ORACLE CORPORATION JAPAN Q4 FY2026 earnings call

### Strategic Positioning - Oracle is uniquely positioned to capitalize on the enterprise AI transition, as one of the only companies able to serve customers across the full technology stack, from AI cloud infrastructure to mission-critical applications, with built-in AI capabilities. - Management emphasizes durable technological differentiation and operational execution for OCI, targeting a 30%-40% long-term margin profile for the infrastructure business, which operates in a projected multi-trillion dollar annual market.

### Product and Customer Highlights - Over 1,000 new AI agents were deployed across Oracle application suites in the past year, enabling agentic autonomous work across enterprise processes. Most core application AI innovations are included at no extra charge for customers. - Major Q4 customer wins and deployments include: 8 additional VA medical centers for electronic health records (now serving 14 total centers, 29,000 clinicians and 500,000 veterans), a large agency-wide award for Fusion HCM from the U.S. Office of Personnel Management, Vodafone for full-stack infrastructure and applications, and Claro for end-to-end AI-enabled customer service. - New AI functionality added to Oracle Database includes AI Agent Memory for enterprise context-aware agent development, and Deep Data Security for granular access control for users and AI agents. - Data center buildout progress: 42% of total capacity is delivered at the Abilene, TX site, with 35% more coming in the next 90 days; early power infrastructure is already complete one month ahead of schedule at the Shackelford, TX site; all new large sites are on track for customer delivery between H1 2027 and H2 2027.

### Pricing and Commercial Innovation - New flexible, value-aligned pricing models have been introduced: prepurchased token bundles for additional advanced AI agent capacity, and outcome-based pricing that ties costs directly to customer business outcomes. A limited Q4 rollout of token bundles saw 33 customers pre-purchase access.

### Capital Allocation - New CFO Hilary Maxson confirmed the company will maintain disciplined capital allocation, a strong balance sheet, and investment-grade credit rating while pursuing large-scale AI infrastructure growth.

1. **Cloud Infrastructure (OCI):** Q4 2026 revenue grew 93% year-over-year, signing $67 billion in new AI infrastructure contracts this quarter. Total bring-your-own-hardware or prepaid AI infrastructure contracts now stand at $75 billion, with equivalent margin to other contract types. Global GPU utilization reached 97.5% in Q4. FY 2026 delivered over 1.2 GW of customer capacity, with Q1 FY 2027 delivery approaching 1 GW. 2. **Cloud Applications:** Q4 2026 revenue was $4.1 billion, growing 10% year-over-year. SaaS deferred revenue grew 16% in the quarter. 3. **Cloud Database:** Q4 2026 revenue grew 29% year-over-year; multi-cloud database revenue grew 404% year-over-year, and multi-cloud bookings grew 325% year-over-year. 4. **Total Company:** Q4 2026 total revenue was $19.2 billion, up 21% year-over-year; full year FY 2026 total revenue surpassed $67 billion for the first time. Q4 non-GAAP operating income was $8.6 billion, up 22% year-over-year; full year non-GAAP operating income was $29 billion, up 16% year-over-year. Remaining Performance Obligations (RPO) ended the year at $638 billion, up 363% year-over-year, with 12% expected to be recognized in the next 12 months and 34% between 13-36 months.

- Long-term targets (previously announced at Analyst Day) of 31% annual revenue CAGR and 28% annual EPS CAGR through FY 2030 are fully reaffirmed by new management. - FY 2027 total revenue is expected to grow 34% constant currency, exceeding the long-term target CAGR. Non-GAAP EPS is expected to be $8.05, up 18% constant currency, excluding FY 2026 one-time investment gains. - FY 2027 net cash outlay for capital expenditures is expected to be ~$70 billion, with $20 billion-$25 billion in customer prepayments/timing impacts, leading to higher reported GAAP CapEx. To support the capital investment program, Oracle plans to raise ~$40 billion in debt and equity in FY 2027, including the already announced $20 billion at-the-market equity issuance, with no additional debt expected to be raised in calendar 2026. - Q1 FY 2027 guidance: total revenue growth of 27%-29% year-over-year in USD, cloud revenue growth of 58%-64% year-over-year, non-GAAP EPS of $1.72-$1.76, up 17%-20% year-over-year. - Revenue and earnings growth are expected to accelerate in the second half of FY 2027 as additional data center capacity comes online to meet customer demand. - Oracle's next Investor Day is scheduled for October 28, 2026 in Las Vegas.

Management noted the following risk factors: - Forward-looking statements are subject to inherent uncertainties, and actual results may differ materially from projected performance due to supply chain volatility, changing component costs, and market dynamics. - Near-term gross margins will decline due to the ramp-up of new data center projects before they reach full contractual revenue contribution. - Long-term contract pricing carries supply chain cost risk for projects far in the future, though Oracle maintains flexible pricing mechanisms to protect margins when costs are uncertain. - Growing competition from new market entrants in AI infrastructure could potentially impact customer retention and pricing, though management notes demand currently far outpaces available supply.

Q: Are higher Q4 CapEx levels driven by rising component costs like memory, and how does Oracle manage component price risk for long-term customer contracts? / A: Higher CapEx in Q4 stems from accelerating spending to ramp up revenue faster, not from component price increases. For contracts where costs are locked in (either because capacity is already deployed or component prices are fixed with suppliers), Oracle uses fixed-price customer contracts. For long-term contracts with uncertain future costs, Oracle uses floating-price mechanisms that pass cost increases through to customers, protecting Oracle's margin.

Q: As a new CFO, how should investors evaluate Oracle's returns during this period of heavy AI infrastructure investment? / A: The best metric to evaluate returns is project-level return on invested capital (ROIC). At steady state, after large infrastructure projects are fully ramped, ROIC for OCI AI infrastructure is expected to be in the high 20s. Bring-your-own-hardware and prepaid contract structures, which collect customer cash upfront and reduce Oracle's upfront capital outlay, will deliver even higher ROIC.

Q: How will growing competition from new AI infrastructure providers impact Oracle's customer retention, new customer growth, and margins? / A: Current AI infrastructure demand massively exceeds existing supply, so new entrants do not create meaningful near-term pressure. Management focuses on delivering strong ongoing service and customer satisfaction, which drives high utilization and strong renewal rates. Oracle's full-stack, end-to-end capabilities for complex large-scale AI clusters are difficult to replicate, and ongoing operational efficiency investments will allow Oracle to improve margins while lowering customer prices over time.

Q: Why is Oracle expanding outcome-based pricing and token bundles for AI applications, and how will this impact growth? / A: Customers want AI spending aligned with measurable ROI and value creation, which these flexible pricing models deliver. Outcome-based pricing is being expanded across the full SaaS portfolio, building on existing use cases in construction, healthcare, and hospitality. Most core AI features remain included at no extra charge, with token bundles for customers wanting additional advanced AI capacity. This pricing flexibility aligns with customer budget requirements, leverages Oracle's unique full-stack position to measure outcomes, and is expected to support stronger application growth.

Q: What is the future expected mix of bring-your-own-hardware/prepaid contracts, and how does this impact the FY 2027 CapEx outlook? / A: The business model is still evolving as customer needs and the AI accelerator ecosystem change, so the ultimate long-term mix is uncertain. Oracle provides value in these contracts by designing, building, securing, and operating the full integrated cloud stack, not just supplying hardware. For FY 2027, the $70 billion net cash outlay CapEx guidance already excludes $20 billion-$25 billion in expected customer prepayments and timing impacts, which reduces Oracle's upfront funding requirement and improves returns on capital. Margins for these contracts are at or above the margin of traditional OCI contracts.