Item 1. Financial Statements (Unaudited)

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Item 1. Financial Statements (Unaudited)

ORACLE CORPORATION

CONDENSED CONSOLIDA****TED BALANCE SHEETS

As of August 31, 2024 and May 31, 2024

(Unaudited)

(in millions, except per share data)August 31, 2024May 31, 2024
ASSETS
Current assets:
Cash and cash equivalents$10,616$10,454
Marketable securities295207
Trade receivables, net of allowances for credit losses of $574 and $485 as of August 31, 2024 and May 31, 2024, respectively8,0217,874
Prepaid expenses and other current assets4,1404,019
Total current assets23,07222,554
Non-current assets:
Property, plant and equipment, net23,09421,536
Intangible assets, net6,2706,890
Goodwill, net62,24962,230
Deferred tax assets12,21912,273
Other non-current assets17,31015,493
Total non-current assets121,142118,422
Total assets$144,214$140,976
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and other borrowings, current$9,201$10,605
Accounts payable2,2072,357
Accrued compensation and related benefits1,7721,916
Deferred revenues11,4559,313
Other current liabilities7,4107,353
Total current liabilities32,04531,544
Non-current liabilities:
Notes payable and other borrowings, non-current75,31476,264
Income taxes payable11,03810,817
Deferred tax liabilities3,4423,692
Other non-current liabilities11,1069,420
Total non-current liabilities100,900100,193
Commitments and contingencies
Oracle Corporation stockholders’ equity:
Preferred stock, $0.01 par value—authorized: 1.0 shares; outstanding: none——
Common stock, $0.01 par value and additional paid in capital—authorized: 11,000 shares; outstanding: 2,771 shares and 2,755 shares as of August 31, 2024 and May 31, 2024, respectively33,08332,764
Accumulated deficit(20,939)(22,628)
Accumulated other comprehensive loss(1,328)(1,432)
Total Oracle Corporation stockholders’ equity10,8168,704
Noncontrolling interests453535
Total stockholders’ equity11,2699,239
Total liabilities and stockholders’ equity$144,214$140,976

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED S****TATEMENTS OF OPERATIONS

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

Three Months Ended August 31,
(in millions, except per share data)20242023
Revenues:
Cloud services and license support$10,519$9,547
Cloud license and on-premise license870809
Hardware655714
Services1,2631,383
Total revenues13,30712,453
Operating expenses:
Cloud services and license support(1)2,5972,179
Hardware(1)162219
Services(1)1,1471,212
Sales and marketing(1)2,0362,026
Research and development2,3062,216
General and administrative358393
Amortization of intangible assets624763
Acquisition related and other1311
Restructuring73138
Total operating expenses9,3169,157
Operating income3,9913,296
Interest expense(842)(872)
Non-operating income (expenses), net20(49)
Income before income taxes3,1692,375
(Provision for) benefit from income taxes(240)45
Net income$2,929$2,420
Earnings per share:
Basic$1.06$0.89
Diluted$1.03$0.86
Weighted average common shares outstanding:
Basic2,7612,728
Diluted2,8512,823

(1)

Exclusive of amortization of intangible assets, which is shown separately.

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEM****ENTS OF COMPREHENSIVE INCOME

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

Three Months Ended August 31,
(in millions)20242023
Net income$2,929$2,420
Other comprehensive income, net of tax:
Net foreign currency translation gains (losses)220(44)
Net unrealized (losses) gains on cash flow hedges(116)72
Other, net—(3)
Total other comprehensive income, net10425
Comprehensive income$3,033$2,445

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMEN****TS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

Three Months Ended August 31,
(in millions, except per share data)20242023
Common stock and additional paid in capital
Balance, beginning of period$32,764$30,215
Common stock issued179308
Stock-based compensation1,007849
Repurchases of common stock(13)(13)
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards(851)(1,060)
Other, net(3)(4)
Balance, end of period$33,083$30,295
Accumulated deficit
Balance, beginning of period$(22,628)$(27,620)
Repurchases of common stock(137)(137)
Cash dividends declared(1,103)(1,091)
Net income2,9292,420
Balance, end of period$(20,939)$(26,428)
Other stockholders’ equity, net
Balance, beginning of period$(897)$(1,039)
Other comprehensive income, net10425
Other, net(82)(12)
Balance, end of period$(875)$(1,026)
Total stockholders’ equity$11,269$2,841
Cash dividends declared per common share$0.40$0.40

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

CONDENSED CONSOLIDATED S****TATEMENTS OF CASH FLOWS

For the Three Months Ended August 31, 2024 and 2023

(Unaudited)

Three Months Ended August 31,
(in millions)20242023
Cash flows from operating activities:
Net income$2,929$2,420
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation804712
Amortization of intangible assets624763
Deferred income taxes(151)(517)
Stock-based compensation1,007849
Other, net130169
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables, net(81)380
Decrease in prepaid expenses and other assets367269
Decrease in accounts payable and other liabilities(531)(457)
Increase in income taxes payable2469
Increase in deferred revenues2,3052,317
Net cash provided by operating activities7,4276,974
Cash flows from investing activities:
Purchases of marketable securities and other investments(477)(333)
Proceeds from sales and maturities of marketable securities and other investments1585
Capital expenditures(2,303)(1,314)
Net cash used for investing activities(2,765)(1,562)
Cash flows from financing activities:
Payments for repurchases of common stock(150)(150)
Proceeds from issuances of common stock179308
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards(851)(1,060)
Payments of dividends to stockholders(1,103)(1,091)
Repayments of commercial paper, net(396)(562)
Proceeds from issuances of term loan credit agreements5,627—
Repayments of senior notes and term loan credit agreements(7,630)(1,000)
Other, net(261)27
Net cash used for financing activities(4,585)(3,528)
Effect of exchange rate changes on cash and cash equivalents85(36)
Net increase in cash and cash equivalents1621,848
Cash and cash equivalents at beginning of period10,4549,765
Cash and cash equivalents at end of period$10,616$11,613
Non-cash investing activities:
Unpaid capital expenditures$1,582$507

See notes to condensed consolidated financial statements.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLID****ATED FINANCIAL STATEMENTS

August 31, 2024

(Unaudited)

1.

BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER

Basis of Presentation

We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the United States (U.S.) Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures herein are adequate to ensure the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year ending May 31, 2025.

There have been no changes to our significant accounting policies as disclosed in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 that had a significant impact on our condensed consolidated financial statements or notes thereto as of and for the three months ended August 31, 2024.

Use of Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC), and we consider various staff accounting bulletins and other applicable guidance issued by the SEC. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent that there are differences between these estimates, judgments or assumptions and actual results, our consolidated financial statements will be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result.

During the first quarter of fiscal 2025, we completed an assessment of the useful lives of our servers and networking equipment and increased the estimate of the useful lives from five years to six years, effective at the beginning of fiscal 2025. Based on the carrying value of our servers and networking equipment as of May 31, 2024, this change in accounting estimate decreased our total operating expenses by $197 million and increased our net income by $157 million, or $0.06 per both basic and diluted share, for the first quarter of fiscal 2025.

Cash, Cash Equivalents and Restricted Cash

Restricted cash that was included within cash and cash equivalents as presented within our condensed consolidated balance sheets as of August 31, 2024 and May 31, 2024 and our condensed consolidated statements of cash flows for the three months ended August 31, 2024 and 2023 was immaterial.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

Remaining Performance Obligations from Contracts with Customers

Trade receivables, net of allowance for credit losses, and deferred revenues are reported net of related uncollected deferred revenues in our condensed consolidated balance sheets as of August 31, 2024 and May 31, 2024. The revenues recognized during the three months ended August 31, 2024 and 2023 that were included in the opening deferred revenues balances as of May 31, 2024 and 2023 were approximately $3.9 billion during each period. Revenues recognized from performance obligations satisfied in prior periods and impairment losses recognized on our receivables were immaterial in each of the three months ended August 31, 2024 and 2023.

Remaining performance obligations, as defined in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, were $99.1 billion as of August 31, 2024, of which we expect to recognize approximately 38% as revenues over the next twelve months, 38% over the subsequent month 13 to month 36, 19% over the subsequent month 37 to month 60 and the remainder thereafter.

Sales of Financing Receivables

We offer certain of our customers the option to acquire certain of our cloud and license, hardware and services offerings through separate long-term payment contracts. We generally sell these contracts that we have financed for our customers on a non-recourse basis to financial institutions within 90 days of the contracts’ dates of execution. We record the transfers of amounts due from customers to financial institutions as sales of financing receivables because we are considered to have surrendered control of these financing receivables. Financing receivables sold to financial institutions were $595 million and $561 million for the three months ended August 31, 2024 and 2023, respectively.

Non-Marketable Investments

Our non-marketable debt investments and equity securities and related instruments totaled $2.3 billion and $2.0 billion as of August 31, 2024 and May 31, 2024, respectively, and are included in other non-current assets in the accompanying condensed consolidated balance sheets and are subject to periodic credit losses and impairment reviews. Certain of these non-marketable equity securities and related instruments are adjusted for observable price changes from orderly transactions. The majority of the non-marketable investments held as of these dates were with Ampere Computing Holdings LLC (Ampere), a related party entity in which we have an ownership interest of approximately 29% as of August 31, 2024. We follow the equity method of accounting for our investment in Ampere and our share of loss under the equity method of accounting is recorded in the non-operating income (expenses), net line item in our condensed consolidated statements of operations. We also have convertible debt investments in Ampere which, under the terms of an agreement with Ampere and other co-investors, will mature in June 2026 and are convertible into equity securities at the holder’s option under certain circumstances. During the three months ended August 31, 2024, we invested $75 million in convertible debt instruments issued by Ampere. The total carrying value of our investments in Ampere after accounting for losses under the equity method of accounting was $1.5 billion as of August 31, 2024. In accordance with the terms of an agreement with other co-investors, we are also a counterparty to certain put (exercisable by a co-investor) and call (exercisable by Oracle) options at prices of approximately $450 million to $1.5 billion, respectively, to acquire additional equity interests in Ampere from our co-investors through January 2027. If either of such options is exercised by us or our co-investors, we would obtain control of Ampere and consolidate its results with our results of operations. Ampere has historically generated net losses.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

Acquisition Related and Other Expenses

Acquisition related and other expenses primarily consist of personnel related costs for transitional and certain other employees, certain business combination adjustments, including adjustments after the measurement period has ended, and certain other operating items, net.

Three Months Ended August 31,
(in millions)20242023
Transitional and other employee related costs$2$6
Business combination adjustments, net(5)1
Other, net164
Total acquisition related and other expenses$13$11

Non-Operating Income (Expenses), net

Non-operating income (expenses), net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan), net losses related to equity investments, including losses attributable to equity method investments (primarily Ampere) and net other income and expenses, including net unrealized gains and losses from our investment portfolio related to our deferred compensation plan and non-service net periodic pension income and losses.

Three Months Ended August 31,
(in millions)20242023
Interest income$133$136
Foreign currency losses, net(50)(82)
Noncontrolling interests in income(43)(37)
Losses from equity investments, net(69)(118)
Other income, net4952
Total non-operating income (expenses), net$20$(49)

Recent Accounting Pronouncements

Segment Reporting**:** In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which enhances the disclosures required for operating segments in our annual and interim consolidated financial statements. ASU 2023-07 is effective for us for our annual reporting for fiscal 2025 and for interim period reporting beginning in fiscal 2026 on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU 2023-07 on our consolidated financial statements.

Income Taxes**:** In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which enhances the disclosures required for income taxes in our annual consolidated financial statements. ASU 2023-09 is effective for us for our annual reporting for fiscal 2026 on a prospective basis. Both early adoption and retrospective application are permitted. We are currently evaluating the impact of our pending adoption of ASU 2023-09 on our consolidated financial statements.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

2.

FAIR VALUE MEASUREMENTS

We perform fair value measurements in accordance with FASB ASC 820, Fair Value Measurement. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:

Level 1: quoted prices in active markets for identical assets or liabilities;

Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities measured at fair value on a recurring basis consisted of the following (Level 1 and Level 2 inputs are defined above):

August 31, 2024May 31, 2024
Fair Value Measurements Using Input TypesFair Value Measurements Using Input Types
(in millions)Level 1Level 2TotalLevel 1Level 2Total
Assets:
Money market funds$3,961$—$3,961$2,620$—$2,620
Time deposits and other5534740248262310
Derivative financial instruments—6363—179179
Total assets$4,016$410$4,426$2,668$441$3,109
Liabilities:
Derivative financial instruments$—$62$62$—$96$96

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

Our cash equivalents and marketable securities investments consist of money market funds, time deposits, marketable equity securities and certain other securities. Marketable securities as presented per our condensed consolidated balance sheets included debt securities with original maturities at the time of purchase greater than three months and the remainder of the debt securities were included in cash and cash equivalents. We classify our marketable debt securities as available-for-sale debt securities at the time of purchase and reevaluate such classification as of each balance sheet date. As of August 31, 2024 and May 31, 2024, all of our marketable debt securities investments mature within one year. Our valuation techniques used to measure the fair values of our instruments that were classified as Level 1 in the table above were derived from quoted market prices and active markets for these instruments that exist. Our valuation techniques used to measure the fair values of Level 2 instruments listed in the table above were derived from the following: non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data including reference rate yield curves, among others.

Based on the trading prices of the $84.5 billion and $86.5 billion of senior notes and other long-term borrowings and the related fair value hedges that we had outstanding as of August 31, 2024 and May 31, 2024, respectively, the estimated fair values of the senior notes and other long-term borrowings and the related fair value hedges using Level 2 inputs at August 31, 2024 and May 31, 2024 were $77.7 billion and $77.2 billion, respectively.

3.

RESTRUCTURING ACTIVITIES

Fiscal 2024 Oracle Restructuring Plan

During fiscal 2024, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our operations due to our acquisitions and certain other operational activities (2024 Restructuring Plan). The total estimated restructuring costs associated with the 2024 Restructuring Plan are up to $635 million and will be recorded to the restructuring expense line item within our condensed consolidated statements of operations as they are incurred through the end of the plan. We recorded $76 million and $153 million of restructuring expenses in connection with the 2024 Restructuring Plan during the three months ended August 31, 2024 and 2023, respectively. Any changes to the estimates of executing the 2024 Restructuring Plan will be reflected in our future results of operations.

Summary of All Plans

AccruedThree Months Ended August 31, 2024AccruedTotal CostsTotal Expected
(in millions)May 31, 2024**(2)**Initial Costs**(3)**Adj. to Cost**(4)**Cash PaymentsOthers**(5)**August 31, 2024**(2)**Accrued to DateProgram Costs
2024 Restructuring Plan(1)
Cloud and license$87$40$(2)$(33)$1$93$233$255
Hardware42—(2)—41117
Services125—(6)—1150106
Other4934(3)(33)—47214257
Total 2024 Restructuring Plan$152$81$(5)$(74)$1$155$508$635
Total other restructuring plans(6)$84$—$(3)$(11)$2$72
Total restructuring plans$236$81$(8)$(85)$3$227

(1)

Restructuring costs recorded to each of the operating segments presented primarily related to employee severance costs. Other restructuring costs represented employee severance costs not related to our operating segments and certain other restructuring plan costs.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

(2)

As of August 31, 2024 and May 31, 2024, substantially all restructuring liabilities have been recorded in other current liabilities within our condensed consolidated balance sheets.

(3)

Costs recorded for the respective restructuring plans during the period presented.

(4)

All plan adjustments were changes in estimates whereby increases and decreases in costs were generally recorded to operating expenses in the period of adjustments.

(5)

Represents foreign currency translation and certain other non-cash adjustments.

(6)

Other restructuring plans presented in the tables above included condensed information for other Oracle based plans and other plans associated with certain of our acquisitions whereby we continued to make cash outlays to settle obligations under these plans during the periods presented but for which the periodic impact to our condensed consolidated statements of operations was not significant.

4.

DEFERRED REVENUES

Deferred revenues consisted of the following:

(in millions)August 31, 2024May 31, 2024
Cloud services and license support$10,257$8,203
Hardware660546
Services487512
Cloud license and on-premise license5152
Deferred revenues, current11,4559,313
Deferred revenues, non-current (in other non-current liabilities)1,4291,233
Total deferred revenues$12,884$10,546

Deferred cloud services and license support revenues and deferred hardware revenues substantially represent customer payments made in advance for cloud or support contracts that are typically billed in advance with corresponding revenues generally being recognized ratably or based upon customer usage over the respective contractual periods. Deferred services revenues include prepayments for our services business and revenues for these services are generally recognized as the services are performed. Deferred cloud license and on-premise license revenues typically resulted from customer payments that related to undelivered products and services or specified enhancements.

5.

STOCKHOLDERS’ EQUITY

Common Stock Repurchases

Our Board of Directors has approved a program for us to repurchase shares of our common stock. As of August 31, 2024, approximately $6.8 billion remained available for stock repurchases pursuant to our stock repurchase program. We repurchased 1.1 million shares for $150 million during the three months ended August 31, 2024 and 1.3 million shares for $150 million during the three months ended August 31, 2023 under the stock repurchase program.

Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchases of our debt, our stock price and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 trading plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

Dividends on Common Stock

In September 2024, our Board of Directors declared a quarterly cash dividend of $0.40 per share of our outstanding common stock. The dividend is payable on October 24, 2024 to stockholders of record as of the close of business on October 10, 2024. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.

Fiscal 2025 Stock‑Based Awards Activity and Compensation Expense

During the first quarter of fiscal 2025, we issued 3 million restricted stock-based units (RSUs), all of which are subject to service-based vesting restrictions. These fiscal 2025 stock-based award issuances were partially offset by stock-based award forfeitures and cancellations of 1 million shares during the first quarter of fiscal 2025.

The RSUs that were granted during the three months ended August 31, 2024 have similar vesting restrictions and contractual lives and were valued using methodologies of a similar nature as those described in Note 12 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

Stock-based compensation expense is included in the following operating expense line items in our condensed consolidated statements of operations:

Three Months Ended August 31,
(in millions)20242023
Cloud services and license support$141$111
Hardware65
Services4334
Sales and marketing162135
Research and development569484
General and administrative8680
Total stock-based compensation$1,007$849

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

6.

INCOME TAXES

Our effective tax rates for each of the periods presented are the result of the mix of income and losses earned in various tax jurisdictions that apply a broad range of income tax rates. Our (provision for) benefit from income taxes varied from the tax computed at the U.S. federal statutory income tax rate for the periods presented primarily due to earnings in foreign operations, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation, the Foreign Derived Intangible Income deduction and the tax effect of Global Intangible Low-Taxed Income. Our effective tax rate was 7.6% for the three months ended August 31, 2024, and our effective tax benefit rate was (1.9%) for the three months ended August 31, 2023.

Our net deferred tax assets were $8.8 billion and $8.6 billion as of August 31, 2024 and May 31, 2024, respectively. We believe that it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credit carryforwards. The amount of net deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2022. Our U.S. federal income tax returns have been examined for all years prior to fiscal 2013 and, with some exceptions, we are no longer subject to audit for those periods. Our U.S. state income tax returns, with some exceptions, have been examined for all years prior to fiscal 2010, and we are no longer subject to audit for those periods.

Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining or have examined returns of Oracle and various acquired entities for years through fiscal 2024. Many of the relevant tax years are at an advanced stage in examination or subsequent controversy resolution processes. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal 2001.

We are under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, Australia, Brazil, Canada, Egypt, Germany, India, Indonesia, Israel, Italy, Pakistan, Saudi Arabia, South Korea and Spain, where the amounts under controversy are significant. In some, although not all, cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by, or any negotiated agreements with, these tax authorities or final outcomes in judicial proceedings and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense.

We believe that we have adequately provided under GAAP for outcomes related to our tax audits. However, there can be no assurances as to the possible outcomes or any related financial statement effect thereof.

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2024

(Unaudited)

7.

SEGMENT INFORMATION

ASC 280, Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision makers (CODMs) are our Chief Executive Officer and Chief Technology Officer. We are organized by line of business and geographically. While our CODMs evaluate results in a number of different ways, the line of business management structure is the primary basis for which the allocation of resources and financial results are assessed. The tabular information below presents financial information that is provided to our CODMs for their review and assists our CODMs with evaluating the company’s performance and allocating company resources.

We have three businesses—cloud and license, hardware and services—each of which is comprised of a single operating segment. All three of our businesses market and sell our offerings globally to businesses of many sizes, government agencies, educational institutions and resellers with a worldwide sales force positioned to offer the combinations that best meet customer needs.

Our cloud and license business engages in the sale, marketing and delivery of our enterprise applications and infrastructure technologies through cloud and on-premise deployment models including our cloud services and license support offerings; and our cloud license and on-premise license offerings. Cloud services and license support revenues are generated from offerings that are typically contracted with customers directly, billed to customers in advance, delivered to customers over time with our revenue recognition occurring over the contractual terms and renewed by customers upon completion of the contractual terms. Cloud services and license support contracts provide customers with access to the latest updates to the applications and infrastructure technologies as they become available and for which the customer contracted and also include related technical support services over the contractual term. Cloud license and on-premise license revenues represent fees earned from granting customers licenses, generally on a perpetual basis, to use our database and middleware and our applications software products within cloud and on-premise IT environments. We generally recognize revenues at the point in time the software is made available to the customer to download and use, which typically is immediate upon signature of the license contract. In each fiscal year, our cloud and license business’ contractual activities are typically highest in our fourth fiscal quarter and the related cash flows are typically highest in the following quarter (i.e., in the first fiscal quarter of the next fiscal year) as we receive payments from these contracts.

Our hardware business provides infrastructure technologies including Oracle Engineered Systems, servers, storage, industry-specific hardware, operating systems, virtualization, management and other hardware-related software to support diverse IT environments. Our hardware business also offers hardware support, which provides customers with software updates for the software components that are essential to the functionality of their hardware products and can also include product repairs, maintenance services and technical support services that are typically delivered and recognized ratably over the contractual term.

Our services business provides services to customers and partners to help maximize the performance of their investments in Oracle applications and infrastructure technologies.

We do not track our assets for each business. Consequently, it is not practical to show assets by operating segment.

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The following table presents summary results for each of our three businesses:

Three Months Ended August 31,
(in millions)20242023
Cloud and license:
Revenues$11,389$10,356
Cloud services and license support expenses2,4222,040
Sales and marketing expenses1,7711,784
Margin(1)$7,196$6,532
Hardware:
Revenues$655$714
Hardware products and support expenses152211
Sales and marketing expenses6570
Margin(1)$438$433
Services:
Revenues$1,263$1,383
Services expenses1,0661,145
Margin(1)$197$238
Totals:
Revenues$13,307$12,453
Expenses5,4765,250
Margin(1)$7,831$7,203

(1)

The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of research and development, general and administrative and certain other allocable expenses, net. Additionally, the margins reported above do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain other non-operating income (expenses), net. Refer to the table below for a reconciliation of our total margin for operating segments to our income before income taxes as reported per our condensed consolidated statements of operations.

The following table reconciles total margin for operating segments to income before income taxes:

Three Months Ended August 31,
(in millions)20242023
Total margin for operating segments$7,831$7,203
Research and development(2,306)(2,216)
General and administrative(358)(393)
Amortization of intangible assets(624)(763)
Acquisition related and other(13)(11)
Restructuring(73)(138)
Stock-based compensation for operating segments(352)(285)
Expense allocations and other, net(114)(101)
Interest expense(842)(872)
Non-operating income (expenses), net20(49)
Income before income taxes$3,169$2,375

ORACLE CORPORATION

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Disaggregation of Revenues

We have considered information that is regularly reviewed by our CODMs in evaluating financial performance and disclosures presented outside of our financial statements in our earnings releases and used in investor presentations to disaggregate revenues to depict how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. The principal category we use to disaggregate revenues is the nature of our products and services as presented in our condensed consolidated statements of operations.

The following table is a summary of our total revenues by geographic region:

Three Months Ended August 31,
(in millions)20242023
Americas$8,372$7,841
EMEA(1)3,2283,005
Asia Pacific1,7071,607
Total revenues$13,307$12,453

(1)

Comprised of Europe, the Middle East and Africa

The following table presents our cloud services and license support revenues by offerings:

Three Months Ended August 31,
(in millions)20242023
Cloud services$5,623$4,635
License support4,8964,912
Total cloud services and license support revenues$10,519$9,547

The following table presents our cloud services and license support revenues by applications and infrastructure ecosystems:

Three Months Ended August 31,
(in millions)20242023
Applications cloud services and license support$4,769$4,471
Infrastructure cloud services and license support5,7505,076
Total cloud services and license support revenues$10,519$9,547

ORACLE CORPORATION

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8.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income for the period by the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding restricted stock-based awards, stock options and shares issuable under the employee stock purchase plan as applicable pursuant to the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share:

Three Months Ended August 31,
(in millions, except per share data)20242023
Net income$2,929$2,420
Weighted-average common shares outstanding2,7612,728
Dilutive effect of employee stock plans9095
Dilutive weighted-average common shares outstanding2,8512,823
Basic earnings per share$1.06$0.89
Diluted earnings per share$1.03$0.86
Anti-dilutive stock awards excluded from calculation(1)2427

(1)

These stock awards primarily relate to contingently issuable shares pursuant to performance stock option arrangements. Such shares could be dilutive in the future.

9.

LEGAL PROCEEDINGS

Derivative Litigation Concerning Oracle’s NetSuite Acquisition

On May 3 and July 18, 2017, two alleged stockholders filed separate derivative lawsuits in the Court of Chancery of the State of Delaware, purportedly on Oracle’s behalf. Thereafter, the court consolidated the two derivative cases and designated the July 18, 2017 complaint as the operative complaint. The consolidated lawsuit was brought against all the then-current members and one former member of our Board of Directors, and Oracle as a nominal defendant. Plaintiff alleged that the defendants breached their fiduciary duties by causing Oracle to agree to purchase NetSuite Inc. at an excessive price. The complaint sought (and the operative complaint continues to seek) declaratory relief, unspecified monetary damages (including interest) and attorneys’ fees and costs. The defendants filed a motion to dismiss, which the court denied on March 19, 2018.

On May 4, 2018, our Board of Directors established a Special Litigation Committee (SLC) to investigate the allegations in this derivative action. Three non-employee directors served on the SLC. On August 15, 2019, the SLC filed a letter with the court, stating that the SLC believed that plaintiff should be allowed to proceed with the derivative litigation on behalf of Oracle. After the SLC advised the Board that it had fulfilled its duties and obligations, the Board withdrew the SLC’s authority, except that the SLC maintained certain authority to respond to discovery requests in the litigation.

After plaintiff filed the July 18, 2017 complaint, an additional plaintiff joined the case. Plaintiffs filed several amended complaints and filed their final amended complaint on December 11, 2020. The final amended complaint asserts claims for breach of fiduciary duty against our Chief Executive Officer, our Chief Technology Officer, the estate of Mark Hurd (our former Chief Executive Officer who passed away on October 18, 2019) and two other members of our Board of Directors. Oracle is named as a nominal defendant. On December 11, 2020, the estate of Mark Hurd and the two other members of our Board of Directors moved to dismiss this complaint. On June 21, 2021, the court granted this motion as to the estate of Mark Hurd and one Board member and denied the motion as to the other Board member, who filed an answer to the complaint on August 9, 2021. On December 28, 2020, our Chief Executive Officer, our Chief Technology Officer and Oracle as a nominal defendant filed answers to the operative complaint.

ORACLE CORPORATION

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Trial commenced on July 18, 2022, and on November 18, 2022, the court held a final hearing on the parties’ post-trial briefing. On December 27, 2022, the court “so ordered” a stipulation, dismissing the Board member from this action. On May 12, 2023, the court issued its trial ruling, finding for defendants and rejecting plaintiffs’ claims. The court entered judgment for defendants on March 5, 2024. On April 2, 2024, plaintiffs filed a notice of appeal, appealing the court’s judgment and certain discovery decisions relating to the SLC. On May 2, 2024, plaintiffs filed their opening appellate brief. On June 3, 2024, our Chief Executive Officer and Chief Technology Officer filed their opposition brief, and the SLC filed an opposition brief on the discovery issues. On July 10, 2024, plaintiffs filed their reply brief. The Supreme Court of Delaware, sitting en banc, will hear oral argument on October 23, 2024.

While Oracle continues to evaluate these claims, we do not believe these matters will have a material impact on our financial position or results of operations.

Derivative Litigation Concerning Oracle’s Cloud Business

On February 12 and May 6, 2019, two stockholder derivative lawsuits were filed in the U.S. District Court for the Northern District of California. The cases were consolidated, and on July 8, 2019, a single plaintiff filed a consolidated complaint. The consolidated complaint brought various claims relating to a Rule 10b-5 class action that was filed in the same court on August 10, 2018, and which was settled for a payment by Oracle of $17,500,000. That matter is now concluded. In the Rule 10b-5 class action, plaintiff alleged Oracle and certain Oracle officers made or were responsible for false and misleading statements regarding Oracle’s cloud business.

Plaintiff in the derivative action filed an amended complaint on June 4, 2021. The derivative suit is brought by an alleged stockholder of Oracle, purportedly on Oracle’s behalf, against our Chief Technology Officer, our Chief Executive Officer and the estate of Mark Hurd. Plaintiff claims that the alleged actions described in the 10b-5 class action caused harm to Oracle, including harming Oracle because Oracle allegedly repurchased its own stock at an inflated price. Plaintiff also claims that defendants violated their fiduciary duties of candor, good faith, loyalty, and due care by failing to prevent this alleged harm. Plaintiff also brings derivative claims for violations of federal securities laws. Plaintiff seeks a ruling that this case may proceed as a derivative action, a finding that defendants are liable for breaching their fiduciary duties, an award of damages to Oracle, an order directing defendants to enact corporate reforms, attorneys’ fees and costs, and unspecified relief. The parties have reached an agreement in principle to settle this case, under which Oracle will implement certain corporate governance measures, which shall remain in place for five years, and Oracle will pay plaintiffs’ attorneys’ fees and costs of no more than $700,000. On April 5, 2024, plaintiffs filed a motion for preliminary approval of the proposed settlement. On August 8, 2024, the court held a hearing where it granted plaintiffs’ motion and preliminarily approved the settlement. A final fairness hearing is scheduled for November 14, 2024.

While Oracle continues to evaluate these claims, we do not believe these matters will have a material impact on our financial position or results of operations.

Netherlands Privacy Class Action

On August 14, 2020, The Privacy Collective (TPC), a foundation having its registered office in Amsterdam, filed a purported class action lawsuit against Oracle Nederland B.V, Oracle Corporation and Oracle America, Inc. (the Oracle Defendants), Salesforce.com, Inc. and SFDC Netherlands B.V. in the District Court of Amsterdam. TPC alleges that the Oracle Defendants’ Data Management Platform product violates certain articles of the EU Charter of Fundamental Rights, the General Data Protection Regulation and the Dutch Telecommunications Act (Telecommunicatiewet). TPC claims damages under a number of categories, including: “immaterial damages” (at a fixed amount of €500 per Dutch internet user); “material damages” (in that the costs of loss of control over personal data should be equated to the market value of the personal data for parties like the Oracle Defendants); compensation for losses suffered due to an alleged data breach (at a fixed amount of €100 per Dutch internet user);

ORACLE CORPORATION

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and compensation for the costs of the litigation funder (10% to 25% of the compensation awarded); and the (actual) cost of the proceedings and extrajudicial costs.

We filed our defense on March 3, 2021, and on December 29, 2021, the District Court issued a judgment, holding that all of TPC’s claims were deemed inadmissible because of fundamental procedural flaws. TPC filed an appeal with the Court of Appeal in Amsterdam challenging the District Court’s judgment, except for the claims regarding the alleged data breach, which were dropped. On June 18, 2024, the Court of Appeal overturned the District Court’s decision regarding admissibility, thus permitting the case to proceed. We requested that the Court of Appeal permit an interim appeal to the Dutch Supreme Court and/or the European Court of Justice, and the Court of Appeal has not yet ruled on this request. We believe that we have meritorious defenses against this action, including defenses to the quantum of damages claimed, and we will continue to vigorously defend it.

While the final outcome of this matter cannot be predicted with certainty and we cannot estimate a range of loss at this time, we do not believe that it will have a material impact on our financial position or results of operations.

Other Litigation

We are party to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to acquisitions we have completed or to companies we have acquired or are attempting to acquire. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any.

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