Categories Earnings Call Transcripts, Technology

Oracle Corp (ORCL) Q1 2021 Earnings Call Transcript

ORCL Earnings Call - Final Transcript

Oracle Corp  (NYSE: ORCL) Q1 2021 earnings call dated Sep. 10, 2020

Corporate Participants:

Ken Bond — Senior Vice President, Investor Relations

Safra A. Catz — Chief Executive Officer

Lawrence J. Ellison — Chairman of the Board and Chief Technology Officer


Mark Moerdler — Bernstein Research — Analyst

Brad Zelnick — Credit Suisse — Analyst

Heather Bellini — Goldman Sachs — Analyst

Raimo Lenschow — Barclays — Analyst

Derrick Wood — Cowen & Company — Analyst

Phil Winslow — Wells Fargo — Analyst



Welcome to Oracle’s First Quarter 2021 Earnings Conference Call. Now I’d like to turn today’s call over to Ken Bond, Senior Vice President.

Ken Bond — Senior Vice President, Investor Relations

Thank you, Erika. Good afternoon, everyone, and welcome to Oracle’s first quarter fiscal year 2021 earnings conference call. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation, and other supplemental financial information can be viewed and downloaded from our Investor Relations website. Additionally, a list of customers being mentioned on this conference call, which have purchased Oracle Cloud services, or went live on Oracle Cloud this quarter will also be available from our Investor Relations website.

On the call today are Chairman and Chief Technology Officer, Larry Ellison, and CEO, Safra Catz.

As a reminder, today’s discussion will include forward-looking statements, including predictions, expectations, estimates, or other information that might be considered forward-looking. Throughout today’s discussion, we will present some important factors relating to our business, which may potentially affect these forward-looking statements. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today.

As a result, we caution you from placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and 10-Q, and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock. And finally, we are not obligating ourselves to revise our results or publicly release any revisions to these forward-looking statements in light of new information or future events.

Before taking questions, we’ll begin with a few prepared remarks. And with that, I’d like to turn the call over to Safra.

Also read: Oracle (ORCL) stock gains as Q1 earnings, revenue beat Street view

Safra A. Catz — Chief Executive Officer

Thanks, Ken, and good afternoon, everyone. Before I start, I want to make sure you understand that we will be making no comments regarding the press reports about TikTok, so there is no need to ask.

So now to Oracle’s results. As you can see, we had a great quarter. As usual, I’ll review our non-GAAP results using constant dollar growth rates, unless I say otherwise. This quarter revenue was more than $150 million above the midpoint of guidance, and EPS was $0.07 above the midpoint. Currency helped a little, but this quarter was all about solid execution on the sales side and disciplined management of our operations, as operating income grew 8%, our best result in three years.

As I’ve said previously and only briefly interrupted by COVID-19, our mix of business is increasingly favorable. What that means is that our growing businesses are growing faster and are now larger than our declining businesses. Our Fusion SaaS momentum is very strong. We’re seeing the success of Autonomous Database, which will continue to get even better now that we have Autonomous Database available on Cloud at Customer.

Our total cloud services and license support revenues for the quarter were $6.9 billion, up 2% from last year, and accounted for 74% of total Company revenue. GAAP application subscription revenues were $2.8 billion, up 4%, but our Fusion apps were up 26% with Fusion ERP up 33% and NetSuite ERP up 23%. Fusion HCM was up 22%. And our Fusion retention rates, which are already high, continue to go up.

GAAP infrastructure subscription revenues were $4.1 billion, up 1%, but with database revenue, up 3%, Autonomous Database consumption revenue was up 64% and annualized consumption revenue for OCI was up 130%. License revenues were $886 million, up 8%. So all-in total revenues for the quarter were $9.4 billion, up 2%. As usual, we have continued to be disciplined in our spending with operating expenses actually down 3% this quarter.

Non-GAAP operating income was $4.2 billion, and as I said, up 8% from last year, and our best operating income growth in three years. Obviously, we’re thrilled with this result. And I expect that Q2 will be good as we’re beginning to see our operating income become a bigger part of our EPS growth.

Operating margin was 45%, up nearly 300 basis points from 42% last year. The non-GAAP tax rate for the quarter was 19.1%, slightly below our base tax rate of 20% as a result of some discrete items. And EPS was $0.93 in US dollars, up 15% in US dollars, 14% in constant currency, and that is despite an interest expense being $120 million higher year-over-year for the quarter. The GAAP tax rate was 13.3%, also a result of some discrete items. And GAAP EPS was $0.72 in US dollars, up 16%, and up 15% in constant currency.

Operating cash flow over the last four quarters was $13.1 billion with capital expenditures of $1.6 billion and free cash flow of $11.5 billion over that same period. We now have more than $42 billion in cash and marketable securities. The short-term deferred revenue balance is $9.9 billion, down 4% in constant currency from a year ago due entirely to timing differences in customer payment. Gross deferred revenue was in fact up in constant currency, and it was up 2%.

As we said before, we’re committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases, prudent use of debt and and a dividend. This quarter, we repurchased nearly 90 million shares for a total of $5 billion. Over the last 12 months, we’ve repurchased 361 million shares for a total of $19.2 billion. Over the last 10 years, we have reduced the shares outstanding by 40%. In addition, we’ve paid out dividends of $3 billion over the last 12 months. And the Board of Directors again declared a quarterly dividend of $0.24.

Now to the guidance. Again, my guidance today is on a non-GAAP basis and in constant currency. Now currency though is extremely volatile, as you can see and what happened in this quarter. And — but assuming current exchange rates remain the same as they are now, currency should have a slightly less than 1% positive impact on total revenue and potentially $0.02 positive effect on EPS for Q2.

So with that, total revenues are expected to grow between 1% to 3% in US dollars. And this — because we will have slightly under 1% tailwind. So, in constant currency, that kind of rounds into 0% to 2%, but probably at the higher side. Non-GAAP EPS in constant currency is expected to grow 8% to 12% between $0.96 and $1 in constant currency. But again, that’s assuming a $0.03 tailwind. So, non-GAAP EPS in USD is expected to grow 10% to 14% and to be between $0.98 and $1.02 in US dollars.

Now my EPS guidance for Q2 assumes our base tax rate of 20%. However, as you see, it’s usually a little below it, sometimes it’s a little above it. However, one-time tax events could cause the actual tax rates for any given quarter to vary. But I expect in normalizing for these things, it will average to 20%, so that’s what I targeted in this guidance.

And with that, I’ll turn it over to Larry for his comments.

Lawrence J. Ellison — Chairman of the Board and Chief Technology Officer

Thanks, Safra. Let’s see, Oracle occupies a unique position in the cloud market. Oracle is the only cloud vendor that competes in both the enterprise applications market, SaaS, and the Infrastructure-as-a-Service market, IaaS. Our competitors in SaaS are people like Salesforce and Workday. Our competitors in IaaS are people like Microsoft and Amazon. They are different markets. We’re the only one that span these two markets. It’s a very interesting dynamic.

I believe we have the best technology in the market today as both the applications layer and the infrastructure layer of the cloud. While analysts have ranked Oracle Cloud applications number one in both market share and customer satisfaction for some time, we’re number one in customer satisfaction in HCM, we’re number one in customer satisfaction in ERP, I can go on. But what’s interesting is that those same analysts are beginning to take notice of the technical quality and customer satisfaction associated with Oracle’s cloud Infrastructure-as-a-Service business.

I’d like to read an approved statement from IDC about their recently published survey. In the 2020 Industry CloudPath survey that IDC recently released where it surveyed 935 IaaS customers on their satisfaction with top IaaS vendors, including Oracle, Amazon Web Services, Microsoft, IBM and Google; Oracle IaaS, OCI, received the highest satisfaction score and the biggest year-over-year score increase of all IaaS vendors. In addition, 86% of those surveyed said, they expect their spend on Oracle IaaS and OCI to increase in the future. I suspect this comes as a big surprise to many of you and many of our competitors, just as Zoom picking Oracle infrastructure surprised a lot of people in the recent past.

I know the biggest question for investors has been, can Oracle preserve its huge market-leading database franchise into this new cloud era? Well, interesting question. Obviously, an extremely important question to me and other — and everyone here at Oracle. But if Oracle Cloud Infrastructure, OCI, is in fact, as OCI — as IDC describes it, the best IaaS platform in the market. The IaaS platform with the highest customer satisfaction. And that same IaaS OCI is the foundation for the world’s only autonomous database.

Where do you think the Oracle Database installed base is going to go? What we’re beginning to see is that it’s just starting to migrate, and it’s migrating to both the Oracle Public Cloud, the only place you could get the Autonomous Database and Oracle Cloud at Customer — excuse me, the only other place you can get the Oracle Autonomous Database and Oracle Cloud Infrastructure all together.

Customers are picking Oracle Cloud Infrastructure and the Oracle Autonomous Database for a few very basic and very obvious reasons: Much better security; much better reliability; much better performance; and dramatically lower cost, much, much lower cost than AWS. And that’s why people are — and I’ll talk about people like 8×8 are — another video conferencing system, are moving entirely from AWS onto the Oracle Cloud. In fact, there is not a major video conferencing company that isn’t talking to Oracle about moving to the Oracle Cloud.

Zoom is a perfect example of why customers are choosing Oracle Cloud Infrastructure. We see the benefits of choosing OCI in Zoom’s results. Zoom’s recent earnings were stunning. Zoom maybe the fastest company ever to have their company name become a verb. At Oracle, we love to Zoom as most of our employees continue to work from home. And we love that Zoom’s usage of Oracle Cloud Infrastructure services delivered triple-digit revenue growth in sequential quarters from Q4 last year to Q1 this year.

OCI cloud data centers are opening all over the world at a record pace. We now have 26 OCI regions live around the world, edging out Amazon AWS, which currently has 24 regions. And we’ll be adding at least another 10 regions in the next nine months. We’re not slowing down, we’re speeding up.

Oracle Database Cloud at Customer is functionally identical to the Oracle Database in the public cloud. That’s why we’re seeing the migrations going both places. They’re going to Database Cloud at Customer, which is a unique Oracle offering, and they’re going directly into our public cloud. The prices are same in both cases. The database is fully serverless and elastic in both cases. You only pay for what you use in both cases. And there are no upfront fees in both cases. We are seeing very rapid adoption of Oracle Database Cloud at Customer among our very largest customers. And this is just the beginning.

In 2018, we delivered the world’s first autonomous database. And the Oracle Autonomous Database is still the world’s only autonomous database. Then in 2019, we introduced the world’s first autonomous operating system. And today, Oracle Autonomous Linux is still the world’s only autonomous operating system.

Now in 2020, we’ve introduced Oracle Autonomous Data Guard, which effectively eliminates site downtime. If the data center running your application goes down for any reason, Autonomous Data Guard immediately switches and automatically — immediately and automatically switches that application over to another data center. No human intervention is required to keep your application running without interruption. And no human labor is required to set up and configure Autonomous Data Guard. To use Autonomous Data Guard, there is nothing to learn and nothing to do do, you just have to turn on a single switch. Only Oracle offers this autonomous reliability feature.

Another unique OCI offering is our dedicated region Gen 2 Cloud at Customer. Customers can now put our entire Gen 2 public cloud behind their firewall in their data center, all of it. It’s not just the Oracle Database behind your firewall. It’s every service that’s in our public cloud, compute, storage, Fusion application, plus the Autonomous Database, Autonomous Linux, Autonomous Data Guard, everything. And we manage it and maintain it for the customer, you get all the benefits of the cloud. But it’s in your data center behind your firewall, no one, not Amazon, not Microsoft, not Google, nobody but Oracle can give customers a complete public cloud in their data center behind their firewall.

Our strategic services are growing rapidly. Autonomous Database revenue grew 64% in annualized consumption. Our Gen 2 OCI consumption rate was 130%. We’re clearly growing faster than the market and we’re taking market share in the process.

With that, I’ll turn it back over to Ken.

Ken Bond — Senior Vice President, Investor Relations

Thank you, Larry. Erika, if you could please queue up the audience for questions. We’ll go to Q&A now.

Questions and Answers:


[Operator Instructions] Our first question comes from Mark Moerdler with Bernstein Research.

Mark Moerdler — Bernstein Research — Analyst

Thank you and congratulations on the strong quarter, especially on license and margins. I’d like to ask about the guidance. Well, Q1 was strong, the economic disruption of COVID-19 is not yet over, and yet you’re guiding little bit strongly. Can you give us some more color on why you feel so confident? And specifically, are you modeling in increased strength at Database, SaaS, ERP, HCM? How big a factor is Gen 2 Cloud in the guidance? Any information would be appreciated. Thanks.

Safra A. Catz — Chief Executive Officer

Sure. Thanks for the question. So, it’s really following the path that we were on before COVID really hit in March. And so, we were — what is going on is very basically an extrapolation of what’s happening in the business. So, the things that are going very well and are growing and are getting larger and larger is everything associated with the cloud.

And that so does implications on license, because options grew not only — database options grew not only double digits, but actually 20-something-percent, and analytics also grew because, as you know, with Oracle licenses, we bring them to our cloud. But in addition Exadata and some of our Oracle-specific hardware that’s very strategic continues to do well. But really the big barn feeders are the fact that our SaaS business is large and growing quickly. And now, OCI and our Database Cloud products and services are growing, and they are getting larger and larger.

And so, because we’ve got annual consumption revenue growing over 100% and this kind of — this is now overwhelms the fact that some of our businesses — I’ll give you an example, on-premise consulting. This business continues to get smaller. And so it’s completely overwhelmed by the businesses that are growing faster. And commitment to our database is incredibly strong. More and more of our customers want to bring their Oracle databases to the Oracle Cloud. And then, of course, you have the cases that Larry talked about, where our just — Oracle Cloud Infrastructure Gen 2 is just so good and so much cheaper and so performant and secure that more and more applications want to come to that.

So, that’s really what’s going on. I’m not seeing into the future. I’m basically looking at what’s going on under the covers and it’s a very easy extrapolation, as our installed bases of our cloud businesses continue to grow.

Mark Moerdler — Bernstein Research — Analyst

Excellent. Thank you.

Ken Bond — Senior Vice President, Investor Relations

Next question, please. Thank you, Erika.


Our next question comes from Brad Zelnick with Credit Suisse.

Brad Zelnick — Credit Suisse — Analyst

Great. Thanks so much for taking the question, and I’ll echo my congrats to the Company as well. I want to ask about Cloud at Customer. Clearly, there is a lot of excitement for how it can enable very large customers to adopt Autonomous Database and have all the benefits of OCI behind the firewall. And I appreciate it’s only really become available in the last few months. But maybe for Larry, from a product market fit perspective, can you explain why this is such a big deal?

And for Safra, are there any leading indicators you can point to, maybe backlog or anything else to help us understand the leading demand for these products, and — which I assume it supports your confidence in the overall business accelerating? Thanks.

Lawrence J. Ellison — Chairman of the Board and Chief Technology Officer

Yeah. I think I can explain it very clearly. So, we’ve been working on Oracle Autonomous Database for several years. As I mentioned in my preamble, we came out with Oracle Autonomous Database in 2018. But if you’re an on-premise user, there was no way to get access to the Oracle Autonomous Database until a couple of months ago. So, the Oracle Autonomous Database was available in our public cloud and has been for three years, and it keeps getting better and better.

But if you’re a big on-premise customer, you didn’t have the access to our latest and greatest database, it was a very strange situation for Oracle that our late technology was not available to the vast majority of our customers. All of a sudden with Cloud at Customer, with Database Cloud at Customer, at very low prices, you can get Oracle Autonomous Database and all the latest and greatest features we offer in the database and we delivered to your data center behind your firewall. And we think the growth here is going to be explosive.

We had a version 1, I’ll just — full disclosure, we had a version 1 of this, that was rather difficult to install and difficult to use. And version 2 is kind of extreme opposite. We learned a lot. And version 2 is really a plug and play. It goes in very, very fast. And it’s very simple to use, incredibly reliable. And we expect this to be one of the great stories this fiscal year. We think this is going to be triple-digit growth, Oracle Database Cloud at Customer. And the other thing is, it’s just going to preserve our database franchise. There is two ways. People are going to make a choice to upgrade or — and move from their current version of Oracle to Autonomous Database. And once with Autonomous Database, they are not going anywhere.

Ken Bond — Senior Vice President, Investor Relations

Great. Thank you. Next question, please.


Our next question is from Heather Bellini with Goldman Sachs.

Heather Bellini — Goldman Sachs — Analyst

Thank you so much for the two of you. I guess, Safra, OCI had a great quarter and obviously, you had really impressive growth with customers like Zoom, that you highlighted. Can you talk to us a little bit about the pipeline momentum you’re seeing with OCI, as customers accelerate their migrations to the cloud? And also, can you share with us what type of workloads in applications are seeing the most traction with it or is it really broad based? Thank you.

Safra A. Catz — Chief Executive Officer

Okay. Let me start, but I know Larry is going to want to say a few things about this. So first of all, you have to understand that our new Fusion customers are also on OCI, which means that all of the applications that they want to build themselves, all custom things on the Oracle Database, they are going to be putting them on OCI also. In addition, just realized that many of our database customers stayed on-premise and waited for us to have OCI Gen 2, which is powerful enough, secure enough, and scalable enough for their crown jewels, and they literally waited.

And I know, and I have visibility into sort of the future because often they want to do what we call BYOL, Bring Your Own License, but they often need options. And so I can see their intentions when they’re buying those options to bring those database workloads. Now, it is falling into the same categories that you’ve seen historically with us, the communications industry, the financial services industry, all of the industries that have very important high-performance applications that run on Oracle, they have been waiting to put them at OCI. And so we see that.

Now, some of them are putting it in the public cloud, many of them, actually many more than I would have expected, and then others are doing Cloud at Customer. And this second generation of Cloud at Customer now with Autonomous Database is just so powerful for our customers. So, we’re talking about apps customers, database customers, customer applications.

And then there are applications that otherwise just to run have some of the competing cloud services that when they do just like Zoom did, 8×8, a whole bunch of others that really use a lot of network, a lot of compute, may use a lot of storage, may have a lot of egress, back and forth taking data in and out, they realized that Oracle is both more performant and since you pay by the minute, the day, the hour, it’s much, much cheaper. So, we compete at every level of the stack. And it’s really very, very, very broad based for us.

I don’t know, Larry, if you want to talk about — add some more to that.

Lawrence J. Ellison — Chairman of the Board and Chief Technology Officer

Yeah. I’ll add a little bit of color. When Safra says our customers waited for us, let me add a little more information. A lot of those customers actually tried to run Oracle at AWS. They tried. It just didn’t work very well. So they decided maybe they should wait. And so they did. So they did try. They looked around. They experimented. But for the vast, vast, vast majority that didn’t work very well. We have an Exadata cloud services. We have — Autonomous Database is not available any place but the Oracle Cloud. Exadata Database service isn’t available any place but the Oracle Cloud. We’re much better.

You’d expect us to be much better running Oracle applications than anybody else, and we are. And a significant percentage of enterprise applications, I don’t know, 40% — 30%, 40% are Oracle applications. So that’s just a gigantic installed base that we think is going to be moving to the Oracle. We’re starting to watch it move to the Oracle Cloud. So, that’s one thing. So they tried, it didn’t work, so they’re coming to us.

Next thing. A lot of our application customers, we got well over 7,000 customer — Fusion application customer, 7,000 Fusion ERP customers. Now, those customers are beginning to build data warehouses around their ERP data, everyone does. And they are building those data warehouses using Autonomous Database and Oracle Analytics, and the Oracle Cloud using Oracle Infrastructure services.

But let’s say, the Oracle Analytics Cloud is in Oracle Infrastructure service and OCI shared service, the Autonomous Database in OCI service. So, our application customers, pretty much all of our medium and large application customers will become — in the not too distant future will become infrastructure customers. Again — and you’ve got to add them on too. So, these are people that are SaaS customers are going to become infrastructure customers, on-premise database customers are going to become infrastructure customers either in the form of Cloud at Customer or public cloud.

Then there are the surprises like Zoom and 8×8 and — but there are more surprises like that. Well, I think Zoom is a great example because it proves that the Oracle Cloud is secure, reliable, high performance and economical. They pick because there is nothing to do with the Oracle Database, it has nothing to do with them doing a SaaS customer, that was just purely an evaluation of our cloud versus Microsoft’s versus Google’s versus Amazon’s.

And another example of that is high-performance computing, car companies simulating crashes. Now, why would anyone go to the Oracle Cloud to do high-performance computing when you can go to Google or you can go to Microsoft or you can go to AWS? Well, because we’re much faster, therefore much — we’re much, much faster and, therefore, they get the simulations done faster, but they got to be willing to pay less. Almost every car — well, that’s too strong. Half of the car companies around the world are now either using our high-performance computing or evaluating our high-performance computing because we benchmarked so well against the competition. And this is all new business like the video conferencing business.

So, the OCI team did a spectacular job of building a second generation, learning from what Microsoft did, what Google did, what Amazon did, and then building the next generation, and it’s so good. We’re winning business everywhere. So — and again — and these are very early days. Gen 2 OCI is relatively new and Gen 2 Cloud at Customer is even newer. And these are both fabulous products, but I think are going to do extremely well over the next few years.

Heather Bellini — Goldman Sachs — Analyst

Thanks you very much.

Ken Bond — Senior Vice President, Investor Relations

Thank you. Next question, please.


Our next question comes from Raimo Lenschow with Barclays.

Raimo Lenschow — Barclays — Analyst

Hey, congrats from me as well. Originally I wanted to ask about the enterprise addition of TikTok, but you said I shouldn’t ask about TikTok. So, a different question now. The — could you maybe discuss like we talked about the strength in cloud, but the other thing that stood out this quarter was how much better you did compared to your peers on the license side. You were up, where everyone kind of was down quite significantly. And you touched on some of the drivers, but maybe you could double click on some of that again because that stems really out as something that we haven’t seen in the industry? Thank you.

Lawrence J. Ellison — Chairman of the Board and Chief Technology Officer

Can I — I’d like to comment on that because I think our license business was really misunderstood. People think our — they see license business and they translate in their brain license means on-premise. That is not true for us. It may be true for everybody else, by the way, probably is true for everybody else, but it’s not true for us. We have this thing called Bring Your Own License to the cloud. We encourage our customers to buy licenses, buy more licenses, and our pitch is, you can run those licenses in your data center on-premise or you can bring those licenses to the cloud and get big discounts running database in the cloud.

So, you cannot look at our growth in our database license business and say that’s the old — a revival of the old on-premise business. That is not correct. A lot of these people, we have — when we see [Indecipherable] these big contracts for database. The reason people are buying more licenses, a lot of them, not all of them, but a majority of them, is because they have the flexibility of bringing those licenses to our public cloud to Cloud at Customer and getting big discounts, getting a benefit, getting better prices by doing that. And a lot of people are doing this. So, again don’t translate license to mean not cloud. A lot of the license is in fact cloud as we always on…

Safra A. Catz — Chief Executive Officer

Right. It’s driven — in fact, it’s driven by their plan to move to the cloud. And that is very, very clear because they’re buying the specific option, which, as I said, the options number — very high percentage growth this quarter because it’s really in preparation for their move to the cloud. But I’ll also tell you that is available also in analytics and in some of the other technology licenses. So, analytics very strong. The database options extremely strong, very much pointing in the direction of moving to the cloud. So that’s really what is driving it.

It’s not — it’s generally not going to be staying on-premise. Some, of course, stays on-premise, and some will stay on-premise indefinitely, but many companies will be either a hybrid or will be Cloud at Customer or, of course, in the public cloud. And that’s really what’s going on here, and it’s really quite clear.

Raimo Lenschow — Barclays — Analyst

Perfect. Thank you, very clear. Congrats, again.

Safra A. Catz — Chief Executive Officer

Yeah. Thank you.


Our next question comes from Derrick Wood with Cowen & Company.

Derrick Wood — Cowen & Company — Analyst

Great. Thanks for taking my question and congrats on a strong quarter. I wanted to ask about the hardware side of the business. This is the first quarter that we’re seeing without negative growth in a long time and to see we’re hitting 70% gross margin, pretty impressive and far sooner than what we would have thought. So, does this tell us that you’re mostly through bleeding off the commodity pieces and the majority of growth is driven by Exadata and Cloud at Customer? And how should we generally think about the directional trends from here in both in terms of growth and margins?

Safra A. Catz — Chief Executive Officer

Yes. So, the hardware growth is entirely dominated by our strategic hardware product, which is really most focused around Exadata. Revenue in Exadata was up 15%. Bookings in our strategic hardware also up very, very high double digit. And we have actually an enormous Exadata backlog, really the largest — it’s actually double what it was — more than double what it was last year.

And the reality is that this segment is very, very strong. We — it has now gotten large enough. And the issue for us in Q4, as I mentioned, was really around supply chain. And that’s taking a while to resolve itself, but we’re able to make and ship a lot of Exadatas, but we have an enormous backlog still behind that. And so that’s really what’s dominating. And of course, what that point to is a commitment by our customers to Oracle. You don’t buy an Exadata to run anything, you buy Oracle Database application — data-based system. And that commitment to the Oracle platform is really shown up in this area.

Cloud at Customer is not recognized upfront. Cloud at Customer is not recognized in the hardware line at all. In fact, it is recognized in the cloud line when they go online and they consume credit, so — cloud credit. So, it doesn’t show up in that on-premise hardware line at all.

Derrick Wood — Cowen & Company — Analyst

Thank you.


Our final question comes from Phil Winslow with Wells Fargo.

Phil Winslow — Wells Fargo — Analyst

Hi. Thanks for taking my question and congrats on a great start to the fiscal year. I just wanted to focus on applications. We haven’t really talked about that a lot on this call. Obviously, you gave us some really strong numbers with Fusion Cloud. Safra, you talked about some of the puts and takes in the overall business. And I wonder if you could talk about those sort of application specifically?

Safra A. Catz — Chief Executive Officer

Sure. I mean, really, when you think of our application business, you really have to think about Fusion and especially, Fusion ERP, HCM, our back office, you have to think about NetSuite. Those are the fastest growing segments. And you have to take into account that we have some other things in that business that are smaller and some of them are from acquisitions. And that is the less strategic part of our business. And if that gets smaller, sometimes replaced by Fusion, that’s why that business is really doing very, very well because the ERP — everything Fusion, but Fusion ERP, HCM, this whole area really growing quickly.

I mean, what you see is, many of our customers both E-Business Suite, PeopleSoft, JD Edwards customers, but we also see a new phenomena, which is, historically, it would be hard to push the door of an SAP customer and SAP on-premise customer too. But now we find many of those doors are not only — can be — basically are already open for us.

So as the only provider of ERP and the cloud for large — medium, large companies, the Fusion products are really taking off. And so we’ve been replacing not only our own products and other companies, but we’ve made a significant foothold in SAP customers simply because they are really very frustrated with their — with the vendors that they have installed on-premise. So, this business for us is an enormous opportunity, and it’s really just chugging on all cylinders worldwide, in fact.

Phil Winslow — Wells Fargo — Analyst

Great. Thanks a lot. Keep up the good work.

Ken Bond — Senior Vice President, Investor Relations

Okay. Thank you, Safra, and thank you, Phil. A telephonic replay of this conference call will be available for 24 hours. Dial-in information can be found in the press release issued earlier today. Please call the Investor Relations department with any follow-up questions from this call and we look forward to speaking with you. Thank you for joining us today.

And with that, I’ll turn the call back to Erika for closing.


[Operator Closing Remarks]


This transcript is produced by AlphaStreet, Inc. While we strive to produce the best transcripts, it may contain misspellings and other inaccuracies. This transcript is provided as is without express or implied warranties of any kind. As with all our articles, AlphaStreet, Inc. does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Neither the information nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securities or commodities. Any opinion expressed in the transcript does not necessarily reflect the views of AlphaStreet, Inc.

© COPYRIGHT 2021, AlphaStreet, Inc. All rights reserved. Any reproduction, redistribution or retransmission is expressly prohibited.

Most Popular

US Bancorp (USB) reports lower adj. earnings for Q2; revenue drops

Financial services company U.S. Bancorp (NYSE: USB) on Wednesday announced operating results for the second quarter of 2024, reporting a decline in revenues and adjusted net income. Total net revenue

Johnson & Johnson (JNJ) Q2 2024 Earnings: Key financials and quarterly highlights

Johnson & Johnson (NYSE: JNJ) reported its second quarter 2024 earnings results today. Reported sales increased 4.3% year-over-year to $22.4 billion. Operational sales growth was 6.6%. Net income decreased 12.8% to

What to look for when Coca-Cola Company (KO) reports Q2 results

The Coca-Cola Company (NYSE: KO) is all set to unveil its second-quarter 2024 financial results next week. Over the years, it has constantly innovated its portfolio and expanded far beyond

Add Comment
Viewing Highlight