [removed: emerge.]

In addition, we often experience increased activity of this nature during times of instability, including during the [added: current] COVID-19 [removed: pandemic,] [added: pandemic] when [added: most of] our [added: employees are working from home, and our] operations may be more susceptible to malfeasance due to operational changes instituted to comply with safety, health and regulatory requirements, among others.

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

[removed: Customers could] [added: If our customers] lose confidence in the security and reliability of our products and services, including our cloud offerings, and perceive them to not be [added: secure, they may decide to reduce or terminate their spend with us.]

[removed: These types of] [added: In addition, cyber-attacks and other] security incidents could [removed: also] lead to [added: significant investigation and remediation costs,] loss or destruction of information, [added: interruption of our operations,] inappropriate use of proprietary and sensitive data, lawsuits, indemnity obligations, regulatory investigations and financial penalties, and claims and increased legal liability, including in some cases contractual costs related to customer notification and fraud monitoring.

Our products operate in conjunction with and are dependent on [removed: products and components across] a [removed: broad ecosystem.][added: wide variety of third-party products, components and services.]

In the wake of the European Union [added: (EU)] 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 we are not deemed to be in compliance, could result in enforcement actions and/or fines.

This is true in the [removed: U.S., where] [added: U.S. where, for example,] the California Consumer Privacy Act (CCPA) became effective in January 2020, the U.S. Congress is considering several privacy bills at the federal level, and other state legislatures are considering privacy laws.

For example, one European data protection regulator has fined a major U.S. technology company [removed: EUR 50] [added: €50] million for its data handling practices.

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

Although we have implemented contracts, [added: diligence programs,] policies and procedures designed to ensure compliance with applicable laws and regulations, there can be no assurance that our employees, contractors, partners, [added: suppliers,] data providers or agents will not violate such laws and regulations or our contracts, policies and procedures.

Macroeconomic developments [removed: like] [added: such as] the [added: global economic effects resulting from the COVID-19 pandemic, the] United Kingdom leaving the EU (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.

In addition, international, regional or domestic political unrest and the related potential impact on global stability, terrorist attacks and the potential for other hostilities in various parts of the world, public health crises such as the [removed: outbreak of the novel coronavirus COVID-19,] [added: COVID-19 pandemic,] and natural disasters continue to contribute to a climate of economic and political uncertainty that could adversely affect our results of operations and financial condition, including our revenue growth and profitability.

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

The intense competition we face in the sales of our products and services and general economic and business conditions [removed: can] [added: could] put pressure on us to change our prices.

[removed: Any future changes] [added: Changes] to our prices and pricing policies could cause our revenues to decline or be delayed as our sales force implements and our customers adjust to the new pricing policies.

[added: We derive a substantial portion of our revenues from, and have significant operations, outside of the U.S.] Compliance with international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in foreign jurisdictions.

These laws and regulations include [removed: U.S. laws and local laws which include] data privacy requirements, labor relations laws, tax laws, foreign currency-related regulations, [removed: anti-competition] [added: competition] regulations, anti-bribery laws and other laws prohibiting payments to governmental officials such as the U.S. Foreign Corrupt Practices Act (FCPA), market access regulations, tariffs, and import, export and general trade regulations, including but not limited to economic sanctions and embargos.

Any such violations could result in prohibitions on our ability to offer our products and services in one or more countries, could delay or prevent potential acquisitions and could also [removed: materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results.]

Compliance with these laws [added: also] requires a significant amount of management attention and effort, which may divert management’s attention from running our business operations and could harm our ability to grow our business, or may increase our expenses as we engage specialized or other additional resources to assist us with our compliance efforts.

| | • | general economic [removed: conditions, including the latency in economic impacts and associated economic recoveries, if any,] [added: conditions] in each country or region; |

The variety of risks and challenges listed above could also disrupt or otherwise negatively impact [removed: the] [added: our] supply chain operations [removed: for our hardware business] and [removed: the] sales of our products and services in affected countries or regions.

Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality technical support, could adversely affect our reputation, our ability to sell [added: and renew] our applications and infrastructure offerings to existing and prospective customers, and our business, operating results, and financial position.

A substantial portion of [removed: the revenue value of] our cloud [removed: license and on-premise] license, [added: on-premise license] and hardware contracts is completed in the latter part of a [removed: quarter] [added: quarter,] and a significant percentage of these [removed: are] [added: is comprised of] larger value orders.

[removed: Our ultimate realized] loss or gain with respect to currency fluctuations will generally depend on the size and type of cross-currency exposures that we enter into, the currency exchange rates associated with these exposures and changes in those rates, whether we have entered into foreign currency forward contracts to offset these exposures and [added: any related fees paid to purchase such contracts, and] other factors.

We are currently restructuring our workforce and in the past we have restructured or made other adjustments to our workforce in response to management changes, product changes, performance issues, change in strategies, acquisitions and other internal [added: and external considerations.]

In addition, we may not achieve or sustain the expected growth, resource redeployment or cost savings benefits of these [removed: restructurings, or may not do so within the expected timeframe.]

Business and Operational Risks

The COVID-19 pandemic and efforts to control its spread have materially affected how we, our customers, partners and suppliers are operating our businesses.

Our operations have been negatively affected by a range of external factors related to the COVID-19 pandemic that are not within our control.

For example, the COVID-19 pandemic has led governments to implement preventative measures to contain or control further spread of the virus, such as travel restrictions, prohibitions of non-essential activities, quarantines, work-from-home directives and shelter-in-place orders.

These preventative measures led to sharp reductions in demand in certain industries in which our customers operate.

During fiscal 2021, we cancelled some customer events and transformed others, including Oracle OpenWorld, to virtual events.

Our shift to creating virtual customer events may not be successful and we may not be able to showcase our products as well as we have historically done through in-person events, or generate the same customer interest, opportunities and leads through these virtual events.

If we attempt to reintroduce large in-person events, we may not be able to do so successfully and our customers may not be able or willing to attend them.

There have also been, and likely will continue to be, delays in our supply chain.

The negative impacts of the global COVID-19 pandemic on the broader global economy and related impacts on our customers’ business operations and their demand for our products may continue into future fiscal periods.

The COVID-19 pandemic may also heighten other risks described in this Risk Factors section.

| | • | we are unable to increase our existing data center capacity or establish data centers in new geographic locations in a timely manner to meet current or expected customer demand; |

Mergers, consolidations or alliances among our competitors, or acquisitions of our competitors by large companies, may result in increased competition.

availability or other business constraints.

restructurings, or may not do so within the expected timeframe.

In response to the COVID-19 pandemic and to ensure the safety of our employees, we have temporarily closed the majority of our offices.

In fiscal 2021, we moved our headquarters to Austin, Texas and announced a modern approach to work that may provide our employees more flexibility to choose where and how to work.

Depending on their role, this means that, when our offices reopen after the COVID-19 pandemic, many employees can choose their office location, as well as continue to work from home some or all the time.

While we believe this may help us engage with a wider pool of talent and may help to retain employees who want or need more flexibility, it could negatively impact employee productivity and it may present risks for our real estate portfolio and strategy.

We intend to reopen our offices when it is safe to do so and local requirements allow, but our employees who opt to return to the office may nevertheless be exposed to health risks, which may expose us to potential liability.

| | • | we may fail to identify or assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquiring a company or technology; |

| | • | we may be unable to obtain required approvals from governmental authorities under competition and antitrust laws on a timely basis, if at all; |

| | | acquisition if we cannot obtain the necessary funding to complete the acquisition in a timely manner or on favorable terms; and |

Data Privacy, Security and Intellectual Property Risks

Nonetheless, we believe that Oracle in particular is an attractive target for computer hackers and other bad actors because Oracle stores and processes large amounts of data, including in customer sectors involving particularly sensitive data such as health sciences, financial services, retail, hospitality and the government.

Successful attempts by one of these malicious actors can lead to the compromise of personal information or the confidential information or data of Oracle or our customers.

Our products and services, including our Oracle Cloud Services, may also be accessed or modified improperly as a result of customer, partner, employee, contractor or supplier error or malfeasance.

Our remediation efforts may not be successful.

emerge.

Our patents may be invalidated or circumvented.

In addition, the laws of some countries do not provide the same level of intellectual property protection as U.S. laws and courts.

Legal and Regulatory Risks

An adverse decision

We may be subjected to increased taxes due to changes in U.S. or international tax laws or from adverse resolutions of tax audits and controversies.

Significant uncertainties exist with respect to the application of the various taxes to the businesses in which we engage, often requiring that we make judgments in determining our tax liabilities and worldwide provision for income taxes.

We are regularly under audit by tax authorities in the U.S. and internationally, which can lead to disagreements such as regarding our intercompany transfer prices and calculations and on the applicability of withholding taxes to our cross-border transactions.

Various measures are being discussed, including adjustments to the manner in which taxable profits are allocated among jurisdictions, as well as the limitation of deductions for, or the imposition of additional withholding taxes on, intercompany payments.

Our future income tax provision and tax rate could significantly increase if such tax law changes are enacted in the U.S. or in countries in which we do business.

In addition, changes in the valuation of our deferred tax assets or liabilities could negatively impact our income tax provision.

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

A novel strain of coronavirus (COVID-19) was first identified in late calendar year 2019 and subsequently declared a pandemic by the World Health Organization in March 2020.

The long-term impacts, if any, of the global COVID-19 pandemic on our business are currently unknown.

We are conducting business as usual with modifications to employee travel, employee work locations, and cancellation of certain marketing events, among other modifications.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders.

We have observed other companies, including customers and partners, taking precautionary and preemptive actions to address the COVID-19 pandemic.

Such companies may take further actions that alter their normal business operations if there are future spikes of COVID-19 infections resulting in additional government mandated shutdowns.

The impacts of the global COVID-19 pandemic on the broader global economy have been swift, dramatic and unpredictable.

The latency and duration of these impacts are diverse across geographies and jurisdictions in which we market, sell and develop our offerings.

The depth and duration of the current economic declines attributable to the COVID-19 pandemic, and any potential economic recoveries, are not currently known.

In the fourth quarter of fiscal 2020 we experienced revenue declines compared to the fourth quarter of fiscal 2019 and delayed payments from customers.

The effect of the pandemic for fiscal 2021 and future periods is unknown.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

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performance and warranty claims as well as significant harm to our brand and reputation, which could impact our future sales.

This is also true for third-party data, products or services incorporated into our own.

Security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting IT products and businesses.

Although this is an industry-wide problem that affects software and hardware companies generally, it affects Oracle in particular because computer hackers tend to focus their efforts on the most prominent IT companies, and they may focus on Oracle because of our reputation for, and marketing efforts associated with, having secure products and services.

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 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.

secure.

This could lead to fewer customers using our products and services and result in reduced revenues and earnings.

The costs we would incur to address and fix these security incidents would increase our expenses.

We face intense competition in all aspects of our business.

We introduced Oracle Bring Your Own License (BYOL) and Universal Credit Pricing to simplify the way customers purchase and consume our cloud services.

Oracle BYOL enables customers to maintain their existing software licenses for Oracle Infrastructure while expanding their IaaS footprint at a discounted price.

Oracle Universal Credit Pricing provides a flexible model for customers to access Oracle Infrastructure services on demand via a single contract.

We derive a substantial portion of our revenues from, and have significant operations, outside of the U.S. Our international operations include cloud operations, cloud, software and hardware development, manufacturing, assembly, sales, customer support, consulting and other services and shared administrative service centers.

We may fail to achieve our financial forecasts due to inaccurate sales forecasts or other factors.

As a result, our quarterly operating results can fluctuate.

For our Oracle Cloud Services, our actual conversion or renewal rates may differ from those used in our forecasts because this business is continuing to evolve and such rates may be unpredictable which could have an adverse effect on our long-term results.

For our license business, we use a “pipeline” system, a common industry practice, to forecast sales and trends in that business.

Our sales personnel monitor the status of all proposals and estimate when a customer will make a purchase decision and the dollar amount of the sale.

These estimates are aggregated periodically to generate a sales pipeline.

Our pipeline estimates can be unreliable both in a particular quarter and over a longer period of time, in part because the conversion rate or closure rate of the pipeline into contracts can be very difficult to estimate.

A reduction in the conversion rates, renewal rates, or in the pipeline itself, could adversely affect our business or results of operations.

In particular, sudden shifts in regional or global economic activity such as those being experienced with the COVID-19 pandemic, a slowdown in IT spending or economic conditions generally can unexpectedly reduce the conversion rates and renewal rates in particular periods as purchasing decisions are delayed, reduced in amount or cancelled.

The conversion rates can also be affected by the tendency of some of our customers to wait until the end of a fiscal period in the hope of obtaining more favorable terms, which can also impede our ability to negotiate, execute and deliver upon these contracts in a timely manner.

In addition, for newly acquired companies, we have limited ability to predict how their pipelines

will convert into sales or revenues for a number of quarters following the acquisition.

Conversion rates and renewal rates post-acquisition may be quite different from the acquired companies’ historical conversion rates.

Differences in conversion rates and renewal rates can also be affected by changes in business practices that we implement in our newly acquired companies.

We then provide a more detailed analysis of our results of operations and financial [removed: condition.][added: condition for fiscal 2021 compared to fiscal 2020.]

Our products and services include [added: enterprise] applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models.

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

The descriptions set forth below as a part of [removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations] [added: this Item 7] and the information contained within [added: Item 1 Business and] Note 15 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report provide additional information related to our businesses and operating segments and align to how our chief operating decision makers (CODMs), which include our Chief Executive Officer and Chief Technology Officer, view our operating results and allocate resources.

For a discussion of the impacts on and risks to our business from COVID-19, please refer to “Impacts of the COVID-19 Pandemic on Oracle’s Business” included in Item 1 Business in this Annual Report, the risks included in Item 1A Risk Factors in this Annual Report and the information presented below in [removed: Results] [added: “Results] of [removed: Operations] [added: Operations”] in this Item 7.

Our cloud and license [removed: line of] business, which represented [added: 84% and] 83% of our total revenues in [removed: each of] fiscal [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020, respectively,] markets, sells and delivers a broad spectrum of [added: enterprise] applications and infrastructure technologies through our cloud and license offerings.

[added: | | • |] Cloud services and license support [removed: revenues] [added: revenues, which] include: [added: |]

| | [removed: •] [added: o] | license support revenues, which are earned by providing Oracle license support services to customers that have elected to purchase support services in connection with the purchase of Oracle applications and infrastructure software licenses for use in cloud, on-premise and other IT environments. Substantially all license support customers renew their support contracts with us upon expiration in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements, which current license support customers are entitled to receive. License support contracts are generally priced as a percentage of the net fees paid by the customer to purchase a cloud license and/or on-premise license; are generally billed in advance of the support services being performed; are generally renewed at the customer’s option; and are generally [removed: recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year; and] |

| | [removed: •] [added: o] | cloud services revenues, which provide customers access to Oracle Cloud applications and infrastructure technologies via cloud-based deployment models that Oracle develops, provides unspecified updates and enhancements for, [added: deploys,] hosts, manages and supports and that customers access by entering into a subscription agreement with us for a stated period. [removed: The majority of our] Oracle Cloud Services [added: arrangements are generally billed in advance of the cloud services being performed; generally have durations of one to three years; are generally renewed at the customer’s option; and are generally recognized as revenues ratably over the contractual period of the cloud contract or, in the case of usage model contracts, as the cloud services are consumed over time.] |

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

Providing choice and flexibility to our customers as to when and how they deploy [removed: our] [added: Oracle] applications and infrastructure technologies are important elements of our corporate strategy.

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

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

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 [removed: ratably;] [added: ratably or based upon customer usage over] the [added: respective contractual terms; 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 [removed: on-premise] [added: on\-premise] license revenues, which we generally recognize at a point in time upon delivery; in each case over those four quarterly periods.

Our hardware business, which represented [added: 8% and] 9% of our total revenues in [removed: each of] fiscal [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020, respectively,] provides a broad selection of [added: enterprise] hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, industry-specific hardware offerings, operating systems, virtualization, management and other hardware-related software, and related hardware support.

Our hardware revenues, cost of hardware and hardware operating margins that we report are affected by many factors, including our [removed: ability] [added: manufacturing partners’ abilities] 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 offerings, including cloud infrastructure offerings; 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; and foreign currency rate fluctuations.

Our services business, which represented 8% of our total revenues in each of fiscal [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] helps customers and partners maximize the performance of their investments in Oracle applications and infrastructure technologies.

Our services offerings include consulting [removed: services, advanced customer] services and [removed: education] [added: advanced customer] services.

[removed: Our services revenues are affected by many factors including, our strategy for, and the] competitive position of, our services; customer demand for our cloud and license and hardware offerings and the associated services for these offerings; general economic conditions; governmental budgetary constraints; personnel reductions in our customers’ IT departments; [removed: and] tighter controls over customer discretionary [removed: spending.][added: spending; and foreign currency rate fluctuations.]

The pace of our acquisitions has slowed [removed: recently,] [added: in recent years,] but as compelling opportunities become available, we may acquire companies, products, services and technologies in furtherance of our corporate strategy.

[added: Note 2 of] Notes to Consolidated Financial Statements included elsewhere in this Annual Report provides additional information related to our recent acquisitions.

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

The most critical judgments required in applying [removed: Topic 606] [added: ASC 606, *Revenue Recognition from Customers*,] 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.

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

[added: 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.

License support contracts are generally priced as a percentage of the net fees paid by the customer to [removed: access] [added: purchase] the license.

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

We apply the provisions of ASC 805, *Business [removed: Combinations*,] [added: Combinations* (ASC 805),] in accounting for our acquisitions.

Subsequent to the measurement period or final determination of the net asset values for the business combination, [added: whichever comes first,] changes in our estimates of such contingencies will affect earnings and could have a material effect on our results of operations and financial position.

[added: We reevaluate these items quarterly based upon facts and] circumstances that existed as of the acquisition date with any adjustments to our preliminary estimates being recorded to goodwill if identified within the measurement period.

If we later determine that it is more likely than not that the net deferred tax assets would be [added: realized, we would reverse the applicable portion of the previously provided valuation allowance as an adjustment to our provision for income taxes at such time.]

[removed: Results] [added: Results] of [removed: Operations][added: Operations]

In our fiscal [removed: 2020] [added: 2021] compared to fiscal [removed: 2019] [added: 2020] results of operations discussion below, we provide an overview of our total consolidated revenues, total consolidated [added: operating] expenses and total consolidated operating margin, all of which are presented on a GAAP basis.

In addition, we discuss below the fiscal [removed: 2020] [added: 2021] compared to fiscal [removed: 2019] [added: 2020] results of each [added: of] our three businesses—cloud and license, hardware and services—which are our operating segments as defined pursuant to ASC 280, *Segment Reporting*.

The financial reporting for our three businesses that is presented below is presented in a manner that is [added: consistent with that used by our CODMs.]

We also utilize these inputs to calculate and present a segment margin for each [removed: business] [added: of our three businesses] in the discussion below.

In addition, research and development expenses, general and administrative expenses, stock-based compensation expenses, amortization of intangible assets, certain other expense allocations, acquisition related and other expenses, restructuring expenses, interest expense, non-operating [added: expenses or] income, net and provision for income taxes are not attributed to our three operating segments because our management does not view the performance of our three businesses including such items and/or it is impractical to do so.

Refer to “Supplemental Disclosure Related to Certain Charges” below for additional discussion of certain of these items and Note 15 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for a reconciliation of the summations of total segment margin as presented in the discussion below to total income before provision [removed: of] [added: for] income taxes as presented per our consolidated statements of operations for all periods presented.

A discussion regarding our financial condition and results of operations for fiscal [removed: 2019] [added: 2020] compared to fiscal [removed: 2018] [added: 2019] can be found in [removed: “Management’s] [added: Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations”] [added: Operations] in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended May 31, [removed: 2019,] [added: 2020,] as filed with the SEC on June [removed: 21, 2019,] [added: 22, 2020,] which is available free of charge on the SEC’s website at www.sec.gov and on our Investor Relations website at www.oracle.com/investor.

As a result, each [added: of our] businesses’ revenues and expenses and our total revenues and expenses will continue to be affected by changes in the U.S. Dollar against major international currencies.

Revenue streams included in our cloud and license business are:

| | | recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year; and |

The proportion of our cloud services and license support revenues relative to our cloud license and on-premise license revenues, hardware revenues and services revenues has increased and we expect this trend to continue.

Cloud services and license support revenues represented 71%, 70% and 68% of our total revenues during fiscal 2021, 2020 and 2019, respectively.

Our services revenues are affected by many factors including our strategy for, and the

Therefore, multiple products and services

We experienced COVID-19 related impacts to our business during fiscal 2021 and 2020.

Certain of these historical impacts on our operating results are further discussed below.

Any future impacts are currently unknown.

Separately, as described further below and in Notes 1 and 14 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report, we recorded a $2.3 billion non-recurring net deferred tax benefit during fiscal 2021 that related to a partial realignment of our legal entity structure that resulted in the intra-group transfer of certain intellectual property rights.

For example, if an entity

Excluding the effects of foreign currency rate fluctuations, our total operating expenses decreased during fiscal 2021 relative to fiscal 2020 primarily due to lower sales and marketing expenses, lower hardware expenses and lower services expenses, all of which were primarily attributable to lower headcount and a reduction in certain variable expenditures as further described below.

In addition, we also incurred lower amortization of intangible assets during fiscal 2021.

These constant currency expense decreases were partially offset by certain constant currency expense increases during fiscal 2021, primarily: higher cloud services and license support expenses, which increased primarily due to higher infrastructure investments that were made to support the increase in our cloud and license business’ revenues; higher research and development and general and administrative expenses, each of which increased primarily due to higher employee related expenses; higher acquisition related and other expenses, which increased primarily due to certain right-of-use assets and other assets that were abandoned in connection with plans to improve our cost structure and operations; and higher restructuring expenses, which increased due to actions taken during fiscal 2021 pursuant to the Fiscal 2019 Oracle Restructuring Plan (2019 Restructuring Plan).

During fiscal 2021 and 2020, we curtailed a number of variable expenditures across all of our lines of businesses and functions including employee travel expenses and marketing expenses, among others, primarily in response to COVID-19.

In fiscal 2022, we expect to accelerate our investments primarily in our cloud and license business.

We expect fiscal 2022 total expenses growth to exceed total revenues growth and, as a result, our fiscal 2022 total operating margin as a percentage of total revenues to be modestly lower relative to fiscal 2021.

| | | $ | 379 | | | $ | 2,547 | |

| | Fiscal 2026 | | | 24 | |

| | | | 2021 | | | | 2020 | | |

We continue

| (Dollars in millions) | | 2021 | | | | Actual | | Constant | | 2020 | | |

Our cloud services and license support expenses have grown in recent periods and, in fiscal 2022, we expect this growth to accelerate as we increase our existing data center capacity and establish data centers in new geographic locations in order to meet current and expected customer demand.

| (Dollars in millions) | | 2021 | | | | Actual | | Constant | | 2020 | | |

| Total expenses(1) | | | 1,333 | | | \-13% | | \-14% | | | 1,540 | |

Our constant currency hardware revenues declined in fiscal 2021 relative to fiscal 2020 primarily due to our continued emphasis on the marketing and sale of our growing cloud-based infrastructure technologies and the de-

Geographically, we experienced constant currency revenue declines in all regions during fiscal 2021, other than Asia Pacific.

| (Dollars in millions) | | 2021 | | | | Actual | | Constant | | 2020 | | |

| Total Margin | | $ | 628 | | | 39% | | 37% | | $ | 450 | |

| Asia Pacific | | 22% | | | | | | | | 20% | | |

Geographically, we experienced constant currency revenue declines in all regions during fiscal 2021.

In constant currency, total services expenses decreased in fiscal 2021 compared to fiscal 2020 primarily due to lower employee related costs caused by lower headcount in addition to lower travel and sub-contractor expenses as described above.

| (Dollars in millions) | | 2021 | | | | Actual | | Constant | | 2020 | | |

These constant currency expense increases were partially offset by lower travel expenses during fiscal 2021 primarily due to the impacts of COVID-19.

| (Dollars in millions) | | 2021 | | | | Actual | | Constant | | 2020 | | |

These increases were partially offset by lower salary expenses due to lower headcount, and by lower travel expenses and certain other variable expense curtailments that we implemented during fiscal 2021 primarily due to the impacts of COVID-19.

In addition, general and administrative expenses during fiscal 2021 were unfavorably affected in comparison to the prior year due to a $29 million litigation related benefit that reduced our expenses during fiscal 2020.

| (Dollars in millions) | | 2021 | | | | Actual | | Constant | | 2020 | | |

| (Dollars in millions) | | 2021 | | | | Actual | | Constant | | 2020 | | |

| Other, net | | | 129 | | | 153% | | 152% | | | 51 | |

| --- | --- |

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

| | | arrangements are generally billed in advance of the cloud services being performed; have durations of one to three years; are generally renewed at the customer’s option; and are generally recognized as revenues ratably over the contractual period of the cloud contract or, in the case of usage model contracts, as the cloud services are consumed over time. |

Cloud license and on-premise license revenues include revenues from the licensing of our software products including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, which our customers deploy within cloud‑based, on‑premise and other IT environments.

Our cloud license and on‑premise license transactions are generally perpetual in nature and are generally recognized up front at the point in time when the software is made available to the customer to download and use.

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

Cloud license and on-premise license customers have the option to purchase and renew license support contracts as described above.

We expect these trends to continue.

Note 2 of

SSP for our products and services can

We reevaluate these items quarterly based upon facts and

realized, we would reverse the applicable portion of the previously provided valuation allowance as an adjustment to our provision for income taxes at such time.

consistent with that used by our CODMs.

Excluding the effects of currency rate fluctuations, our total operating expenses decreased during fiscal 2020 relative to fiscal 2019 primarily due to lower expenses for substantially all of our operating expense categories other than cloud services and license support expenses, which increased primarily due to headcount and infrastructure investments that were made to support the increase in our cloud and license business’ revenues; and research and development expenses, which increased primarily due to higher stock-based compensation expenses.

We curtailed a number of variable expenditures in our fourth quarter of fiscal 2020 including marketing

| Income tax reform(7) | | | — | | | | (389 | ) |

| | | $ | 2,547 | | | $ | 2,054 | |

| | Fiscal 2021 | | $ | 1,351 | |

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

| | | | 2020 | | | | 2019 | | |

| (7) | The fiscal 2019 income tax reform adjustment presented in the table above was due to an adjustment made pursuant to SEC Staff Accounting Bulletin No. 118 (SAB 118) related to the enactment 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 in our Annual Report on Form 10-K for the fiscal year ended May 31, 2019. |

| Total expenses(1) | | | 1,540 | | | \-17% | | \-15% | | | 1,847 | |

These unfavorable

impacts to our fiscal 2020 hardware revenues were partially offset by increased hardware revenues related to certain of our strategic hardware offerings, namely our Oracle Exadata offerings.

Excluding the effects of currency rate fluctuations, our total services revenues decreased in fiscal 2020 relative to fiscal 2019 primarily due to declines in our consulting services and education services revenues.

In constant currency, total services expenses were flat in fiscal 2020 compared to fiscal 2019 as lower expenses incurred for travel and sub-contractors as described above and lower expenses related to the delivery of our education services were offset by higher employee related expenses associated with our consulting offerings during fiscal 2020.

| % of Total Revenues | | 15% | | | | | | | | 15% | | |

These decreases were partially offset by modestly higher fiscal 2020 employee salary expenses in constant currency.

In addition, during fiscal 2019 we recorded certain business combination related adjustments that benefited our expenses during this period.

These increases to our fiscal 2020 expenses growth were partially offset by lower fiscal 2020 transitional employee related costs.

Prior to fiscal 2020, restructuring expenses also included charges for duplicate facilities.

| Restructuring expenses | | $ | 250 | | | \-44% | | \-42% | | $ | 443 | |

Interest expense decreased in fiscal 2020 compared to fiscal 2019 primarily due to the maturities and repayments of $4.5 billion of senior notes during fiscal 2020 and $2.0 billion of senior notes during fiscal 2019.

This decrease in interest expense during fiscal 2020 was partially offset by additional interest expense incurred related to our issuance of $20.0 billion of senior notes in April 2020.

| Interest income | | $ | 527 | | | \-52% | | \-51% | | $ | 1,092 | |

| Other, net | | | (16 | ) | | 13% | | 25% | | | (14 | ) |

On a constant currency basis, our non-operating income, net decreased in fiscal 2020 compared to fiscal 2019 primarily due to lower interest income in fiscal 2020, which was primarily attributable to lower average cash, cash equivalent and marketable securities balances and, to a lesser extent, lower interest rates on these balances during fiscal 2020, and also due to higher fiscal 2020 foreign currency losses.

Provision for income taxes increased in fiscal 2020 relative to fiscal 2019 primarily due to the absence in fiscal 2020 of tax benefits we recorded in fiscal 2019 attributable to changes in estimates related to our adoption of the Tax Act, as recorded pursuant to SAB 118, and the increase of a deferred tax asset associated with the partial realignment of our legal structure.

We expect to collect substantially all of these delayed customer payments in future periods.

| | • | $3.50 billion of 2.50% senior notes due April 2025; |

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

Cash, cash [removed: equivalents,] [added: equivalents] and marketable securities were [removed: $43.1] [added: $46.6] billion and [removed: $37.8] [added: $43.1] billion as of May 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] respectively.

Our bank deposits [removed: and time deposits] are generally held with large, diverse financial institutions worldwide with high investment-grade credit ratings or financial institutions that meet investment-grade ratings criteria, which we believe mitigates credit risk and certain other risks.

In addition, as of May 31, [removed: 2020,] [added: 2021,] substantially all of our marketable securities were high [removed: quality with substantially all having] [added: quality, fixed-rate debt securities and had] maturity dates within one year (a description of [removed: our] [added: the types of] marketable securities held [added: as of May 31, 2021 and 2020] 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).

Due in part to these factors, [removed: our future investment income may vary due to changes in interest rates or] we may realize losses if we [removed: are forced to] sell securities [added: prior to their scheduled maturities] that [removed: decline] [added: declined] in market value due to changes in interest rates.

However, because we classify [added: substantially all of] our [added: investments in] debt securities as [removed: “available for sale,”] [added: available-for-sale and record changes in their fair values to AOCL on our consolidated balance sheets,] no gains or losses are recognized [added: in our earnings] due to [added: market] changes in interest rates unless such securities are sold prior to [removed: maturity] [added: their scheduled maturities] or [added: the] declines in fair [removed: value] [added: values] are [removed: determined] [added: due] to [removed: be other-than-temporary.][added: expected credit loss.]

We generally do not use our [added: marketable debt securities] investments for trading purposes.

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

[added: |] Interest [removed: Expense Risk—Interest Rate Swap Agreements] [added: rate swap] and [removed: Cross-Currency Interest Rate Swap Agreements][added: cross-currency interest rate swap agreements | | 100 basis points increase in interest rates | | Earnings | | $ | (24 | ) | | $ | (24 | ) |]

Our total borrowings were [added: $84.2 billion as of May 31, 2021, consisting of $84.1 billion of fixed-rate borrowings and $113 million of other borrowings, compared to] $71.6 billion as of May 31, 2020, consisting of $71.5 billion of fixed-rate borrowings and $113 million of other borrowings.

As of May 31, [removed: 2020,] [added: 2021,] we held certain interest rate [added: and cross-currency interest rate] swap agreements that have the economic effect of modifying the fixed-interest [added: rate] obligations associated with [removed: our $1.5 billion] [added: certain] of [removed: 2.80% fixed-rate senior notes due July 2021 (July 2021 Notes), so that the fixed-rate interest payable on these] [added: our] senior notes [removed: effectively became] [added: to] variable [added: interest rate obligations] based on [removed: LIBOR.][added: LIBOR that we have designated as fair value hedges, among certain other effects.]

By entering into [removed: the aforementioned] [added: these] swap arrangements, we have assumed risks associated with variable interest rates based upon LIBOR.

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

We [removed: transact business in various foreign currencies and] have established a program that primarily utilizes foreign currency forward contracts to offset the risks [removed: associated with] [added: that arise from] the [removed: effects of certain foreign currency exposures.][added: aforementioned transactions.]

Under this program, our strategy is to enter into foreign currency forward contracts [added: for major currencies in which we have an exposure] so that increases or decreases in our foreign currency exposures are offset by gains or losses on the foreign currency forward contracts [removed: in order to] [added: which] mitigate the risks and volatility associated with our foreign currency transactions.

Our foreign currency exposures [removed: typically] [added: primarily] arise from [removed: intercompany sublicense fees, intercompany loans and other] [added: various] intercompany transactions.

Our foreign currency forward contracts are generally short-term in [removed: duration.][added: duration and we do not use them for trading purposes.]

[removed: As] [added: Furthermore, as] a large portion of our consolidated operations are international, we could experience additional foreign currency volatility in the future, [added: in which] the amounts and timing [removed: of which] are unknown.

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

Fluctuations in foreign currencies impact the amount of total [removed: assets] [added: assets, liabilities, earnings] and [removed: liabilities] [added: cash flows] that we report for our foreign subsidiaries upon the translation of these amounts into U.S. [removed: Dollars.][added: Dollars for, and as of the end of, each reporting period.]

The market values of our fixed-rate marketable securities investments are adversely impacted as interest rates increase.

Borrowings and Related Fair Value Hedges

With the exception of those senior notes for which we have

corresponding fair value hedges that are recorded at their fair values as of each reporting period and discussed further below, we record all of our fixed-rate borrowings at amortized cost and therefore, any changes in interest rates do not impact the values that we report for these senior notes or our consolidated financial statements.

Consequently, these swap agreements are recorded at their fair values at each reporting period and incur gains and losses due to changes in market interest rates but are substantially offset by the corresponding losses and gains on the related senior notes for which the swap agreements pertained.

Changes in interest rates affected the interest expense that we recognized in our consolidated statements of operations and the values that we report for these instruments as of each reporting date.

As described under “Constant Currency Presentation” above, our international operations have provided and are expected to continue to provide a significant portion of our consolidated revenues and expenses that we report in U.S. Dollars.

As a result, our consolidated revenues and expenses are affected and will continue to be affected by changes in the U.S. Dollar against major foreign currencies.

In particular, the strengthening of the U.S. Dollar generally will reduce the reported amount of our foreign-denominated cash, cash equivalents, marketable securities, total revenues and total expense that we translate into U.S. Dollars and report in our consolidated financial statements for, and as of the end of, each reporting period.

We transact business in various foreign currencies.

Our principal currency exposures include the Euro, Japanese Yen, Saudi Arabian Riyal, Indian Rupee and British Pound.

We realize gains or losses with respect to our foreign currency exposures, net of gains or losses from our foreign currency forward contracts, and we also incur costs to enter into these foreign currency forward contracts, substantially all of which are included in non-operating income, net in our consolidated financial statements.

Refer to Notes 1 and 10 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional details about our foreign currency forward contracts.

Sensitivity Analysis

The following table sets forth the hypothetical potential losses that we consider to be the most material to the fair values of our interest rate and currency influenced holdings, including associated derivatives, or future earnings resulting from hypothetical changes in relevant market rates as of or for the reporting periods below:

| | | | | | | Year Ended May 31, | | | | | | |

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

| (in millions) | | Hypothetical Change | | Impact | | 2021 | | | | 2020 | | |

| Interest rate risk: | | | | | | | | | | | | |

| Marketable securities | | 50 basis points increase in interest rates | | Fair values | | $ | (23 | ) | | $ | (15 | ) |

| Interest rate swap and cross-currency interest rate swap agreements | | 100 basis points increase in interest rates | | Fair values | | $ | (37 | ) | | $ | (63 | ) |

| Foreign currency risk: | | | | | | | | | | | | |

| Total revenues | | 10% decrease in foreign exchange rates | | Earnings | | $ | (2,061 | ) | | $ | (1,942 | ) |

| Cash, cash equivalents and marketable securities | | 10% decrease in foreign exchange rates | | Fair values | | $ | (650 | ) | | $ | (491 | ) |

We held a mix of both fixed and floating-rate debt securities.

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

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 each of May 31, 2020 and 2019 we estimate the change would have decreased the fair values of our marketable securities holdings by $15 million and $128 million, respectively.

Changes in the overall level of interest rates affect the interest income that is generated from our cash, cash equivalents and marketable securities.

For fiscal 2020 and 2019, total interest income was $527 million and $1.1 billion, respectively, with our cash, cash equivalents and marketable securities investments yielding an average 1.47% and 2.08%, respectively, on a worldwide basis.

We have also entered into cross-currency interest rate swap agreements to manage the foreign currency exchange rate risk associated with our €750 million of 3.125% fixed-rate senior notes due July 2025 Notes (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 July 2021 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, *Derivatives and Hedging* (ASC 815).

The fair values of our outstanding fixed to variable interest rate swap agreements as of May 31, 2020 and 2019 were a $12 million net gain and a $17 million net loss, respectively.

We estimate that the changes in the fair values of these swap agreements as of May 31, 2020 and 2019, respectively, were primarily attributable to a decrease and increase, respectively, in forward interest rate prices.

If LIBOR-based interest rates would have been higher by 100 basis points as of May 31, 2020 and 2019, the change would have decreased the collective fair values of the fixed to variable swap agreements by $63 million and $90 million, respectively.

Changes in the overall level of interest rates affect the interest expense that we recognize in our consolidated statements of operations.

An interest rate risk sensitivity analysis is used to measure interest rate risk by computing estimated changes in cash flows as a result of assumed changes in market interest rates.

As of May 31, 2020 and 2019, if LIBOR-based interest rates would have been higher by 100 basis points, the change would have increased our interest expense annually by approximately $24 million and $52 million, respectively, as it relates to our fixed to variable interest rate swap agreements and related borrowings, and as of May 31, 2019, as it related to our floating-rate borrowings.

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.

Accordingly, we record the fair values of these contracts as of the end of our reporting period to our consolidated balance sheet with changes in fair values recorded to our consolidated statement of operations.

Given the short duration of the forward contracts, amounts recorded generally are not significant.

The balance sheet classification for the fair values of these forward contracts is prepaid expenses and other current assets for forward contracts in an unrealized gain position and other current liabilities for forward contracts in an unrealized loss position.

The statement of operations classification for

changes in fair values of these forward contracts is non-operating income, net for both realized and unrealized gains and losses.

We expect that we will continue to realize gains or losses with respect to our foreign currency exposures, net of gains or losses from our foreign currency forward contracts.

The notional amounts of the forward contracts we held to purchase U.S. Dollars in exchange for other major international currencies were $4.2 billion and $3.8 billion as of May 31, 2020 and 2019, respectively, and the notional amounts of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were $3.9 billion and $3.3 billion as of May 31, 2020 and 2019, respectively.

The fair values of our outstanding foreign currency forward contracts were nominal at May 31, 2020 and 2019.

Net foreign exchange transaction losses included in non-operating income, net in the accompanying consolidated statements of operations were $185 million and $111 million in fiscal 2020 and 2019, respectively.

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 AOCL 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 2020, 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, 2020 decreased relative to what we would have reported using a constant currency rate from May 31, 2019.

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 a decrease of $125 million and $158 million for fiscal 2020 and 2019, respectively.

If overall foreign currency exchange rates in comparison to the U.S. Dollar uniformly would have been weaker by 10% as of May 31, 2020 and May 31, 2019 the amount of cash, cash equivalents and marketable securities we would report in U.S. Dollars would have decreased by approximately $491 million and $434 million, respectively, assuming constant foreign currency cash, cash equivalents and marketable securities balances.

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 [removed: Cloud at Customer] [added: Cloud@Customer] offering (an instance of Oracle Cloud in a customer’s own data center).

Oracle Cloud [removed: Software-as-a-Service and Infrastructure-as-a-Service (SaaS and IaaS, respectively,] [added: Services offerings, which include Oracle SaaS] and [removed: collectively,] Oracle [removed: Cloud Services) offerings] [added: IaaS offerings,] provide a comprehensive and integrated stack of applications and infrastructure services delivered via [removed: a] cloud-based deployment [removed: model.][added: models.]

Oracle hardware [removed: product offerings] [added: products] include Oracle Engineered Systems, servers, storage and industry-specific products, among others.

Customers generally opt to purchase hardware support contracts when they purchase Oracle [removed: hardware.][added: hardware products.]

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

In fiscal [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018,] [added: 2019,] we invested [removed: $6.1] [added: $6.5] billion, [removed: $6.0] [added: $6.1] billion and [removed: $6.1] [added: $6.0] billion, respectively, in research and development to enhance our existing portfolio of offerings and products and to develop new technologies and services.

We focus our development efforts on improving the performance, security, operation, integration and cost-effectiveness of our offerings relative to our competitors; [removed: making it easier for] [added: facilitating the ease with which] organizations [added: are able] to deploy, use, manage and maintain our offerings; and incorporating emerging technologies within our offerings to enable leaner business processes, [removed: automation and innovation.]

For example, the Oracle Autonomous Database is designed to deliver transformational infrastructure through an Oracle Cloud IaaS offering that utilizes Oracle’s [removed: Generation 2] [added: Next-Generation] Cloud Infrastructure’s machine learning capabilities.

After an initial purchase of Oracle products and services, our customers can continue to benefit from our [added: offerings,] research and development efforts and deep IT expertise by electing to purchase and renew Oracle support offerings for their [added: license and hardware deployments, which may include product enhancements that we periodically deliver to our products, and by renewing their Oracle Cloud Services contracts with us.]

[added: Item 7] Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 15 of Notes to Consolidated Financial Statements, both included elsewhere in this Annual Report, provide additional information related to our businesses and operating segments.

While the world continues to navigate the risks and uncertainties associated with the COVID-19 pandemic, we are committed to providing critical technologies, programs and support to individuals and organizations to navigate, adjust and [removed: continue] [added: advance] their operations in light of the unique demands and constraints imposed by the pandemic.

[removed: For decades, we have] [added: Regardless of IT deployment model, Oracle has] developed, delivered and supported products and services [added: for decades] that enable telecommunication companies to keep people connected; retailers to provide food and other necessities; researchers to identify solutions; hospitals to provide care; airlines to ensure travel; banks to help people access funds; insurers to provide benefits; governments to keep people safe and informed; utilities to supply power and water; and many other critical functions.

| | • | enterprises, [removed: which have] [added: which, at] the [removed: ability] [added: onset of the COVID-19 pandemic, Oracle permitted at no additional charge] to [removed: complimentarily] access Oracle [added: Fusion Cloud] Human Capital Management (HCM) [removed: Cloud] options for employee health and safety programs in order to proactively manage and respond to COVID-19 implications on their workforces; |

For additional [removed: details] [added: discussion] regarding the impacts and risks to our business from the COVID-19 pandemic, refer to Item 1A Risk Factors and Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K.

[added: Oracle] Applications and Infrastructure Technologies

We believe that our customers increasingly recognize the value of access to [added: the latest versions of Oracle] cloud-based applications and infrastructure capabilities via a lower cost, rapidly deployable, flexible and interoperable services model that Oracle [added: provisions,] manages, upgrades and maintains on the customer’s behalf.

We believe that we can market and sell our [added: Oracle] SaaS and IaaS offerings together to help [added: new and existing] customers migrate their extensive installed base of on-premise applications and infrastructure technologies to the Oracle Cloud [removed: while at] [added: and we believe we are in] the [removed: same time reaching] [added: early stages of what we expect will be] a [removed: broader ecosystem] [added: material migration] of [removed: developers] [added: our existing Oracle customer base from on-premise applications] and [removed: partners.][added: infrastructure products and services to the Oracle Cloud.]

[removed: We] [added: In addition, we] also believe we can market our SaaS and IaaS services to [added: a broader ecosystem of] small and medium-sized [removed: businesses and] [added: businesses,] non-IT lines of business [removed: purchasers] [added: purchasers, developers and partners] due to the highly available, intuitive design, low touch and low cost characteristics of the Oracle Cloud.

[added: Oracle] Applications Technologies

Our applications cloud services and license support revenues represented [removed: 40%, 40%] [added: 41% of our total cloud services] and [removed: 38%] [added: license support revenues in fiscal 2021 and 40%] of our total cloud services and license support revenues [removed: during] [added: in each of] fiscal [removed: 2020, 2019] [added: 2020] and [removed: 2018, respectively.][added: 2019.]

Oracle applications technologies include our Oracle Cloud SaaS offerings, which are available for customers as a subscription, and [added: Oracle Applications license offerings, which are available for customers to purchase for use within the Oracle Cloud, and other cloud-based and on-premise IT environments, and include the option to purchase related license support.]

[removed: Oracle Applications license offerings, which] [added: These technologies] are available [removed: for customers] [added: through a subscription] to [added: our Oracle Cloud IaaS offerings or through the] purchase [removed: for use] [added: of a license and related license support, at the customer’s option, to run] within the Oracle Cloud, [added: as a part of a customer’s on-premise cloud services,] and [added: in] other [removed: cloud-based and on-premise] [added: customer] IT [removed: environments, with the option to purchase related license support.][added: environments.]

We offer applications that are deployable to meet [removed: a number of] [added: several] business automation requirements across a broad range of industries.

We also offer industry-specific applications, which provide solutions to customers in the [added: automotive,] communications, construction and engineering, [added: consumer goods, education and research,] financial services, [removed: health sciences,] [added: food and beverage, healthcare, high technology,] hospitality, [added: industrial] manufacturing, [added: life sciences, media and entertainment,] public sector, retail and utilities industries, among others.

Our SaaS offerings represent an industry leading business innovation platform, leveraging [removed: our Generation 2] [added: Oracle’s Next-Generation] Cloud Infrastructure, and include a broad suite of modular, next generation cloud software applications spanning all core business functions including, among others:

| | • | Oracle [added: Fusion Cloud] Enterprise Resource Planning [removed: (ERP) Cloud,] [added: (ERP),] which is designed to be a complete, global and integrated ERP solution to help organizations improve decision making and workforce productivity, and to optimize back-office operations by utilizing a single data and security model with a common user interface; |

| | • | Oracle [added: Fusion Cloud] Enterprise [removed: and] Performance Management [removed: (EPM) Cloud,] [added: (EPM),] which is designed to analyze financial performance, drive accurate and agile financial plans, optimize the financial close and consolidation process, streamline account reconciliation and satisfy an organization’s reporting requirements; |

| | • | Oracle [added: Fusion Cloud] Supply Chain [added: and Manufacturing] Management [removed: (SCM) Cloud,] [added: (SCM),] which is designed to help organizations create, optimize and digitize their supply chains and innovate products quickly; |

| | • | Oracle [removed: Human Capital Management (HCM) Cloud,] [added: Fusion Cloud HCM,] which is designed to help organizations find, develop and retain their talent, enable collaboration, provide complete workforce insights, improve business process efficiency, and enable users to connect to an integrated suite of HCM applications from any device; |

| | • | Oracle [added: Fusion Cloud Advertising and] Customer Experience [removed: Cloud] including Sales, Service, Marketing and [removed: Data Cloud,] [added: Advertising,] which is designed to be a complete and integrated solution to help organizations deliver consistent and personalized customer experiences across their customer channels, touch points and interactions. It also enables organizations to leverage their own data and consumer data to inform and measure marketing strategies and programs; and |

[removed: We also] [added: In addition, we] offer [removed: a number of] [added: several] cloud-based industry solutions to address specific customer needs within certain [removed: industries.][added: industries including construction and engineering, retail, and utilities, among others.]

[added: Our SaaS] offerings are designed to support connected business processes in the cloud and are centered on an intuitive [removed: interface,] [added: and conversational user experience,] a [removed: responsive] [added: responsive, open] and flexible business core, and a common data model.

We believe Oracle [removed: ERP] [added: Fusion] Cloud [added: ERP] is a strategic suite of applications that is foundational to facilitate and extract more business value out of the adoption of other Oracle SaaS offerings, such as Oracle [removed: HCM] [added: Fusion] Cloud [added: HCM] and Oracle [removed: EPM Cloud,] [added: Fusion Cloud EPM,] as customers realize the value of a common data model that spans across core business applications.

Our SaaS offerings are designed to deliver a secure data isolation architecture and flexible upgrades; self-service access controls for users; a Service-Oriented [removed: Architecture (SOA);] [added: Architecture;] built-in social, mobile and business insight capabilities (analytics); and a high performance, high availability infrastructure based on our infrastructure technologies, including Oracle’s [removed: Generation 2] [added: Next-Generation] Cloud Infrastructure.

Our SaaS offerings are also designed to natively incorporate [removed: emerging] [added: advanced] technologies such as Internet-of-Things (IoT), artificial intelligence, machine learning, blockchain, digital assistants and advances in the “human interface” and how users interact with Oracle Cloud SaaS offerings within a business context or to augment human capabilities to enhance productivity.

Oracle Applications are designed to manage and automate core business functions across the enterprise, including [removed: HCM; ERP; financial management and governance, risk and compliance; procurement; project portfolio management; SCM; business analytics] [added: HCM, ERP, EPM, SCM, Advertising] and [removed: enterprise performance management; Oracle] Customer [removed: Experience Cloud and customer relationship management;] [added: Experience,] and industry-specific [removed: applications,] [added: applications as described above,] among others.

[removed: As described below, we] [added: We] provide customers the option to purchase license support contracts in connection with the purchase of Oracle Applications licenses.

Our license support contracts are generally priced as a percentage of the net fees paid by the customer to [removed: access] [added: purchase] the license and are typically one year in duration.

[added: Oracle] Infrastructure Technologies

Our infrastructure technologies are designed to be flexible, cost-effective, [removed: standards-based] [added: standards-based, secure] and high-performance in order to facilitate the development, running, integration, management and extension across an organization’s cloud-based, on-premise and hybrid IT environments.

Using Oracle technologies, our customers build, deploy, run, manage and support their internal and external products, services and business operations including, for example, a global cloud application supplier that utilizes Oracle Cloud Infrastructure-as-a-Service (IaaS) to provide its Software-as-a-Service (SaaS) offerings; a multi-national financial institution that runs its banking applications using the Oracle Exadata Database Machine; and a global consumer products company that leverages Oracle Fusion Cloud Enterprise Resource Planning for its accounting processes, consolidation and financial planning functions.

automation and innovation.

We have three businesses, each of which is comprised of a single operating segment.

Many enterprises, governments and educational institutions have faced unprecedented disruption due to the COVID-19 pandemic and their customers expect to deal with organizations in digital ways more than ever before.

Organizations have been required to adjust their operations and IT infrastructures to operate safely while agilely responding to evolving purchaser needs and business requirements.

Organizations have turned to the Oracle Cloud to accelerate their digital transformations using applications and infrastructure technologies that are designed to be complete, current, and robust in order to safely and securely operate, safeguard and advance their business initiatives.

| | • | the U.S. federal government, which received Oracle’s National Electronic Health Records Cloud and Oracle’s Public Health Management Applications Suite to help public health agencies collect and analyze information related to COVID-19 and track any adverse effects related to COVID-19 vaccines; |

| | • | national governments of several African countries, which are receiving systems and services to manage public health vaccination programs, through our work with the Tony Blair Institute; |

The proportion of our cloud services and license support revenues relative to our cloud license and on-premise license revenues, hardware revenues and services revenues has increased and represented 71%, 70% and 68% of our total revenues during fiscal 2021, 2020 and 2019, respectively.

| | • | NetSuite Applications Suite, which is designed to be a unified, cloud-based applications suite to run a company’s entire business and includes financials and ERP, customer relationship management, human resources, professional services and commerce, among others. It is generally marketed to small to medium-sized organizations. |

Customers, partners and other interested parties may elect to subscribe to Oracle applications and infrastructure training and certification programs through a variety of online, cloud-based learning subscriptions offered by Oracle University.

Learners generally have unlimited access to course content delivered during the subscription period.

We believe our SaaS offerings remove business boundaries between front- and back-office activities.

Our customers utilize Oracle hardware products and related offerings in their cloud-based, on-premise or hybrid environments to run their internal business operations and to deliver products and services to their customers.

Cloud from their on-premise data centers or from other cloud-based IT environments, among other uses.

Oracle Cloud IaaS machine learning features are designed to be embedded into customer applications for a variety of predictive use cases including, among others, the servicing of machine parts that are at risk of failing, the stocking of retailer store shelves, and the financial modeling to stay within a business’ forecasts.

Oracle Dedicated Region Cloud@Customer is designed to enable customers to bring a self-contained Oracle Cloud instance into their data centers while accessing a substantial portfolio of Oracle Cloud IaaS and SaaS offerings.

Oracle Roving Edge Infrastructure offerings are designed to enable customers to access cloud computing and storage services at the edge of networks and in generally disconnected locations in order to accelerate deployment of cloud workloads outside of the data center.

We also offer Oracle Database cloud services, such as Oracle Exadata Cloud Service and Oracle Database Service, as a part of our Oracle Cloud IaaS offerings.

compliance, manage lifecycles of documents and get actionable, targeted business intelligence.

Java is the world’s most popular programming language that is used to deliver cloud development and deployment services, microservices, big data analytics, data management, social services, mobile services, chatbots, and continuous integration tools for numerous platforms and technologies including websites, enterprise and consumer applications, embedded devices and gaming.

Oracle is the steward of the Java platform and ecosystem.

Customers generally purchase Java offerings through subscriptions that include license and support services.

Oracle’s Java offerings are used by customers to support their Java deployments and to stay current with the latest security updates and other technology innovations.

servers that they believe will be most appropriate and valuable for their particular IT environments.

We offer a portfolio of operating systems, including Oracle Linux and Oracle Solaris, virtualization software including Oracle Virtual Machine, and other hardware-related software.

We have invested in the expansion of the Oracle Cloud by increasing existing data center capacity and adding additional data centers in new geographic locations to meet current and expected customer demand.

We expect this trend will continue.

We develop the substantial majority of our products and services offerings internally utilizing the skills and diversity of a global workforce.

development of our products.

Human Capital Resources

At Oracle, our success is driven by the quality of our people, who we believe are among the best and brightest in the industry.

We strive to create an environment that supports employee success and a culture where everyone has a voice in driving innovation.

Workforce

Our employee counts by lines of business are:

| | 35,000 | | | Sales and marketing | | | 23,000 | | | Services |

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

| | 19,000 | | | Cloud services and license support operations | | | 40,000 | | | Research and development |

| | 3,000 | | | Hardware | | | 12,000 | | | General and administrative |

Diversity and Inclusion

license and hardware deployments, which may include product enhancements that we periodically deliver to our products, and by renewing their Oracle Cloud Services contracts with us.

We have three businesses:

| | • | 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 83% of our total revenues in each of fiscal 2020 and 2019, and 81% of our total revenues in fiscal 2018; |

| | • | our hardware business, which is comprised of a single operating segment and includes our hardware products and related hardware support services offerings, represented 9% of our total revenues in each of fiscal 2020 and 2019, and 10% of our total revenues in fiscal 2018; and |

| | • | our services business, which is comprised of a single operating segment, represented 8% of our total revenues in each of fiscal 2020 and 2019, and 9% of our total revenues in fiscal 2018. |

| | • | the U.S. federal government, which received an Oracle system to collect and distribute information as to how COVID-19 patients respond to potential therapies; |

| | • | NetSuite Application Suite, which is a cloud-based ERP solution that is generally marketed to small to medium-sized organizations and is designed to run back-office operations and financial processes, and includes financial management, revenue management and billing, inventory, supply chain and warehouse management capabilities, among others. |

Our SaaS

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

Oracle Cloud IaaS offerings.

In addition, Oracle Cloud IaaS offers networking, connectivity, and edge

Oracle also offers Oracle Managed Cloud Services, which are designed to provide comprehensive software and hardware hosting, management, maintenance and security services for an organization’s cloud-based, hybrid or other infrastructure for a fee for a stated term.

Oracle Big Data and Analytics

Big data generally refers to a massive amount of unstructured, streaming and structured data that is so large that it is difficult to process using traditional IT techniques.

We offer big data and analytics solutions to complement and extend our applications and infrastructure technologies.

We believe that most businesses view big data as a potentially high-value source of analytics that can be used to gain new insights into their customers’ behaviors, to anticipate future demand more accurately, to align workforce deployment with business activity forecasts and to accelerate the pace of operations, among other benefits.

We offer a broad portfolio of offerings to address an organization’s big data requirements including, among others, cloud-based services for data integration, data management, data science, analytics and integrated machine learning.

Java is the computer industry’s most widely-used software development language and is viewed as a global standard.

We believe the Java programming language and platform together represent one of the most popular and powerful development environments in the world, one that is used by millions of developers globally to develop embedded applications, web content, enterprise software and games.

Oracle Middleware software

products and certain of our Oracle Applications are built using the Oracle Java technology platform, which we believe is a key advantage for our business.

Customers may license the use of Java or access Java Enterprise Edition through Oracle WebLogic Cloud.

Our storage offerings include, among others, Oracle’s Zero Data Loss Recovery Appliance that provides unique, recovery-focused data protection for the Oracle Database; Oracle ZFS Storage Appliance, a unified storage system that combines network attached storage, storage area network and object storage capabilities; and Oracle’s StorageTek tape storage and automation product line, which includes tape drives, tape libraries, media and software packages that provide lifecycle data management and security for enterprise backup and archive requirements.

We offer a portfolio of operating systems, including Oracle Linux and Oracle Solaris, virtualization software including Oracle VM, and other hardware-related software including development, management and file systems tools that are designed to optimize the performance, efficiency, and security of hardware products while providing customers with high levels of flexibility, reliability and availability.

| | • | education services for Oracle’s cloud and license offerings, including training and certification programs that are offered to customers, partners and employees through a variety of formats including instructor-led classes, live virtual training, in-application guided learning, video-based training on demand, online learning subscriptions, private events and custom training. |

devices.

Our internal manufacturing operations consist primarily of materials procurement, assembly, testing and quality control of our Oracle Engineered Systems and certain of our enterprise and data center servers and storage products.

For all other manufacturing, we generally rely on third-party manufacturing partners to produce our hardware-related components and hardware products and we may involve our internal manufacturing operations in the final assembly, testing and quality control processes for these components and products.

We distribute most of our hardware products from either our facilities or partner facilities.

No single customer accounted for 10% or more of our total revenues in fiscal 2020, 2019 or 2018.

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

We develop the substantial majority of our product offerings internally.

Employees

As of May 31, 2020, we employed approximately 135,000 full-time employees, including approximately 36,000 in sales and marketing, approximately 19,000 in our cloud services and license support operations, approximately 3,000 in hardware, approximately 25,000 in services, approximately 39,000 in research and development and approximately 13,000 in general and administrative positions.

[removed: [Index to] [added: | Item 15. | | [Exhibits and] Financial [removed: Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)][added: Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | | 62 |]

For the fiscal year ended May 31, [removed: 2020][added: 2021]

| [removed: Redwood City, California] [added: Austin, Texas] (Address of principal executive offices) | [removed: 94065] [added: 78741] (Zip Code) |

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

| [added: Large accelerated filer ☒ | Accelerated filer ☐ |] Non-accelerated filer ☐ | Smaller reporting company ☐ | [added: Emerging growth company ☐ |]

The aggregate market value of the voting stock held by non-affiliates of the registrant was [removed: $107,880,125,000] [added: $96,373,328,000] based on the number of shares held by non-affiliates of the registrant as of May 31, [removed: 2020,] [added: 2021,] and based on the closing sale price of common stock as reported by the New York Stock Exchange on November [removed: 29, 2019,] [added: 30, 2020,] 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: 16, 2020: 3,068,682,000.][added: 15, 2021: 2,792,000,000.]

Portions of the registrant's definitive proxy statement relating to its [removed: 2020] [added: 2021] annual [removed: stockholders'] meeting [added: of stockholders] are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

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

FISCAL YEAR [removed: 2020][added: 2021]

| Item 1A. | | [Risk Factors](#ITEM_1A_RISK_FACTORS) | | [removed: 17] [added: 18] |

| Item 1B. | | [Unresolved Staff Comments](#ITEM_1B_UNRESOLVED_STAFF_COMMENTS) | | [removed: 33] [added: 32] |

| Item 2. | | [Properties](#ITEM_2_PROPERTIES) | | [removed: 33] [added: 32] |

| Item 6. | | [Selected Financial Data](#ITEM_6_SELECTED_FINANCIAL_DATA) | | [removed: 36] [added: 35] |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS) | | [removed: 37] [added: 36] |

| Item 7A. | | [Quantitative and Qualitative Disclosures About Market Risk](#ITEM_7A_QUANTITATIVE_QUALITATIVE_DISCLOS) | | [removed: 59] [added: 57] |

| Item 8. | | [Financial Statements and Supplementary Data](#ITEM_8_FINANCIAL_STATEMENTS_SUPPLEMENTAR) | | [removed: 61] [added: 59] |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ITEM_9_CHANGES_IN_DISAGREEMENTS_WITH_ACC) | | [removed: 61] [added: 59] |

| Item 9A. | | [Controls and Procedures](#ITEM_9A_CONTROLS_PROCEDURES) | | [removed: 61] [added: 59] |

| Item 9B. | | [Other Information](#ITEM_9B_OR_INFORMATION) | | [removed: 63] [added: 60] |

| Item 10. | | [Directors, Executive Officers and Corporate Governance](#ITEM_10_DIRECTORS_EXECUTIVE_FICERS_CORPO) | | [removed: 64] [added: 61] |

| Item 11. | | [Executive Compensation](#ITEM_11_EXECUTIVE_COMPENSATION) | | [removed: 64] [added: 61] |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ITEM_12_SECURITY_OWNERSHIP_CERTAIN_BENEF) | | [removed: 64] [added: 61] |

| Item 13. | | [Certain Relationships and Related Transactions, and Director Independence](#ITEM_13_CERTAIN_RELATIONSHIPS_RELATED_TR) | | [removed: 64] [added: 61] |

| Item 14. | | [Principal [removed: Accounting] [added: Accountant] Fees and Services](#ITEM_14_PRINCIPAL_ACCOUNTING_FEES_SERVIC) | | [removed: 64] [added: 61] |

| Item 16. | | [Form 10-K Summary](#FORM_10K_SUMMARY) | | [removed: 117] [added: 111] |

This Annual Report on Form 10-K contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as [removed: amended,] [added: amended (the Exchange Act),] and the Private Securities Litigation Reform Act of 1995.

| | • | our belief that our Oracle Cloud Software-as-a-Service and Infrastructure-as-a-Service (SaaS and IaaS, respectively, and collectively, Oracle Cloud Services) offerings are opportunities for us to expand our cloud and license business, and that [removed: demand for] [added: we are in the early stages of what we expect will be a material migration of] our [added: existing] Oracle [removed: Cloud Services will continue] [added: customer base from on-premise applications and infrastructure products and services] to [removed: increase;] [added: the Oracle Cloud;] |

| | • | our belief that we can market our SaaS and IaaS services to [added: a broader ecosystem of] small and medium-sized [removed: businesses and] [added: businesses,] non-IT lines of business [removed: purchasers;] [added: purchasers, developers and partners due to the highly available, intuitive design, low touch and low cost characteristics of the Oracle Cloud;] |

| | • | our belief that Oracle [removed: ERP] [added: Fusion] Cloud [added: ERP] is a strategic suite of applications that is foundational to facilitate and extract more business value out of the adoption of other Oracle SaaS offerings as [removed: our] customers realize [added: the] value of a common data model that spans across core business applications; |

| | • | our expectations regarding the [removed: performance of our] Oracle Autonomous [removed: Database, including its ability] [added: Database] to [removed: reduce] [added: deliver rapid insights and innovation to our customers while also reducing] customer downtime and cost; |

| | • | our belief that we have adequately provided under U.S. generally accepted accounting principles for outcomes related to our tax audits and that the final outcome of our [removed: tax related] [added: tax-related] examinations, [added: agreements or judicial proceedings will not have a material effect on our results of operations, and our belief that our net deferred tax assets will likely be realized in the foreseeable future;] |

| | • | the possibility that certain legal proceedings to which we are a party could have a material impact on our [added: financial position,] future cash flows and results of operations; |

| | • | [removed: the timing and amount] [added: declarations] of future cash dividend payments and [added: the timing and amount of future] stock repurchases, including our expectation that the levels of our future stock repurchase activity may be modified in comparison to past periods in order to use available cash for other purposes; |

| | • | our ability to predict [removed: quarterly] [added: revenues, particularly certain cloud license and on-premise license revenues and] hardware revenues; |

Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included elsewhere in this Annual Report and as may be updated in filings we make from time to time with the U.S. Securities and Exchange Commission (the SEC), including our Quarterly Reports on Form 10-Q to be filed by us in our fiscal year [removed: 2021,] [added: 2022,] which runs from June 1, [removed: 2020] [added: 2021] to May 31, [removed: 2021.][added: 2022.]

| 2300 Oracle Way | |

(737) 867-1000

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Such proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended May 31, 2021.

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

| | | [Signatures](#SIGNATURES) | | 117 |

| | | | | |

| | • | our belief that our SaaS offerings remove business boundaries between front- and back-office activities; |

| | • | our expectation that current and expected customer demand will require us to accelerate cloud services and license support expenses in order to expand the Oracle Cloud by increasing existing data center capacity and adding additional data centers in new geographic locations, which may result in lower total operating margins in future periods; |

| | • | our expectation that variable expenditures that were curtailed primarily in response to COVID-19 may normalize in future periods provided global economic conditions improve; |

| | • | our expectation that the proportion of our cloud services and license support revenues relative to our cloud license and on-premise license revenues, hardware revenues and services revenues will continue to increase; |

| | • | the possibility that we may incur additional restructuring expenses in future periods due to the initiation of new restructuring plans; |

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

| --- | --- |

| | |

| 500 Oracle Parkway | |

(650) 506-7000

| Large accelerated filer ☒ | Accelerated filer ☐ |

| Emerging growth company ☐ | |

| Item 15. | | [Exhibits and Financial Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | | 65 |

| | | [Signatures](#SIGNATURES) | | 123 |

| | • | our belief that we can market and sell our SaaS and IaaS offerings together to help customers migrate their extensive installed base of on-premise applications and infrastructure technologies to the Oracle Cloud while at the same time reaching a broader ecosystem of developers and partners; |

| | | agreements or judicial proceedings will not have a material effect on our results of operations, and our belief that our net deferred tax assets will be realized in the foreseeable future; |

| | • | the timing and amount of expenses we expect to incur and the cost savings we expect to realize pursuant to our Fiscal 2019 Oracle Restructuring Plan; |

| | • | our expectations regarding our ability to collect delayed customer payments; |

Our headquarters facility consists of approximately [removed: 2.1] [added: 0.9] million square feet in [removed: Redwood City, California,] [added: Austin, Texas,] substantially all of which we own.

We also own or lease other facilities for current use consisting of approximately [removed: 25.4] [added: 24.1] million square feet in various other locations in the U.S. and abroad.

Approximately [removed: 2.8] [added: 3.9] million square feet, or [removed: 10%,] [added: 16%,] of our total owned and leased space is sublet or is being actively marketed for sublease or disposition.

We lease our principal internal manufacturing facility for our [removed: hardware products in Hillsboro, Oregon.]

Our cloud operations deliver our Oracle Cloud Services through the use of global data [removed: centers including those that we own and operate and those that we utilize] [added: centers, substantially all of which were leased] through colocation suppliers.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

hardware products in Hillsboro, Oregon.

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: 8,511] [added: 8,100] stockholders of record as of May 31, [removed: 2020.][added: 2021.]

On [removed: September 11, 2019 and] March [removed: 12, 2020,] [added: 10, 2021,] we announced that our Board of Directors approved [removed: expansions] [added: an expansion] of our stock repurchase program [removed: totaling $30.0] [added: by an additional $20.0] billion.

As of May 31, [removed: 2020,] [added: 2021,] approximately [removed: $16.6] [added: $15.6] 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: 2020] [added: 2021] and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:

[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: 2020,] [added: 2021,] 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: 2015] [added: 2016] IN STOCK OR

| March 1, 2021—March 31, 2021 | | | 29.0 | | | $ | 68.95 | | | | 29.0 | | | $ | 21,648.4 | |

| April 1, 2021—April 30, 2021 | | | 52.6 | | | $ | 76.00 | | | | 52.6 | | | $ | 17,648.4 | |

| May 1, 2021—May 31, 2021 | | | 25.4 | | | $ | 78.92 | | | | 25.4 | | | $ | 15,648.4 | |

| Total | | | 107.0 | | | $ | 74.79 | | | | 107.0 | | | | | |

| | | 5/16 | | | | 5/17 | | | | 5/18 | | | | 5/19 | | | | 5/20 | | | | 5/21 | | |

| Oracle Corporation | | | 100.0 | | | | 114.7 | | | | 119.9 | | | | 132.0 | | | | 142.8 | | | | 212.5 | |

| S&P 500 Index | | | 100.0 | | | | 117.5 | | | | 134.4 | | | | 139.5 | | | | 157.4 | | | | 220.8 | |

| S&P Information Technology Index | | | 100.0 | | | | 133.8 | | | | 171.6 | | | | 179.1 | | | | 247.9 | | | | 353.6 | |

| March 1, 2020—March 31, 2020 | | | 67.9 | | | $ | 47.15 | | | | 67.9 | | | $ | 18,648.4 | |

| April 1, 2020—April 30, 2020 | | | 38.7 | | | $ | 51.68 | | | | 38.7 | | | $ | 16,648.4 | |

| May 1, 2020—May 31, 2020 | | | — | | | $ | — | | | | — | | | $ | 16,648.4 | |

| Total | | | 106.6 | | | $ | 48.80 | | | | 106.6 | | | | | |

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

| | | 5/15 | | | | 5/16 | | | | 5/17 | | | | 5/18 | | | | 5/19 | | | | 5/20 | | |

| Oracle Corporation | | | 100.0 | | | | 93.9 | | | | 107.7 | | | | 112.6 | | | | 123.9 | | | | 134.0 | |

| S&P 500 Index | | | 100.0 | | | | 101.7 | | | | 119.5 | | | | 136.7 | | | | 141.8 | | | | 160.1 | |

| S&P Information Technology Index | | | 100.0 | | | | 103.1 | | | | 138.0 | | | | 176.9 | | | | 184.7 | | | | 255.6 | |

Omitted at registrant’s option.

| --- | --- |

The following table sets forth selected financial data as of and for our last five fiscal years.

This selected financial data should be read in conjunction with the consolidated financial statements and related notes included in Item 15 of this Annual Report.

Over our last five fiscal years, we have acquired a number of companies, including NetSuite Inc. (NetSuite) in fiscal 2017.

The results of our acquired companies have been included in our consolidated financial statements since their respective dates of acquisition and have contributed to our revenues, income, earnings per share and total assets.

| | | As of and for the Year Ended May 31, | | | | | | | | | | | | | | | | | | |

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

| (in millions, except per share amounts) | | 2020 | | | | 2019 | | | | 2018 | | | | 2017 | | | | 2016(4) | | |

| Consolidated Statements of Operations Data: | | | | | | | | | | | | | | | | | | | | |

| Total revenues | | $ | 39,068 | | | $ | 39,506 | | | $ | 39,383 | | | $ | 37,792 | | | $ | 37,047 | |

| Operating income | | $ | 13,896 | | | $ | 13,535 | | | $ | 13,264 | | | $ | 12,913 | | | $ | 12,604 | |

| Net income(1) | | $ | 10,135 | | | $ | 11,083 | | | $ | 3,587 | | | $ | 9,452 | | | $ | 8,901 | |

| Earnings per share—diluted(1) | | $ | 3.08 | | | $ | 2.97 | | | $ | 0.85 | | | $ | 2.24 | | | $ | 2.07 | |

| Diluted weighted average common shares outstanding | | | 3,294 | | | | 3,732 | | | | 4,238 | | | | 4,217 | | | | 4,305 | |

| Cash dividends declared per common share | | $ | 0.96 | | | $ | 0.81 | | | $ | 0.76 | | | $ | 0.64 | | | $ | 0.60 | |

| Consolidated Balance Sheets Data: | | | | | | | | | | | | | | | | | | | | |

| Working capital(2) | | $ | 34,940 | | | $ | 27,756 | | | $ | 57,035 | | | $ | 50,995 | | | $ | 47,105 | |

| Total assets(2) | | $ | 115,438 | | | $ | 108,709 | | | $ | 137,851 | | | $ | 136,003 | | | $ | 112,180 | |

| Notes payable and other borrowings(3) | | $ | 71,597 | | | $ | 56,167 | | | $ | 60,619 | | | $ | 57,909 | | | $ | 43,855 | |

| (1) | Our net income and diluted earnings per share were impacted in fiscal 2019 and 2018 by the effects of our adoption 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 in our Annual Report on Form 10-K for the fiscal year ended May 31, 2019. |

| (2) | Working capital and total assets increased in fiscal 2020 primarily due to the favorable impacts to our net current assets resulting from our fiscal 2020 net income and the issuance of $20.0 billion of long-term senior notes in fiscal 2020, partially offset by cash used for repurchases of our common stock and dividend payments in fiscal 2020. Working capital and total assets 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 the fiscal 2016 to 2018 periods presented primarily due to the favorable impacts to our net current assets resulting from our net income generated during the periods presented and the issuance of long-term senior notes of $10.0 billion in fiscal 2018 and $14.0 billion in fiscal 2017. These working capital and total assets increases were partially offset by cash used for acquisitions, repurchases of our common stock and dividend payments in the fiscal 2016 to 2018 periods presented. In addition, our total assets were also affected in all periods presented by the repayments of notes payable and other borrowings as discussed further below. |

| (3) | Our notes payable and other borrowings, which represented the summation of our notes payable, 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, increased during fiscal 2020 primarily due to the issuance of $20.0 billion of long-term senior notes. Notes payable and other borrowings decreased during fiscal 2019 primarily due to repayments of certain short-term borrowings and senior notes. Notes payable and other borrowings increased between fiscal 2016 and 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, and fiscal 2016 short-term borrowings of $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. |

| (4) | The summary consolidated financial data for the fiscal year ended and as of May 31, 2016 have not been updated to reflect the adoption of ASC 606, *Revenue from Contracts with Customers* (ASC 606) or ASU 2017-07, *Improving the Presentation of Net Periodic Pension Costs and Net Periodic Postretirement Benefit Costs* (ASU 2017-07). Refer to our Annual Report on Form 10-K for the fiscal year ended May 31, 2019 for additional discussion regarding Oracle’s adoption of these accounting pronouncements. |

Based on our management’s evaluation (with the participation of our Principal Executive and Financial Officer), as of the end of the period covered by this report, our Principal Executive and Financial Officer has concluded that our disclosure controls and procedures were effective as of May 31, [removed: 2020] [added: 2021] 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 and Financial Officer as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Principal Executive and Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of May 31, [removed: 2020] [added: 2021] based on the guidelines established in *Internal Control—Integrated 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: 2020.][added: 2021.]

The effectiveness of our internal control over financial reporting as of May 31, [removed: 2020] [added: 2021] 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.

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

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

The other information required by this Item 10 is incorporated [added: herein] 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: 2020] [added: 2021] Annual Meeting of Stockholders [removed: (2020] [added: (2021] 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 “Delinquent Section 16(a) Reports.”

The information required by this Item 11 is incorporated [added: herein] by reference from the information to be contained in our [removed: 2020] [added: 2021] Proxy Statement under the sections entitled “Board of [removed: 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: 2020] [added: 2021] 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: 2020] [added: 2021] 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: 2020] [added: 2021] Proxy Statement under the section entitled “Ratification of Selection of Independent Registered Public Accounting Firm.”

| [Reports of Independent Registered Public Accounting Firm](#REPORT_INDEPENDENT_REGISTERED_PUBLIC_ACC) | | [removed: 66] [added: 63] |

| [Balance Sheets as of May 31, [removed: 2020] [added: 2021] and [removed: 2019](#CONSOLIDATED_BALANCE_SHEETS)] [added: 2020](#CONSOLIDATED_BALANCE_SHEETS)] | | [removed: 69] [added: 66] |

| [Statements of Operations for the years ended May 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018](#CONSOLIDATED_STATEMENTS_OPERATIONS)] [added: 2019](#CONSOLIDATED_STATEMENTS_OPERATIONS)] | | [removed: 70] [added: 67] |

| [Statements of Comprehensive Income for the years ended May 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] [added: 2019](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] | | [removed: 71] [added: 68] |

| [Statements of Equity for the years ended May 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018](#CONSOLIDATED_STATEMENTS_EQUITY)] [added: 2019](#CONSOLIDATED_STATEMENTS_EQUITY)] | | [removed: 72] [added: 69] |

| [Statements of Cash Flows for the years ended May 31, [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] [added: 2019](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] | | [removed: 73] [added: 70] |

| [Notes to Consolidated Financial Statements](#N1_ORGANIZATION_SIGNIFICANT_ACCOUNTING_P) | | [removed: 74] [added: 71] |

| [Schedule II. Valuation and Qualifying Accounts](#SCHEDULE_II) | | [removed: 117] [added: 111] |

We have audited the accompanying consolidated balance sheets of Oracle Corporation (the Company) as of May 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] 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: 2020,] [added: 2021,] 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 financial position of the Company at May 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] and the results of its operations and its cash flows for each of the three years in the period ended May 31, [removed: 2020,] [added: 2021,] 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 Company's internal control over financial reporting as of May 31, [removed: 2020,] [added: 2021,] 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, 2020] [added: 21, 2021] expressed an unqualified opinion thereon.

The critical audit [removed: matter] [added: matters] communicated below [removed: is a matter] [added: are matters] arising from the current period audit of the financial statements that [removed: was] [added: were] communicated or required to be communicated to the audit committee and that: (1) [removed: relates] [added: relate] to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of [removed: the] critical audit [removed: matter] [added: matters] does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit [removed: matter] [added: matters] below, providing [removed: a] separate [removed: opinion] [added: opinions] on the critical audit [removed: matter] [added: matters] or on the accounts or disclosures to which [removed: it relates.][added: they relate.]

| Description of the matter | | As discussed in Note 17 of the financial statements, the Company is involved in various claims and legal proceedings. The Company accrues a liability for an estimated loss if the potential loss from any claim or legal proceeding is considered probable, and the amount can be reasonably estimated. For purposes of disclosure, the Company also performs an assessment of the materiality of legal contingencies where a loss is either reasonably possible or it is reasonably possible that an exposure to loss exists in excess of the amount accrued. The audit of the Company’s accounting for and disclosure of legal contingencies [removed: is] [added: was] highly subjective and [removed: requires] [added: required] significant judgment in assessing the Company’s evaluation of the probability of a loss, and the estimated amount or range of loss. These judgments [removed: are] [added: were] impacted by uncertainties related to the ultimate outcome of the legal contingencies, the status of the litigation or the appeals processes, and the status of any settlement discussions associated with the legal contingencies. |

| [removed: How we addressed the matter in our audit] [added: *How* *we* *addressed the* *matter in* *our* *audit*] | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls over the identification and evaluation of these matters, including controls over management’s assessment of the probability of incurrence of a loss and whether the loss or range of loss was reasonably estimable. Our substantive audit procedures, among others, included gaining an understanding of the status of ongoing lawsuits, reviewing letters addressing the matters from internal and external legal counsel, meetings with internal legal counsel to discuss the allegations, and obtaining a representation letter from management on these matters. We also evaluated the Company’s disclosures in relation to these matters. |

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

We have audited Oracle Corporation’s internal control over financial reporting as of May 31, [removed: 2020,] [added: 2021,] based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway 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: 2020,] [added: 2021,] 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 Oracle Corporation as of May 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] 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: 2020,] [added: 2021,] the related notes, and the financial statement schedule listed in the Index at Item 15(a) 2 and our report [added: dated] June [removed: 22, 2020] [added: 21, 2021] expressed an unqualified opinion thereon.

As of May 31, [removed: 2020] [added: 2021] and [removed: 2019][added: 2020]

| (in millions, except per share data) | | [added: 2021 | | | |] 2020 | | | | 2019 | | |

| Cash and cash equivalents | | $ | [removed: 37,239] [added: 30,098] | | | $ | [removed: 20,514] [added: 37,239] | |

| Marketable securities | | | [removed: 5,818] [added: 16,456] | | | | [removed: 17,313] [added: 5,818] | |

| Trade receivables, net of allowances for doubtful accounts of [removed: $409] [added: $373] and [removed: $371] [added: $409] as of May 31, [removed: 2020] [added: 2021] and May 31, [removed: 2019,] [added: 2020,] respectively | | | [removed: 5,551] [added: 5,409] | | | | [removed: 5,134] [added: 5,551] | |

| Prepaid expenses and other current assets | | | [removed: 3,532] [added: 3,604] | | | | [removed: 3,425] [added: 3,532] | |

| Total current assets | | | [removed: 52,140] [added: 55,567] | | | | [removed: 46,386] [added: 52,140] | |

| Property, plant and equipment, net | | | [removed: 6,244] [added: 7,049] | | | | [removed: 6,252] [added: 6,244] | |

| Intangible assets, net | | | [removed: 3,738] [added: 2,430] | | | | [removed: 5,279] [added: 3,738] | |

| Goodwill, net | | | [removed: 43,769] [added: 43,935] | | | | [removed: 43,779] [added: 43,769] | |

| Deferred tax assets | | | [removed: 3,252] [added: 13,636] | | | | [removed: 2,696] [added: 3,252] | |

| Other non-current assets | | | [removed: 6,295] [added: 8,490] | | | | [removed: 4,317] [added: 6,295] | |

| Total non-current assets | | | [removed: 63,298] [added: 75,540] | | | | [removed: 62,323] [added: 63,298] | |

| Total assets | | $ | [removed: 115,438] [added: 131,107] | | | $ | [removed: 108,709] [added: 115,438] | |

| Notes payable, current | | $ | [removed: 2,371] [added: 8,250] | | | $ | [removed: 4,494] [added: 2,371] | |

| Accounts payable | | | [removed: 637] [added: 745] | | | | [removed: 580] [added: 637] | |

| Accrued compensation and related benefits | | | [removed: 1,453] [added: 2,017] | | | | [removed: 1,628] [added: 1,453] | |

| Deferred revenues | | | [removed: 8,002] [added: 8,775] | | | | [removed: 8,374] [added: 8,002] | |

| Other current liabilities | | | [removed: 4,737] [added: 4,377] | | | | [removed: 3,554] [added: 4,737] | |

| Total current liabilities | | | [removed: 17,200] [added: 24,164] | | | | [removed: 18,630] [added: 17,200] | |

| Notes payable and other borrowings, non-current | | | [removed: 69,226] [added: 75,995] | | | | [removed: 51,673] [added: 69,226] | |

| | | Income Tax – Uncertain tax positions |

| Description of the matter | | As discussed in Note 14 of the financial statements, the Company recognizes uncertain tax positions and measures unrecognized tax benefits related to various domestic and foreign matters. As of May 31, 2021, the total amount of unrecognized tax benefits was $6.9 billion, of which $4.4 billion, if recognized would impact the Company’s effective tax rate. The Company uses significant judgment in the accounting for uncertain tax positions including the interpretation and application of tax laws and legal rulings in various jurisdictions. Auditing management’s evaluation of whether an uncertain tax position is more likely than not to be sustained and the measurement of the benefit of various tax positions was complex, involved significant judgment, and was based on interpretations of tax laws and legal rulings. |

| How we addressed the matter in our audit | | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls over management’s process for interpretation of tax laws and legal rulings, as well as development of the assumptions and estimates used in the measurement of uncertain tax positions. To test management’s assessment of which uncertain tax positions are more likely than not to be sustained, we performed audit procedures that included, among others reading and evaluating management’s assumptions and analysis, including any communications with taxing authorities that detailed the basis and technical merits of the uncertain tax positions. We involved our tax subject matter professionals in assessing the technical merits of certain tax positions based on our knowledge of relevant tax laws and experience with related taxing authorities. In addition, we also evaluated the Company’s disclosures in relation to these matters included in Note 14 of the financial statements. |

June 21, 2021

June 21, 2021

| (in millions, except per share data) | | 2021 | | | | 2020 | | |

| Deferred tax liabilities | | | 7,864 | | | | 41 | |

For the Years Ended May 31, 2021, 2020 and 2019

For the Years Ended May 31, 2021, 2020 and 2019

| Repurchases of common stock | | | (329 | ) | | | (2,893 | ) | | | (18,107 | ) | | | — | | | | (21,000 | ) | | | — | | | | (21,000 | ) |

| Other comprehensive income, net | | | — | | | | — | | | | — | | | | 541 | | | | 541 | | | | 2 | | | | 543 | |

| Net income | | | — | | | | — | | | | 13,746 | | | | — | | | | 13,746 | | | | 180 | | | | 13,926 | |

| Balances as of May 31, 2021 | | | 2,814 | | | $ | 26,533 | | | $ | (20,120 | ) | | $ | (1,175 | ) | | $ | 5,238 | | | $ | 714 | | | $ | 5,952 | |

For the Years Ended May 31, 2021, 2020 and 2019

| Net income | | $ | 13,746 | | | $ | 10,135 | | | $ | 11,083 | |

May 31, 2021

Certain prior year balances have been reclassified to conform to the current year presentation.

Such reclassifications did not affect total revenues, operating income or net income.

The comparability of our operating results during fiscal 2021 compared to the corresponding prior year periods, and of our consolidated balance sheets as of May 31, 2021 and 2020, was impacted by the income tax related effects of a partial realignment of our legal entity structure that resulted in the intra-group transfer of certain intellectual property rights.

During fiscal 2021, we recognized a benefit from income taxes primarily due to the result of a total net tax benefit of $2.3 billion that was recorded as a deferred tax asset of $11.3 billion and a non-current deferred tax liability of $9.1 billion.

The deferred tax asset was recognized as a result of the book and tax basis difference on the intra-group transfer of certain intellectual property and the realignment of certain legal entities, partially offset by a Global Intangible Low-Taxed Income (GILTI) non-current deferred tax liability.

The tax amortization related to the intellectual property deferred tax asset will be recognized in future periods and any unused amortization in a particular year will carry forward indefinitely.

The $11.3 billion deferred tax asset was measured based on the tax rate at which it is expected to reverse in the future.

We expect to realize the net deferred tax asset recorded as a result of the intangible property transfer and will periodically assess the realizability of the net deferred tax asset.

Refer to Note 14 below for additional information regarding our income taxes.

May 31, 2021

*Ventures (Topic 323), and Derivatives and Hedging (Topic 815)*; neither of which had a material impact to our consolidated financial statements for the year ended May 31, 2021.

Our hardware support offerings

May 31, 2021

May 31, 2021

Our cloud licenses and on-premise licenses have not historically been sold on a standalone basis, as the

May 31, 2021

May 31, 2021

assumed at the acquisition date fair values.

Substantially all of our marketable debt securities

May 31, 2021

For investments through which we have significant influence in, but not control of, the investee, we account for such investments pursuant to the equity method of accounting whereby we record our proportionate share of the investee’s earnings or losses, amortization of differences between our investment basis and the proportional book equity of the investee, and impairment, if any, as a component of non-operating income, net for each reporting period.

Certain of the non-marketable equity securities held as of May 31, 2021 and 2020 were with a related party entity for which we follow the equity method of accounting.

We are also a counterparty to certain options to acquire additional equity interests in that entity at various times through December 2023 and we could obtain control of that entity should such options be exercised.

May 31, 2021

| --- | --- |

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

[Index to Financial Statements](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH)

June 22, 2020

| Balances as of May 31, 2017 | | | 4,137 | | | $ | 27,065 | | | $ | 28,535 | | | $ | (860 | ) | | $ | 54,740 | | | $ | 390 | | | $ | 55,130 | |

| Repurchase of common stock | | | (238 | ) | | | (1,632 | ) | | | (9,871 | ) | | | — | | | | (11,503 | ) | | | — | | | | (11,503 | ) |

| Fair values of stock awards assumed in connection with acquisitions | | $ | — | | | $ | 8 | | | $ | 3 | |

| Change in unsettled investment purchases | | $ | — | | | $ | — | | | $ | (303 | ) |

Topic 842 requires companies to generally recognize on the balance sheet, operating and financing lease liabilities and corresponding right-of-use (ROU) assets.

We adopted this new standard using the effective date of June 1, 2019 as our initial application date.

Consequently, financial information for the comparative periods was not updated.

We elected the package of practical expedients permitted under the transition guidance of the new standard, which allows us to carry forward our historical lease classification.

The adoption of Topic 842 did not result in a cumulative catch-up adjustment to the opening of our accumulated deficit balance as of June 1, 2019.

There was no material impact to our consolidated statements of operations and consolidated statements of cash flows for the year ended May 31, 2020 due to the adoption of Topic 842.

Refer to the “Leases” section below for a description of our accounting policy that we have applied since our adoption of Topic 842.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

information available to us at the time that these estimates, judgments and assumptions are made.

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, on-premise or other IT infrastructure for a fee for a stated term.

technologies.

Our advanced customer services are offered as standalone arrangements or as a part of arrangements to customers buying other products and services.

Education services include instructor-led, media-based and internet-based training in the use of our cloud, software and hardware products.

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.

subsequent adjustments are recorded to our consolidated statements of operations.

We hold investments in certain non-marketable equity securities with no readily determinable fair values in which we do not have a controlling interest or significant influence.

unit.

Shipping and Handling Costs

Our shipping and handling costs for hardware products sales are included in hardware expenses for all periods presented.

at the statutory tax rates in the jurisdictions that we are able to recognize such tax deductions.

| Other income (loss), net | | | (16 | ) | | | (14 | ) | | | 191 | |

ASU 2020-04 is effective for all entities upon issuance through December 31, 2022.

In January 2020, the FASB issued ASU 2020-01, *Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)* (ASU 2020-01).

ASU 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815.

ASU 2020-01 is effective for us in the first quarter of fiscal 2022, and earlier adoption is permitted.

We are currently evaluating the impact of our pending adoption of ASU 2020-01 on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, *Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments* (ASU 2016-13) and also issued subsequent amendments to the initial guidance (collectively, Topic 326).

Topic 326 requires measurement and recognition of expected credit losses for financial assets held.

We will adopt Topic 326 effective June 1, 2020 with the cumulative effect of adoption recorded as an adjustment to accumulated deficit.

We are currently evaluating the impact of our pending adoption of ASU 2019-12 on our consolidated financial statements.

Fiscal 2018 Acquisition of Aconex Limited

On March 28, 2018, we completed our acquisition of Aconex Limited (Aconex), a provider of cloud-based collaboration software for construction projects.