The Oracle Fourth Quarter and Fiscal Year 2023 Earnings Call has begun with Ken Bond welcoming everyone to the call. The press release and financial tables, as well as a list of customers who purchased Oracle Cloud Services, can be found on the Investor Relations website. Larry Ellison and Safra Catz are also present on the call. The discussion will include forward-looking statements, but these are subject to risks and uncertainties that may cause actual results to differ from what is being discussed. The call will end with a few prepared remarks before taking questions.

Safra Catz discussed Oracle's journey to success over the past three years, during which their fast-growing businesses eclipsed their declining businesses and drove revenue growth acceleration. She highlighted their differentiated technology and customer experience as the two fundamental differences that have driven their momentum, which has been reflected in their exploding AI demand and growth rate of 77%. Catz concluded by expressing their commitment to their 2026 targets.

Oracle has implemented AI machine learning capabilities for their customers and have grown the business to $11 billion in SaaS revenue. Their infrastructure is becoming increasingly popular due to its unique capabilities and they have changed their culture to be focused on customer success. They have created an organization called Customer Success Services to ensure customers get the most value from their Oracle purchases and this approach has led to higher renewal rates, expansion rates, and referencing. They will discuss their financials in Q4, including and excluding Cerner.

Cloud revenues, including SaaS and IaaS, grew 55%, with IaaS revenue up 77% and SaaS revenue up 47%. Application subscription revenues, including product support, increased 37%, and SaaS cloud revenue, excluding Cerner, was up 17%. Strategic back office SaaS applications now have an annualized revenue of $6.6 billion and grew 24%. Infrastructure subscription revenues, including support, increased 15%, and infrastructure cloud services revenue grew 89%, with an annualized revenue of $5.2 billion. Database subscription revenues, including database support, were up 6%, with cloud database services increasing 41%. Software license revenues were down 14%.

Oracle reported total revenues of $13.8 billion for the quarter, an 18% increase from the previous year. Gross profit dollars of cloud services and license support grew 19% with Cerner and 10% without. Non-GAAP operating income was $6.2 billion, up 12%, with an operating margin of 44%. For the full fiscal year, total company revenue was $50 billion, up 22%, with total application subscriptions increasing 35% and 10% excluding Cerner. Total cloud services and license support revenue was $35.3 billion, up 21%.

Microsoft reported strong financial results for the fourth quarter and full year of fiscal 2023, with total cloud services up 50% to $15.9 billion and total cloud services excluding Cerner up 29% to $13.6 billion. Revenue growth in strategic back office cloud applications was up 27%, and cloud infrastructure services were up 63%. Non-GAAP EPS was up 4% in USD and 10% in constant currency, and the operating margin percentage was 42%. Operating cash flow was up 42% at $5.6 billion and free cash flow was up 46% at $3.7 billion, with capital expenditures of $8.7 billion. The remaining performance obligation (RPO) balance was $67.9 billion, up 47% in constant currency, and 49% of total RPO is expected to be recognized as revenue over the next 12 months.

The company is expecting to have a successful year for their Gen 2 OCI business, with 42 public cloud regions and 7 more being built, as well as 12 public regions that interconnect with Microsoft Azure. They have returned value to shareholders through stock repurchases and dividends and are expecting to have a positive effect on total revenue and EPS in Q1. They are expecting total revenues to grow from 7-9% in constant currency and 8-10% in USD.

The CEO of the company thanked customers and employees for their loyalty and hard work in making the past fiscal year a success. He also discussed their expectations for the upcoming year, with cloud revenue expected to continue growing at similar rates and a higher non-GAAP operating margin percentage. He concluded by thanking the CTO, Chairman, and founder for leading the company with brilliance, determination, and vision.

Oracle's Gen2 Cloud has hardware and software that is different than other hyperscalers' clouds, allowing it to deliver higher performance at lower cost. Its RDMA network is optimized for building large-scale GPU clusters, which has made Oracle the number one choice among cutting-edge AI development companies, who have recently signed contracts to purchase more than $2 billion of capacity. Oracle is also launching a generative AI cloud service for enterprise customers that protects the privacy of their training data.

Oracle's application development teams adopted AI cloud services and used private data to supplement training of existing Cohere large language models, resulting in two specialized models. Cohere and Oracle are working together to make it easy for enterprise customers to train their own specialized models while protecting data privacy. In the future, these models will help professionals use time more efficiently and improve patient care and access to healthcare.

Safra Catz and Larry Ellison explain why Oracle Cloud Infrastructure (OCI) is growing and accelerating: customers want to spend less and do more to stay competitive and agile. Oracle's technology, such as Fusion, costs less and helps customers run their business, while OCI offers customers the ability to run workloads at a much faster speed than their competitors at a lower cost. They also recently announced a new version of MySQL with a fast query processor called HeatWave.

Oracle is unique in being a leader in both infrastructure and applications, and in five years, it is expected that Oracle will have taken advantage of the generative AI opportunity in both areas. Oracle's infrastructure services are cheaper and faster than competitors, and their Fusion ERP system is one-tenth the cost of SAP's HANA system. This has led to Oracle taking market share from other companies, and it is why Oracle has had a successful year.

Larry Ellison discusses the strategic difference between Oracle's cloud and other cloud providers, which is that Oracle uses its infrastructure to build applications with it. He also mentions Oracle's low-code application development tool, APEX, which allows applications to scale to millions of users and to be built in a fraction of the time, with a fraction of the cost. Additionally, Oracle uses AI technology to make their database better, making it an autonomous database which does not require DBAs.

Oracle has a competitive advantage in technology due to their use of AI and cloud technology, which enables their self-healing and autonomous Linux operating system. This technology has enabled Oracle to have applications and infrastructure that feed into each other, making the applications better and the infrastructure better. Customers often combine Oracle's vertical application with Fusion, an industry-by-industry approach, which has been a major factor in their impressive SaaS growth.

Oracle has been successful in acquiring customers across all segments, particularly in healthcare, with its horizontal and vertical applications. Its cloud-based system offers customers a 21st century solution that is kept up to date every 90 days, and is a more cost-effective option than other hosted solutions. Oracle has also specialized its HCM system for the healthcare industry, adding features to better manage their workforce which can be complex due to nurses seeing private patients, working for multiple hospitals, and doing work in clinics.

Oracle Fusion HCM has been designed to help hospitals manage their professional staff, such as those with multiple jobs and teaching assignments in universities. Oracle is also investing in Cerner to automate the entire healthcare ecosystem, from pharmaceutical companies designing drugs to hospitals testing them to regulators approving them. This would help to speed up the regulatory process and reduce costs.

Safra Catz and Raimo Lenschow discuss the cost, synergy capture, and cost takeout of Oracle's partnership with Cerner. Catz believes they are just at the beginning of the process and there is still much work to be done on the operational and development side. When asked about the customer concentration, industry concentration, and pipeline of the OCI Gen 2 business, Catz deferred the question to Larry, though she noted that customers range from small to large.

Oracle Cloud is being adopted by companies of all sizes and industries, including technology companies such as Zoom and NVIDIA. These companies use the Oracle Cloud for running applications and AI training. Oracle Cloud is seen as more cost-effective, secure, and faster than other cloud providers, which is why customers quickly realize its advantages. Larry Ellison adds that customers do their due diligence to make sure the technology is up to par.

Safra Catz discussed the early adopters of the Oracle Cloud, which are typically highly technical companies and industries such as telecommunications and phone companies, due to the performance and cost advantages, the high reliability, and the lack of human error that could lead to data loss. Kirk Materne then asked Catz a question about the free cash flow and CapEx for the quarter, to which she responded by discussing how the company was able to keep CapEx flat going into the next year despite the high demand for OCI.

Safra Catz discussed the efficiency of Oracle's underlying infrastructure, citing the use of OCI and Autonomous Database Serverless, which has enabled them to move from 12 racks to 10 racks and miniaturize their capabilities for cost savings. Ken Bond concluded the call and thanked everyone for participating.

This summary was generated with AI and may contain some inaccuracies.