{"url_path":"/sec/orcl/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-22","source_url":"https://www.sec.gov/Archives/edgar/data/1341439/0001193125-26-277521-index.html","accession_number":"0001193125-26-277521","cik":"0001341439","ticker":"ORCL","issuer_name":"ORACLE CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/1341439/0001193125-26-277521-index.html","primary_entity_key":"0001341439","primary_entity_name":"ORACLE CORP"},"word_count":9938,"has_tables":true,"body_markdown":"Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations\n\nWe begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our businesses and significant trends. This overview is followed by a summary of our critical accounting estimates that we believe are important to understanding significant assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition for fiscal 2026 compared to fiscal 2025. A discussion regarding our financial condition and results of operations for fiscal 2025 compared to fiscal 2024 can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended May 31, 2025, as filed with the SEC on June 18, 2025, which is available free of charge on the SEC’s website at www.sec.gov and on our Investor Relations website at www.oracle.com/investor.\n\nBusiness Overview\n\nOracle provides products and services that build, run and support enterprise information technology (IT) frameworks. Our products and services include enterprise applications and infrastructure offerings that incorporate and are enhanced by artificial intelligence (AI) technologies, including embedded AI-driven automation and analytics and generative AI capabilities. These offerings are delivered worldwide through a variety of flexible and interoperable IT deployment models. These models include cloud-based, on-premise and hybrid deployments. We provide choice and flexibility to our customers as to when and how they deploy Oracle applications and infrastructure technologies. Through our worldwide sales force and Oracle Partner Network, we sell to customers all over the world, including businesses of various sizes and industries, government agencies, educational institutions and resellers.\n\nWe have three businesses: cloud and software (formerly referred to as cloud and license); hardware; and services; each of which is comprised of a single operating segment. The descriptions set forth below as a part of this Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations and the information contained within Item 1 Business and Note 13 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report provide additional information related to our businesses and operating segments and align to how our chief operating decision makers (CODMs), which are our Chief Executive Officers and Chief Technology Officer, view our operating results and allocate resources.\n\nCloud and Software Business\n\nOur cloud and software business, which represented 87% and 86% of our total revenues in fiscal 2026 and 2025, respectively, markets, sells and delivers a broad spectrum of enterprise applications and infrastructure technologies through our cloud and software offerings. Revenue streams included in our cloud and software business are:\n\n•\nCloud revenues, which are earned by providing customers access to Oracle Cloud applications and infrastructure technologies via cloud-based deployment models that Oracle develops, provides unspecified updates and enhancements for, deploys, hosts, manages and supports and that customers access by entering into a subscription agreement with us for a stated period. Oracle Cloud Applications and Oracle Cloud Infrastructure (collectively Oracle Cloud) arrangements generally: have durations of one to five years; are renewed at the customer’s option; and are recognized as revenues ratably over the contractual period of the cloud contract or, in the case of usage model contracts, as the cloud services are consumed over time; and\n\n•\nSoftware revenues, which include:\n\no\nsoftware license revenues, which are generated from licensing our software products, including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, for deployment by our customers in cloud-based, on-premise or other IT environments. Our software license transactions are generally perpetual in nature and are generally recognized as revenues up front at the point in time when the software is made available to the customer to download and use. Revenues from usage-based royalty arrangements for distinct software licenses are recognized at the point in time when the software end user usage occurs. The timing of a few large software license transactions can\n\n39\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nsubstantially affect our quarterly software license revenues due to the point-in-time nature of revenue recognition for software license transactions. Software license customers have the option to purchase and renew software support contracts, as further described below; and\n\no\nsoftware support revenues, which are generated by providing Oracle software support services to customers that have elected to purchase support services in connection with the purchase of Oracle applications and infrastructure software licenses. Substantially all software support customers renew their support contracts with us upon expiration in order to continue to benefit from technical support services and the periodic issuance of unspecified updates and enhancements, which current software support customers are entitled to receive. Software support contracts are generally: priced as a percentage of the net fees paid by the customer to purchase a software license; billed in advance of the support services being performed; renewed at the customer’s option; and recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year.\n\nProviding choice and flexibility to our customers as to when and how they deploy Oracle applications and infrastructure technologies are important elements of our corporate strategy. In recent periods, customer demand for our applications and infrastructure technologies delivered through our Oracle Cloud has increased. To address customer demand and enable customer choice, we have certain programs for customers to pivot their applications and infrastructure software licenses and the related software support to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads. The proportion of our cloud revenues relative to our total revenues has increased and we expect this trend to continue. Cloud revenues represented 51% and 43% of our total revenues during fiscal 2026 and 2025, respectively.\n\nOur cloud and software business’ revenue growth is affected by many factors, including the strength of general economic and business conditions, including the effects of inflation, tariffs and trade policy, geopolitical conditions and other macroeconomic factors on customer demand; governmental budgetary constraints; the strategy for and competitive position of our offerings; customer satisfaction with our offerings; the continued renewal of our cloud and software support customer contracts by the customer contract base; substantially all customers continuing to purchase software support contracts in connection with their license purchases; the pricing of software support contracts sold in connection with the sales of licenses; the pricing, amounts and volumes of cloud services and licenses sold; our ability to manage Oracle Cloud capacity requirements to meet existing and prospective customer demand; and foreign currency rate fluctuations.\n\nOn a constant currency basis, we expect that our total cloud and software revenues generally will continue to increase due to:\n\n•\nexpected growth in our cloud offerings; and\n\n•\ncontinued demand for our software offerings.\n\nWe believe these factors should contribute to future growth in our cloud and software business’ total revenues, which should enable us to continue to make investments in research and development and our cloud operations to develop, improve, increase the capacity of and expand the geographic footprint of our cloud and software products and services. We continue to place significant emphasis, both domestically and internationally, on direct sales through our own sales force. We also continue to market certain of our cloud and software offerings through indirect channels.\n\nCosts associated with our cloud and software business are included in cloud and software expenses and sales and marketing expenses. These costs are largely infrastructure- and personnel-related and include the cost of providing our cloud and software support offerings, salaries and commissions earned by our sales force for the sale of our cloud and software offerings and marketing program costs.\n\nOur cloud and software business’ margin has historically trended upward over the course of the four quarters within a particular fiscal year due to the historical upward trend of our cloud and software business’ revenues over those quarterly periods and because the majority of our costs for this business are generally fixed in the short term. The historical upward trend of our cloud and software business’ revenues over the course of the four quarters within a particular fiscal year is primarily due to the addition of new cloud and software support contracts to the customer\n\n40\n\n[Table of Contents](#toc_page)\n\n \n\n \n\ncontract base, which we generally recognize as revenues ratably or based upon customer usage over the respective contractual terms and the renewal of existing customers’ cloud and software support contracts over the course of each fiscal year, which we generally recognize as revenues in a similar manner; and the historical upward trend of our software license revenues, which we generally recognize at a point in time upon delivery; in each case over those four fiscal quarterly periods. Our margin for this business may be adversely impacted due to increases in supply chain and energy costs, the impact of tariffs and other trade barriers on our costs, and our ability to pass such costs on to customers; inflation; foreign currency rate fluctuations; governmental budgetary constraints; trade policy and other factors.\n\nHardware Business\n\nOur hardware business, which represented 5% of our total revenues in each of fiscal 2026 and 2025, provides a broad selection of enterprise hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, industry-specific hardware offerings, operating systems, virtualization, management and other hardware-related software and related hardware support. Each hardware product and its related software, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for as a combined performance obligation. The revenues for this combined performance obligation are generally recognized at the point in time that the hardware product and its related software are delivered to the customer and ownership is transferred to the customer. Our hardware support offerings provide customers with unspecified software updates for software components that are essential to the functionality of our hardware products and associated software products. Our hardware support offerings can also include product repairs, maintenance services and technical support services. Hardware support contracts are entered into and renewed at the option of the customer, are generally priced as a percentage of the net hardware products fees and are generally recognized as revenues ratably as the hardware support services are delivered over the contractual term, which is generally one year. The majority of our hardware products are sold through indirect channels, including independent distributors and value-added resellers, and we also market and sell our hardware products through our direct sales force. We expect to continue to make investments in research and development to improve existing hardware products and services and to develop new hardware products and services.\n\nCosts associated with our hardware business include the cost of hardware products, which consists of expenses for materials and labor used to produce these products by our internal manufacturing operations or by third-party manufacturers, warranty and related expenses and the impact of periodic changes in inventory valuation, including the impact of inventory determined to be excess and obsolete; the cost of materials used to repair customer products with eligible support contracts; the cost of labor and infrastructure to provide support services; and sales and marketing expenses, which are largely personnel-related and include variable compensation earned by our sales force for the sales of our hardware offerings.\n\nOur quarterly hardware revenues are difficult to predict. Our hardware revenues, cost of hardware and hardware operating margins that we report are affected by many factors, including our manufacturing partners’ abilities to timely and cost-effectively manufacture or deliver a few large hardware transactions; our strategy for and the pricing and position of our hardware products relative to competitor offerings; customer demand for competing offerings, including cloud infrastructure offerings; the strength of general economic and business conditions, including the effects of inflation, tariffs and trade policy, geopolitical conditions and other macroeconomic factors on customer demand; governmental budgetary constraints; whether customers decide to purchase hardware support contracts at or in close proximity to the time of hardware product sale; the percentage of our hardware support contract customer base that renews its support contracts; the effect of tariffs and other trade barriers on our costs, and our ability to pass such costs on to customers; the geographic locations of our customers; the close association between hardware products, which have a finite life, and customer demand for related hardware support as hardware products age; customer decisions to either maintain or upgrade their existing hardware infrastructure to newly developed technologies that are available; and foreign currency rate fluctuations.\n\n41\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nServices Business\n\nOur services business, which represented 8% and 9% of our total revenues in fiscal 2026 and 2025, respectively, helps customers and partners maximize the performance of their investments in Oracle applications and infrastructure technologies. We believe that our services are differentiated based on our focus on Oracle technologies, extensive experience, broad sets of intellectual property and best practices. Our services offerings include consulting services and customer success services (formerly referred to as advanced customer services). Services revenues are generally recognized over time as the services are performed. The cost of providing our services consists primarily of personnel-related expenses, technology infrastructure expenditures, facilities expenses and external contractor expenses. Our services business has lower margins than our cloud and software and hardware businesses. Our services revenues are affected by many factors including our strategy for, and the competitive position of, our services; customer demand for our cloud and software and hardware offerings and the related services that we may market and sell in connection with these offerings; general economic conditions; governmental budgetary constraints; personnel reductions in our customers’ IT departments; tighter controls over customer discretionary spending; and foreign currency rate fluctuations.\n\nAcquisitions\n\nOur selective acquisition program is another element of our corporate strategy. Historically, we have invested billions of dollars to acquire a number of complementary companies, products, services and technologies. As compelling opportunities become available, we may acquire companies, products, services and technologies in furtherance of our corporate strategy. We estimate the financial impact of any potential acquisition with regard to earnings, operating margin, cash flows and return on invested capital targets, among others, before deciding to move forward with an acquisition.\n\nCritical Accounting Estimates\n\nOur consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP), which requires us to make certain estimates, judgments and assumptions that can affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Critical accounting estimates are those estimates that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on our financial condition or results of operations. 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. To the extent that there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. We have critical accounting estimates in the area of income taxes. Refer to Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for more discussion of our significant accounting policies.\n\nIncome Taxes\n\nJudgment is required in determining our worldwide income tax provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of revenue sharing and cost reimbursement arrangements among related entities, the process of identifying items of revenues and expenses that qualify for preferential tax treatment and the segregation of foreign and domestic earnings and expenses to avoid double taxation. Although we believe that our estimates are reasonable, the final tax outcome of these matters could be different from that which is reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision and net income in the period in which such determination is made.\n\nWe record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In order for us to realize our deferred tax assets, we must be able to generate sufficient taxable income in those jurisdictions where the deferred tax assets are located. We consider future growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if carryback is permitted under the law, and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event we were to determine that we would not be able to\n\n42\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nrealize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. If we later determine that it is more likely than not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously provided valuation allowance as an adjustment to our provision for income taxes at such time.\n\nWe calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. Adjustments based on filed returns are generally recorded in the period when the global tax implications are known, which can materially impact our effective tax rate.\n\nThe amount of income tax we pay is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed assessments. Our estimate of the potential outcome for any uncertain tax issue may require certain judgments.\n\nWe account for uncertain tax issues pursuant to the Financial Accounting Standards Board’s Accounting Standards Codification (ASC) 740, Income Taxes, which contains a two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Although we believe that we have adequately reserved for our uncertain tax positions, no assurance can be given with respect to the final outcome of these matters. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, judicial rulings and refinement of estimates or realization of earnings or deductions that differ from our estimates. To the extent that the final outcome of these matters is different than the amounts recorded, such differences generally will impact our provision for income taxes in the period in which such a determination is made. Our provisions for income taxes include the impact of reserve provisions and changes to reserves that are considered appropriate and also include the related interest and penalties.\n\nResults of Operations\n\nPresentation of Operating Segment Results and Other Financial Information\n\nIn our results of operations discussion below, we provide an overview of our total consolidated revenues, total consolidated operating expenses and total consolidated operating margin, all of which are presented on a GAAP basis. We also present a GAAP-based discussion below for substantially all of the other expense items as presented in our consolidated statements of operations that are not directly attributable to our three businesses.\n\nIn addition, we discuss below the results of each of our three businesses—cloud and software, hardware and services—which are our operating segments as defined pursuant to ASC 280, Segment Reporting. The financial reporting for our three businesses that is presented below is presented in a manner that is consistent with that used by our CODMs. Our operating segment presentation below reflects revenues, direct costs and sales and marketing expenses that correspond to and are directly attributable to each of our three businesses. We also utilize these inputs to calculate and present a segment margin for each of our three businesses in the discussion below.\n\nConsistent with our internal management reporting processes, research and development expenses, general and administrative expenses, stock-based compensation expenses, amortization of intangible assets, certain other expense allocations, restructuring and other expenses, interest expense, non-operating income, net and provision for income taxes are not attributed to our three operating segments because our management does not view the performance of our three businesses including such items and/or it is impracticable to do so. Refer to “Supplemental Disclosure Related to Certain Charges” below for additional discussion of certain of these items and Note 13 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for more information about our operating segments and a reconciliation of the summations of total segment margin as presented in the discussion below to total income before income taxes as presented per our consolidated statements of operations for fiscal 2026 and 2025.\n\n43\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nConstant Currency Presentation\n\nOur international operations have provided, and are expected to continue to provide, a significant portion of each of our businesses’ revenues and expenses. As a result, each of our businesses’ revenues and expenses and our total revenues and expenses will continue to be affected by changes in the U.S. Dollar against major international currencies. In order to provide a framework for assessing how our underlying businesses performed, excluding the effects of foreign currency rate fluctuations, we compare the percent change in the results from one period to another period in this Annual Report using constant currency. To present this information, current and comparative prior period results for entities reporting in currencies other than U.S. Dollars are converted into U.S. Dollars at constant exchange rates (i.e., the rates in effect on May 31, 2025, which was the last day of our prior fiscal year) rather than the actual exchange rates in effect during the respective periods. For example, if an entity reporting in Euros had revenues of 1.0 million Euros from products sold on May 31, 2026 and 2025, our financial statements would reflect reported revenues of $1.16 million in fiscal 2026 (using 1.16 as the applicable average exchange rate for the period) and $1.13 million in fiscal 2025 (using 1.13 as the applicable average exchange rate for the period). The constant currency presentation, however, would translate the fiscal 2026 results using the fiscal 2025 exchange rate and indicate, in this example, no change in revenues between the periods compared. In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency.\n\nTotal Revenues and Operating Expenses\n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nTotal Revenues by Geography:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAmericas\n\n \n\n$\n\n44,478\n\n \n\n \n\n22%\n\n \n\n22%\n\n \n\n$\n\n36,339\n\n \n\nEMEA(1)\n\n \n\n \n\n15,297\n\n \n\n \n\n9%\n\n \n\n3%\n\n \n\n \n\n14,025\n\n \n\nAsia Pacific\n\n \n\n \n\n7,582\n\n \n\n \n\n8%\n\n \n\n8%\n\n \n\n \n\n7,035\n\n \n\nTotal revenues\n\n \n\n \n\n67,357\n\n \n\n \n\n17%\n\n \n\n16%\n\n \n\n \n\n57,399\n\n \n\nTotal Operating Expenses\n\n \n\n \n\n46,751\n\n \n\n \n\n18%\n\n \n\n17%\n\n \n\n \n\n39,721\n\n \n\nTotal Operating Margin\n\n \n\n$\n\n20,606\n\n \n\n \n\n17%\n\n \n\n13%\n\n \n\n$\n\n17,678\n\n \n\nTotal Operating Margin %\n\n \n\n31%\n\n \n\n \n\n \n\n \n\n \n\n \n\n31%\n\n \n\n% Revenues by Geography:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAmericas\n\n \n\n66%\n\n \n\n \n\n \n\n \n\n \n\n \n\n63%\n\n \n\nEMEA\n\n \n\n23%\n\n \n\n \n\n \n\n \n\n \n\n \n\n25%\n\n \n\nAsia Pacific\n\n \n\n11%\n\n \n\n \n\n \n\n \n\n \n\n \n\n12%\n\n \n\nTotal Revenues by Business:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCloud and software\n\n \n\n$\n\n58,530\n\n \n\n \n\n19%\n\n \n\n17%\n\n \n\n$\n\n49,230\n\n \n\nHardware\n\n \n\n \n\n3,084\n\n \n\n \n\n5%\n\n \n\n3%\n\n \n\n \n\n2,936\n\n \n\nServices\n\n \n\n \n\n5,743\n\n \n\n \n\n10%\n\n \n\n8%\n\n \n\n \n\n5,233\n\n \n\nTotal revenues\n\n \n\n$\n\n67,357\n\n \n\n \n\n17%\n\n \n\n16%\n\n \n\n$\n\n57,399\n\n \n\n% Revenues by Business:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCloud and software\n\n \n\n87%\n\n \n\n \n\n \n\n \n\n \n\n \n\n86%\n\n \n\nHardware\n\n \n\n5%\n\n \n\n \n\n \n\n \n\n \n\n \n\n5%\n\n \n\nServices\n\n \n\n8%\n\n \n\n \n\n \n\n \n\n \n\n \n\n9%\n\n \n\n \n\n(1)\nComprises Europe, the Middle East and Africa\n\nTotal revenues increased by $10.0 billion in reported currency in fiscal 2026 relative to fiscal 2025 due to a $9.3 billion increase in cloud and software revenues, a $510 million increase in services revenues and a $148 million increase in hardware revenues, in each case during fiscal 2026 relative to fiscal 2025. The increase in our cloud and software business revenues was primarily due to growth in our cloud revenues as customers purchased our applications and infrastructure technologies and also renewed their related cloud contracts. In constant currency, cloud applications and cloud infrastructure contributed 16% and 84%, respectively, to the growth in cloud revenues in fiscal 2026. In our hardware business, the increase in revenues was primarily due to the growth in revenues from our Oracle Exadata and certain other strategic hardware product offerings. In our services business, the increase in\n\n44\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nrevenues was attributable to an increase in our consulting services revenues. The Americas, the EMEA and the Asia Pacific regions contributed 88%, 5% and 7%, respectively, to the constant currency total revenue growth during fiscal 2026.\n\nTotal GAAP operating expenses increased by $7.0 billion in reported currency in fiscal 2026 relative to fiscal 2025. The increase in GAAP operating expenses in reported currency was primarily due to a $6.0 billion increase in cloud and software expenses primarily due to higher infrastructure expenses; a $1.5 billion increase in restructuring and other expenses primarily due to higher restructuring expenses; a $412 million increase in research and development expenses primarily due to an increase in employee-related expenses and an increase in computer equipment expenses; an $86 million increase in hardware expenses; and a $16 million increase in general and administrative expenses, in each case during fiscal 2026 relative to fiscal 2025. These increases in GAAP operating expenses in reported currency were partially offset by a $636 million decrease in expenses for the amortization of intangible assets as certain of our assets were fully amortized; a $320 million decrease in sales and marketing expenses primarily due to lower employee related expenses; and a $20 million decrease in services expenses.\n\nOur total operating margin increased in fiscal 2026 relative to fiscal 2025 due to higher revenues as discussed above. Total margin as a percentage of revenues remained flat in fiscal 2026 relative to fiscal 2025.\n\nSupplemental Disclosure Related to Certain Charges\n\nTo supplement our consolidated financial information, we believe that the following information is helpful to an overall understanding of our past financial performance and prospects for the future.\n\nOur operating results reported pursuant to GAAP included the following items that affected our GAAP net income:\n\n \n\n \n\nYear Ended May 31,\n\n \n\n(in millions)\n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\nAmortization of intangible assets(1)\n\n \n\n$\n\n1,671\n\n \n\n \n\n$\n\n2,307\n\n \n\nRestructuring and other(2)\n\n \n\n \n\n1,838\n\n \n\n \n\n \n\n374\n\n \n\nStock-based compensation, operating segments(3)\n\n \n\n \n\n1,618\n\n \n\n \n\n \n\n1,597\n\n \n\nStock-based compensation, R&D and G&A(3)\n\n \n\n \n\n3,193\n\n \n\n \n\n \n\n3,077\n\n \n\nIncome tax effects(4)\n\n \n\n \n\n(3,070\n\n)\n\n \n\n \n\n(2,514\n\n)\n\n \n\n \n\n$\n\n5,250\n\n \n\n \n\n$\n\n4,841\n\n \n\n \n\n(1)\nRepresents the amortization of intangible assets, all of which were acquired in connection with our acquisitions. As of May 31, 2026, estimated future amortization related to intangible assets was as follows (in millions):\n\n \n\nFiscal 2027\n\n \n\n$\n\n731\n\n \n\n \n\nFiscal 2028\n\n \n\n \n\n694\n\n \n\n \n\nFiscal 2029\n\n \n\n \n\n620\n\n \n\n \n\nFiscal 2030\n\n \n\n \n\n582\n\n \n\n \n\nFiscal 2031\n\n \n\n \n\n377\n\n \n\n \n\nThereafter\n\n \n\n \n\n225\n\n \n\n \n\nTotal intangible assets, net\n\n \n\n$\n\n3,229\n\n \n\n(2)\nRestructuring and other expenses in fiscal 2026 consist of employee severance costs in connection with the Fiscal 2026 Oracle Restructuring Plan (2026 Restructuring Plan) and certain other operating expenses, net. Restructuring and other expenses in fiscal 2025 consist of employee severance in connection with the Fiscal 2024 Oracle Restructuring Plan (2024 Restructuring Plan) and certain other operating expenses, net. Additional information regarding certain of our restructuring plans is provided in management’s discussion below under “Restructuring and Other Expenses,” and in Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.\n\n45\n\n[Table of Contents](#toc_page)\n\n \n\n \n\n(3)\nStock-based compensation was included in the following operating expense line items of our consolidated statements of operations (in millions):\n\n \n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n2026\n\n \n\n \n\n2025\n\n \n\n \n\nCloud and software\n\n \n\n$\n\n622\n\n \n\n \n\n$\n\n609\n\n \n\n \n\nHardware\n\n \n\n \n\n27\n\n \n\n \n\n \n\n29\n\n \n\n \n\nServices\n\n \n\n \n\n210\n\n \n\n \n\n \n\n202\n\n \n\n \n\nSales and marketing\n\n \n\n \n\n759\n\n \n\n \n\n \n\n757\n\n \n\n \n\nStock-based compensation, operating segments\n\n \n\n \n\n1,618\n\n \n\n \n\n \n\n1,597\n\n \n\n \n\nResearch and development\n\n \n\n \n\n2,805\n\n \n\n \n\n \n\n2,638\n\n \n\n \n\nGeneral and administrative\n\n \n\n \n\n388\n\n \n\n \n\n \n\n439\n\n \n\n \n\nTotal stock-based compensation\n\n \n\n$\n\n4,811\n\n \n\n \n\n$\n\n4,674\n\n \n\n(4)\nFor fiscal 2026 and 2025, the applicable jurisdictional tax rates were applied to our income before income taxes after excluding the tax effects of items within the table above such as for stock-based compensation, amortization of intangible assets, restructuring and other expenses, and after excluding the net deferred tax effects associated with a previously recorded income tax benefit that resulted from a partial realignment of our legal entity structure; and for fiscal 2026, after excluding the impact of the U.S. One, Big, Beautiful Bill Act related to the remeasurement of a deferred tax liability. These adjustments resulted in an effective tax rate of 19.9%, instead of 12.6%, for fiscal 2026 and 19.7%, instead of 12.1%, for fiscal 2025, which in each case represented our effective tax rates as derived per our consolidated statements of operations.\n\nCloud and Software Business\n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nCloud and Software Revenues:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAmericas\n\n \n\n$\n\n39,304\n\n \n\n \n\n24%\n\n \n\n23%\n\n \n\n$\n\n31,714\n\n \n\nEMEA\n\n \n\n \n\n12,951\n\n \n\n \n\n10%\n\n \n\n4%\n\n \n\n \n\n11,773\n\n \n\nAsia Pacific\n\n \n\n \n\n6,275\n\n \n\n \n\n9%\n\n \n\n10%\n\n \n\n \n\n5,743\n\n \n\nTotal revenues\n\n \n\n \n\n58,530\n\n \n\n \n\n19%\n\n \n\n17%\n\n \n\n \n\n49,230\n\n \n\nExpenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCloud and software(1)\n\n \n\n \n\n16,850\n\n \n\n \n\n56%\n\n \n\n54%\n\n \n\n \n\n10,827\n\n \n\nSales and marketing(1)\n\n \n\n \n\n7,212\n\n \n\n \n\n-3%\n\n \n\n-5%\n\n \n\n \n\n7,473\n\n \n\nTotal expenses(1)\n\n \n\n \n\n24,062\n\n \n\n \n\n31%\n\n \n\n30%\n\n \n\n \n\n18,300\n\n \n\nTotal Margin\n\n \n\n$\n\n34,468\n\n \n\n \n\n11%\n\n \n\n10%\n\n \n\n$\n\n30,930\n\n \n\nTotal Margin %\n\n \n\n59%\n\n \n\n \n\n \n\n \n\n \n\n \n\n63%\n\n \n\n% Revenues by Geography:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAmericas\n\n \n\n67%\n\n \n\n \n\n \n\n \n\n \n\n \n\n64%\n\n \n\nEMEA\n\n \n\n22%\n\n \n\n \n\n \n\n \n\n \n\n \n\n24%\n\n \n\nAsia Pacific\n\n \n\n11%\n\n \n\n \n\n \n\n \n\n \n\n \n\n12%\n\n \n\nRevenues by Offerings:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCloud applications\n\n \n\n$\n\n15,888\n\n \n\n \n\n11%\n\n \n\n10%\n\n \n\n$\n\n14,272\n\n \n\nCloud infrastructure\n\n \n\n \n\n18,101\n\n \n\n \n\n77%\n\n \n\n75%\n\n \n\n \n\n10,234\n\n \n\nSoftware license\n\n \n\n \n\n4,737\n\n \n\n \n\n-9%\n\n \n\n-10%\n\n \n\n \n\n5,201\n\n \n\nSoftware support\n\n \n\n \n\n19,804\n\n \n\n \n\n1%\n\n \n\n-1%\n\n \n\n \n\n19,523\n\n \n\nTotal revenues\n\n \n\n$\n\n58,530\n\n \n\n \n\n19%\n\n \n\n17%\n\n \n\n$\n\n49,230\n\n \n\n \n\n(1)\nExcludes stock-based compensation and certain expense allocations. Also excludes amortization of intangible assets and certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.\n\nOur cloud and software business’ total revenues increased by $9.3 billion in reported currency in fiscal 2026 relative to fiscal 2025 primarily due to an increase in cloud revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts. Excluding the favorable impact of currency rate fluctuations of 2% in fiscal 2026, cloud applications and cloud infrastructure contributed 16% and 84%, respectively, to the constant currency growth in cloud revenues in fiscal 2026. The Americas, the EMEA and the Asia Pacific regions contributed 87%, 6% and 7%, respectively, to the constant currency revenue growth for this business during fiscal 2026.\n\nOur cloud and software business’ total expenses increased by $5.8 billion in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the unfavorable effects of currency rate fluctuations of 1% in fiscal 2026, the constant currency increase in expenses was primarily due to a $5.7 billion increase in infrastructure expenses in fiscal 2026\n\n46\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nrelative to fiscal 2025. Our cloud and software expenses have grown in recent periods, and we expect this trend to continue during fiscal 2027 and in the next few fiscal years as we increase our existing data center capacity and establish data centers in new geographic locations in order to meet current and expected customer demand.\n\nExcluding the effects of currency rate fluctuations, our cloud and software business’ total margin increased in fiscal 2026 relative to fiscal 2025 due to increases in total revenues for this business as discussed above. Total margin as a percentage of revenues in constant currency decreased in fiscal 2026 relative to fiscal 2025 due to an increase in total expenses driven by higher infrastructure expenses to support growth in our cloud infrastructure offering.\n\nHardware Business\n\n \n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nHardware Revenues:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAmericas\n\n \n\n$\n\n1,518\n\n \n\n \n\n5%\n\n \n\n5%\n\n \n\n$\n\n1,441\n\n \n\nEMEA\n\n \n\n \n\n923\n\n \n\n \n\n3%\n\n \n\n-2%\n\n \n\n \n\n893\n\n \n\nAsia Pacific\n\n \n\n \n\n643\n\n \n\n \n\n7%\n\n \n\n7%\n\n \n\n \n\n602\n\n \n\nTotal revenues\n\n \n\n \n\n3,084\n\n \n\n \n\n5%\n\n \n\n3%\n\n \n\n \n\n2,936\n\n \n\nExpenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nHardware(1)\n\n \n\n \n\n832\n\n \n\n \n\n12%\n\n \n\n9%\n\n \n\n \n\n742\n\n \n\nSales and marketing(1)\n\n \n\n \n\n235\n\n \n\n \n\n-15%\n\n \n\n-17%\n\n \n\n \n\n276\n\n \n\nTotal expenses(1)\n\n \n\n \n\n1,067\n\n \n\n \n\n5%\n\n \n\n2%\n\n \n\n \n\n1,018\n\n \n\nTotal Margin\n\n \n\n$\n\n2,017\n\n \n\n \n\n5%\n\n \n\n3%\n\n \n\n$\n\n1,918\n\n \n\nTotal Margin %\n\n \n\n65%\n\n \n\n \n\n \n\n \n\n \n\n \n\n65%\n\n \n\n% Revenues by Geography:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAmericas\n\n \n\n49%\n\n \n\n \n\n \n\n \n\n \n\n \n\n49%\n\n \n\nEMEA\n\n \n\n30%\n\n \n\n \n\n \n\n \n\n \n\n \n\n30%\n\n \n\nAsia Pacific\n\n \n\n21%\n\n \n\n \n\n \n\n \n\n \n\n \n\n21%\n\n \n\n \n\n(1)\nExcludes stock-based compensation and certain expense allocations. Also excludes amortization of intangible assets and certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.\n\nTotal hardware revenues increased by $148 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the favorable impact of currency rate fluctuations of 2% in fiscal 2026, the increase in hardware revenues was primarily due to the growth in revenues from our Oracle Exadata and certain other strategic hardware product offerings. Geographically, we experienced a constant currency increase in hardware revenues in the Americas and the Asia Pacific regions, partially offset by a constant currency decrease in hardware revenues in the EMEA region in fiscal 2026.\n\nTotal hardware expenses increased by $49 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the unfavorable currency rate fluctuations effect of 3% in fiscal 2026, the constant currency increase in hardware expenses during fiscal 2026 relative to fiscal 2025 was due to a $69 million increase in hardware product and support costs, partially offset by a $47 million decrease in sales and marketing expenses.\n\nIn constant currency, our hardware business’ total margin and total margin as a percentage of revenues increased in fiscal 2026 relative to fiscal 2025 due to higher total revenues for this business as described above.\n\n47\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nServices Business\n\n \n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nServices Revenues:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAmericas\n\n \n\n$\n\n3,656\n\n \n\n \n\n15%\n\n \n\n14%\n\n \n\n$\n\n3,184\n\n \n\nEMEA\n\n \n\n \n\n1,423\n\n \n\n \n\n5%\n\n \n\n-1%\n\n \n\n \n\n1,359\n\n \n\nAsia Pacific\n\n \n\n \n\n664\n\n \n\n \n\n-4%\n\n \n\n-3%\n\n \n\n \n\n690\n\n \n\nTotal revenues\n\n \n\n \n\n5,743\n\n \n\n \n\n10%\n\n \n\n8%\n\n \n\n \n\n5,233\n\n \n\nTotal Expenses(1)\n\n \n\n \n\n4,210\n\n \n\n \n\n-1%\n\n \n\n-2%\n\n \n\n \n\n4,240\n\n \n\nTotal Margin\n\n \n\n$\n\n1,533\n\n \n\n \n\n54%\n\n \n\n51%\n\n \n\n$\n\n993\n\n \n\nTotal Margin %\n\n \n\n27%\n\n \n\n \n\n \n\n \n\n \n\n \n\n19%\n\n \n\n% Revenues by Geography:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAmericas\n\n \n\n64%\n\n \n\n \n\n \n\n \n\n \n\n \n\n61%\n\n \n\nEMEA\n\n \n\n25%\n\n \n\n \n\n \n\n \n\n \n\n \n\n26%\n\n \n\nAsia Pacific\n\n \n\n11%\n\n \n\n \n\n \n\n \n\n \n\n \n\n13%\n\n \n\n \n\n(1)\nExcludes stock-based compensation and certain allocations. Also excludes amortization of intangible assets and certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.\n\nTotal services revenues increased by $510 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the favorable impact of currency rate fluctuations of 2% in fiscal 2026, the increase in services revenues was primarily due to increases in our consulting services revenues in fiscal 2026 relative to fiscal 2025. The constant currency increase in services revenues in the Americas region was partially offset by a constant currency decrease in services revenues in the EMEA and the Asia Pacific regions in fiscal 2026.\n\nTotal services expenses decreased by $30 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the unfavorable effects of currency rate fluctuations of 1% in fiscal 2026, the constant currency decrease in services expenses was primarily due to a $54 million decrease in employee-related expenses and a $53 million decrease in bad debt expenses, partially offset by a $37 million increase in external contractor expenses, in each case during fiscal 2026 relative to fiscal 2025.\n\nIn constant currency, our services business’ total margin and total margin as a percentage of revenues increased in fiscal 2026 relative to fiscal 2025 due to higher total revenues and lower total expenses for this business as described above.\n\nResearch and Development Expenses: Research and development expenses consist primarily of personnel-related expenditures. We intend to continue to invest significantly in our research and development efforts because, in our judgment, they are essential to maintaining our competitive position.\n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nResearch and development(1)\n\n \n\n$\n\n7,467\n\n \n\n \n\n3%\n\n \n\n3%\n\n \n\n$\n\n7,222\n\n \n\nStock-based compensation\n\n \n\n \n\n2,805\n\n \n\n \n\n6%\n\n \n\n6%\n\n \n\n \n\n2,638\n\n \n\nTotal expenses\n\n \n\n$\n\n10,272\n\n \n\n \n\n4%\n\n \n\n4%\n\n \n\n$\n\n9,860\n\n \n\n% of Total Revenues\n\n \n\n15%\n\n \n\n \n\n \n\n \n\n \n\n \n\n17%\n\n \n\n \n\n(1)\nExcluding stock-based compensation\n\nTotal research and development expenses increased by $412 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the favorable effects of currency rate fluctuations of less than 1% in fiscal 2026, the constant currency increase in research and development expenses was primarily due to a $234 million increase in employee-related expenses, including stock-based compensation, and a $132 million increase in computer equipment expenses in fiscal 2026 relative to fiscal 2025.\n\n48\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nGeneral and Administrative Expenses: General and administrative expenses primarily consist of personnel-related expenditures for IT, finance, legal and human resources support functions.\n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nGeneral and administrative(1)\n\n \n\n$\n\n1,230\n\n \n\n \n\n6%\n\n \n\n4%\n\n \n\n$\n\n1,163\n\n \n\nStock-based compensation\n\n \n\n \n\n388\n\n \n\n \n\n-12%\n\n \n\n-12%\n\n \n\n \n\n439\n\n \n\nTotal expenses\n\n \n\n$\n\n1,618\n\n \n\n \n\n1%\n\n \n\n0%\n\n \n\n$\n\n1,602\n\n \n\n% of Total Revenues\n\n \n\n2%\n\n \n\n \n\n \n\n \n\n \n\n \n\n3%\n\n \n\n \n\n(1)\nExcluding stock-based compensation\n\nTotal general and administrative expenses increased by $16 million in reported currency in fiscal 2026 relative to fiscal 2025. Excluding the unfavorable effects of currency rate fluctuations of 1% in fiscal 2026, general and administrative expenses in constant currency remained flat in fiscal 2026 relative to fiscal 2025.\n\nAmortization of Intangible Assets: Substantially all our intangible assets were acquired through our business combinations. We amortize our intangible assets over, and monitor the appropriateness of, the estimated useful lives of these assets. We also periodically review these intangible assets for potential impairment based upon relevant facts and circumstances. Refer to Note 5 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional information regarding our intangible assets and related amortization.\n\n \n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nCloud and software agreements and related relationships\n\n \n\n$\n\n558\n\n \n\n \n\n-53%\n\n \n\n-53%\n\n \n\n$\n\n1,176\n\n \n\nDeveloped technology\n\n \n\n \n\n627\n\n \n\n \n\n-2%\n\n \n\n-2%\n\n \n\n \n\n642\n\n \n\nOther\n\n \n\n \n\n486\n\n \n\n \n\n-1%\n\n \n\n-1%\n\n \n\n \n\n489\n\n \n\nTotal amortization of intangible assets\n\n \n\n$\n\n1,671\n\n \n\n \n\n-28%\n\n \n\n-28%\n\n \n\n$\n\n2,307\n\n \n\nAmortization of intangible assets decreased by $636 million in reported currency in fiscal 2026 relative to fiscal 2025 due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.\n\nRestructuring and Other Expenses: Restructuring and other expenses consist of restructuring expenses for employee severance costs, contract termination costs and certain other exit costs to improve our cost structure prospectively resulted from the execution of management-approved restructuring plans that were developed for certain strategic initiatives and/or to improve operational efficiencies; and other operating expenses, net. For additional information regarding our restructuring plans, see Note 7 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.\n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nRestructuring\n\n \n\n$\n\n1,779\n\n \n\n \n\n496%\n\n \n\n486%\n\n \n\n$\n\n299\n\n \n\nOther, net\n\n \n\n \n\n59\n\n \n\n \n\n-22%\n\n \n\n-22%\n\n \n\n \n\n75\n\n \n\nTotal restructuring and other expenses\n\n \n\n$\n\n1,838\n\n \n\n \n\n391%\n\n \n\n384%\n\n \n\n$\n\n374\n\n \n\nRestructuring and other expenses increased by $1.5 billion in reported currency in fiscal 2026 relative to fiscal 2025 primarily due to higher restructuring expenses from actions we took in fiscal 2026 relative to fiscal 2025. Restructuring activities in fiscal 2026 primarily related to the 2026 Restructuring Plan, while restructuring activities in fiscal 2025 primarily related to the 2024 Restructuring Plan, which is substantially complete.\n\nOur management approved, committed to and initiated the 2026 Restructuring Plan and the 2024 Restructuring Plan in order to restructure and further improve efficiencies in our operations.\n\nThe majority of the initiatives undertaken by the 2026 Restructuring Plan were effected to implement our continued emphasis in developing, marketing, selling and delivering our cloud-based offerings. Certain of the cost savings\n\n49\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nrealized pursuant to the 2026 Restructuring Plan initiatives were offset by investments in resources and geographies that we believe better address the development, marketing, sale and delivery of our cloud-based offerings, including investments in the development and delivery of our second-generation cloud infrastructure. We may incur additional restructuring expenses in future periods due to the initiation of new restructuring plans or from changes in estimated costs associated with existing restructuring plans.\n\nInterest Expense:\n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nInterest expense\n\n \n\n$\n\n4,599\n\n \n\n \n\n29%\n\n \n\n29%\n\n \n\n$\n\n3,578\n\n \n\nInterest expense increased in fiscal 2026 relative to fiscal 2025 primarily due to higher average borrowings from the issuances of $43.0 billion of senior notes in fiscal 2026 and an aggregate of $14.0 billion of senior notes in fiscal 2025, partially offset by lower interest expense due to scheduled repayments of debt made during fiscal 2026 and 2025.\n\nNon-Operating Income, net: Non-operating income, net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan), net gains and losses related to marketable and non-marketable investments, including net gains and losses attributable to equity method investments and net other income and expenses, including net gains and losses from our investment portfolio related to our deferred compensation plan, for which an equal and offsetting amount was recorded to our operating expenses during the same period, and non-service net periodic pension income and losses.\n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nInterest income\n\n \n\n$\n\n780\n\n \n\n \n\n35%\n\n \n\n35%\n\n \n\n$\n\n578\n\n \n\nForeign currency losses, net\n\n \n\n \n\n(131\n\n)\n\n \n\n-11%\n\n \n\n-17%\n\n \n\n \n\n(147\n\n)\n\nNoncontrolling interests in income\n\n \n\n \n\n(222\n\n)\n\n \n\n21%\n\n \n\n21%\n\n \n\n \n\n(184\n\n)\n\nGains (losses) from marketable and non-marketable investments, net\n\n \n\n \n\n2,811\n\n \n\n \n\n*\n\n \n\n*\n\n \n\n \n\n(278\n\n)\n\nOther income, net\n\n \n\n \n\n309\n\n \n\n \n\n241%\n\n \n\n242%\n\n \n\n \n\n91\n\n \n\nTotal non-operating income, net\n\n \n\n$\n\n3,547\n\n \n\n \n\n*\n\n \n\n*\n\n \n\n$\n\n60\n\n \n\n \n\n*\n\nNot meaningful\n\n \n\n50\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nOur non-operating income, net increased by $3.5 billion in reported currency in fiscal 2026 relative to fiscal 2025 primarily due to a $2.7 billion gain from the sale of our investment in Ampere Computing Holdings LLC (Ampere), a $380 million gain from other investments, net, a $205 million increase in gains from our investment portfolio related to our deferred compensation plan included in other income, net and a $202 million increase in interest income. Refer to Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional information on the Ampere transaction.\n\nProvision for Income Taxes: Our effective income tax rates for each of the periods presented were the result of the mix of income earned and losses incurred in various tax jurisdictions that apply a broad range of income tax rates. Refer to Note 12 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for a discussion regarding the differences between the effective income tax rates as presented for the periods below and the U.S. federal statutory income tax rates that were in effect during these periods. Future effective tax rates could be adversely affected by an unfavorable shift of earnings weighted to jurisdictions with higher tax rates, by unfavorable changes in tax laws and regulations, by adverse rulings in tax-related litigation, or by shortfalls in stock-based compensation realized by employees relative to stock-based compensation that was recorded for book purposes, among others.\n\n \n\n \n\n \n\nYear Ended May 31,\n\n \n\n \n\n \n\n \n\n \n\n \n\nPercent Change\n\n \n\n \n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nActual\n\n \n\nConstant\n\n \n\n2025\n\n \n\nProvision for income taxes\n\n \n\n$\n\n2,467\n\n \n\n \n\n44%\n\n \n\n39%\n\n \n\n$\n\n1,717\n\n \n\nEffective tax rate\n\n \n\n12.6%\n\n \n\n \n\n \n\n \n\n \n\n \n\n12.1%\n\n \n\nProvision for income taxes increased in fiscal 2026 relative to fiscal 2025 primarily related to an unfavorable impact of $933 million from the enactment of the U.S. One, Big, Beautiful Bill Act, which was signed into law on July 4, 2025 that required a remeasurement of a deferred tax liability previously recorded during fiscal 2021 as part of the partial realignment of our legal entity structure, an unfavorable jurisdictional mix of earnings of $589 million, higher income before provision for income taxes of $584 million and a net change in unrecognized tax benefits associated with settlements with tax authorities and other events of $240 million, substantially offset by an increase in tax benefits related to stock-based compensation of $1.5 billion and the realization of a one-time tax attribute of $125 million.\n\nLiquidity and Capital Resources\n\n \n\n \n\nAs of May 31,\n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nChange\n\n \n\n2025\n\n \n\nWorking capital\n\n \n\n$\n\n4,803\n\n \n\n \n\n*\n\n \n\n$\n\n(8,064\n\n)\n\nCash, cash equivalents and marketable securities\n\n \n\n$\n\n31,894\n\n \n\n \n\n185%\n\n \n\n$\n\n11,203\n\n \n\n \n\n*\n\nNot meaningful\n\nWorking capital: The increase in working capital as of May 31, 2026 in comparison to May 31, 2025 was primarily due to favorable impacts from net income; proceeds from the issuance of senior notes, net of issuance costs, of $42.7 billion during fiscal 2026; $5.0 billion of cash proceeds from the issuance of Mandatory Convertible Preferred Stock, net of issuance costs; $4.9 billion of cash proceeds from the sale of our investments, primarily in Ampere; and $1.3 billion of net cash proceeds from our employee stock programs, partially offset by $55.7 billion of cash used for capital expenditures; $5.8 billion of cash used to pay dividends to our preferred and common stockholders; $5.7 billion of long-term borrowings that were reclassified to current liabilities; $864 million of cash used for purchases of non-current investments; and $95 million of cash used for repurchases of our common stock, in each case during fiscal 2026. Our working capital may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.\n\nCash, cash equivalents and marketable securities: Cash and cash equivalents primarily consist of deposits held at major banks, money market funds and other securities with original maturities of 90 days or less. Marketable securities consist primarily of time deposits with original maturities at the time of purchase greater than 90 days. The increase in cash, cash equivalents and marketable securities as of May 31, 2026 in comparison to May 31, 2025\n\n51\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nwas primarily due to proceeds from the issuance of senior notes, net of issuance costs, of $42.7 billion during fiscal 2026; $32.0 billion of cash inflows from our operations; $5.0 billion of cash proceeds from the issuance of Mandatory Convertible Preferred Stock, net of issuance costs; $4.9 billion of cash inflows from the sale of our investments, primarily in Ampere; $3.3 billion of cash inflows from short-term financing related to capital expenditures, net; and $1.3 billion of net cash provided by our employee stock programs, partially offset by $55.7 billion of cash used for capital expenditures; $5.8 billion of cash used to pay dividends to our common and preferred stockholders; $5.0 billion of cash used for scheduled repayments of debt; $851 million of cash used for repayment of commercial paper, net; $337 million of cash outflows for other financing activities, net; $864 million of cash used for purchases of non-current investments; and $95 million of cash used for repurchases of our common stock, in each case during fiscal 2026. Our cash and cash equivalents may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.\n\n \n\n \n\nYear Ended May 31,\n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nChange\n\n \n\n2025\n\n \n\nNet cash provided by operating activities\n\n \n\n$\n\n31,977\n\n \n\n \n\n54%\n\n \n\n$\n\n20,821\n\n \n\nNet cash used for investing activities\n\n \n\n$\n\n(51,854\n\n)\n\n \n\n139%\n\n \n\n$\n\n(21,711\n\n)\n\nNet cash provided by financing activities\n\n \n\n$\n\n40,284\n\n \n\n \n\n*\n\n \n\n$\n\n1,098\n\n \n\n \n\n*\n\nNot meaningful\n\nCash flows from operating activities: Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their cloud and software support agreements. Over the course of a fiscal year, we also generate cash from the sales of software licenses, hardware offerings and other services. Our primary uses of cash from operating activities are typically for employee-related expenditures, expenses related to data center leases and power for our cloud business, taxes, and interest payments.\n\nNet cash provided by operating activities increased by $11.2 billion in fiscal 2026 relative to fiscal 2025 primarily due to higher net income adjusted for certain non-cash charges and higher cash favorable working capital changes, net, which includes $4.6 billion cash inflows from customer prepayments with significant financing component.\n\nCash flows from investing activities: The changes in cash flows from investing activities primarily relate to our investments in capital assets to support the growth in our cloud and software business and purchases, maturities and sales of our investments in marketable securities and other instruments.\n\nNet cash used for investing activities increased by $30.1 billion in fiscal 2026 relative to fiscal 2025 primarily due to a $34.4 billion increase in capital expenditures, partially offset by $4.3 billion of cash proceeds from the sale of our investment in Ampere.\n\nCash flows from financing activities: The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments, issuance of other financing or equity instruments, stock repurchases, dividend payments and net proceeds related to employee stock programs.\n\nNet cash provided by financing activities increased by $39.2 billion in fiscal 2026 relative to fiscal 2025 primarily due to an increase of $28.8 billion in proceeds from the issuance of senior notes, net of issuance costs; lower scheduled repayments of debt of $5.2 billion; proceeds from the issuance of Mandatory Convertible Preferred Stock of $5.0 billion; higher net cash proceeds from short-term financing related to capital expenditures of $1.9 billion; higher net cash proceeds from our employee stock programs of $1.6 billion; and lower stock repurchases of $505 million, in each case during fiscal 2026 relative to fiscal 2025. These increases were partially offset by higher repayments of commercial paper notes, net of issuances, of $2.7 billion and higher dividend payments of $1.0 billion. Further, during fiscal 2025, we refinanced our term loan credit agreement that we entered into in fiscal 2023, which resulted in no net impact on financing cash flows for the period reported.\n\n52\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nFree cash flow: To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing four-quarter basis to analyze cash flows generated from our operations. We believe that free cash flow is also useful as one of the bases for comparing our performance with that of our competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity. We calculate free cash flow as follows:\n\n \n\n \n\nYear Ended May 31,\n\n \n\n(Dollars in millions)\n\n \n\n2026\n\n \n\n \n\nChange\n\n \n\n2025\n\n \n\nNet cash provided by operating activities\n\n \n\n$\n\n31,977\n\n \n\n \n\n54%\n\n \n\n$\n\n20,821\n\n \n\nCapital expenditures\n\n \n\n \n\n(55,663\n\n)\n\n \n\n162%\n\n \n\n \n\n(21,215\n\n)\n\nFree cash flow\n\n \n\n$\n\n(23,686\n\n)\n\n \n\n*\n\n \n\n$\n\n(394\n\n)\n\nNet income\n\n \n\n$\n\n17,087\n\n \n\n \n\n \n\n \n\n$\n\n12,443\n\n \n\nNet cash provided by operating activities as a percent of net income\n\n \n\n187%\n\n \n\n \n\n \n\n \n\n167%\n\n \n\nFree cash flow as percent of net income\n\n \n\n-139%\n\n \n\n \n\n \n\n \n\n-3%\n\n \n\n \n\n*\n\nNot meaningful\n\nRecent Financing Activities:\n\nRevolving Credit Agreement: In March 2026, we terminated our existing $6.0 billion, five-year revolving credit agreement. On the same date, we entered into a new $10.0 billion, five-year revolving credit agreement (the Revolving Credit Agreement). As of May 31, 2026, we did not have any outstanding borrowings under the Revolving Credit Agreement. The description above is a summary and is qualified in its entirety by reference to the full text of the Revolving Credit Agreement, which is incorporated by reference herein as Exhibit 10.14.\n\nCommercial Paper Program: In March 2026, our commercial paper program was increased to $10.0 billion. Our commercial paper program allows us to issue and sell unsecured short-term promissory notes (Commercial Paper Notes) pursuant to a private placement exemption from the registration requirements under federal and state securities laws pursuant to dealer agreements with various banks and an Issuing and Paying Agency Agreement with Deutsche Bank Trust Company Americas. There were $1.5 billion of outstanding Commercial Paper Notes as of May 31, 2026. We used the net proceeds from the issuance of commercial paper for general corporate purposes.\n\nCash Dividends: In fiscal 2026, we declared and paid aggregate cash dividends of $1,263.89 per share of outstanding Mandatory Convertible Preferred Stock that totaled $63 million and $2.00 per share of outstanding common stock that totaled $5.7 billion. In June 2026, our Board of Directors (the Board) declared a quarterly cash dividend of $1,625 per share of our outstanding Mandatory Convertible Preferred Stock and $0.50 per share of our outstanding common stock. The Mandatory Convertible Preferred Stock dividend is payable on July 15, 2026 to stockholders of record as of the close of business on July 1, 2026 and the common stock dividend is payable on July 24, 2026 to stockholders of record as of the close of business on July 10, 2026. Future declarations of dividends on Oracle securities and the establishment of future record and payment dates for our common stock are subject to the final determination of the Board.\n\nMandatory Convertible Preferred Stock: On February 5, 2026, we issued 100,000,000 depositary shares, representing 50,000 shares of our 6.50% Series D Mandatory Convertible Preferred Stock (Mandatory Convertible Preferred Stock). We received cash proceeds of $5.0 billion, net of issuance costs. The other terms and conditions of the Mandatory Convertible Preferred Stock are set forth in the Certificate of Designations, which is incorporated by reference herein as Exhibit 3.03.\n\nCommon Stock: On February 2, 2026, we entered into an equity distribution agreement with ‎certain sales agents party thereto, pursuant to which we may sell shares of our common stock having aggregate sales proceeds of up to $20 billion from time to time through an “at-the-market” offering program (the ATM Program). As of May 31, 2026, we have not sold any shares of our common stock under the ATM Program.\n\n53\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nSenior Notes: During fiscal 2026, we issued a total of $43.0 billion par value of senior notes comprising the following:\n\n•\n$500 million of floating rate notes due February 2029;\n\n•\n$3.0 billion of 4.55% senior notes due February 2029;\n\n•\n$3.0 billion of 4.45% senior notes due September 2030;\n\n•\n$3.5 billion of 4.95% senior notes due February 2031;\n\n•\n$3.0 billion of 4.80% senior notes due September 2032;\n\n•\n$3.0 billion of 5.35% senior notes due May 2033;\n\n•\n$4.0 billion of 5.20% senior notes due September 2035;\n\n•\n$5.0 billion of 5.70% senior notes due February 2036;\n\n•\n$2.5 billion of 5.875% senior notes due September 2045;\n\n•\n$2.25 billion of 6.55% senior notes due February 2046;\n\n•\n$3.5 billion of 5.95% senior notes due September 2055;\n\n•\n$5.0 billion of 6.70% senior notes due February 2056;\n\n•\n$2.0 billion of 6.10% senior notes due September 2065; and\n\n•\n$2.75 billion of 6.85% senior notes due February 2066.\n\nWe issued the Mandatory Convertible Preferred Stock and the senior notes for general corporate purposes, which may include capital expenditures, repayment of indebtedness, future investments or acquisitions and payment of cash dividends on or repurchases of our common stock. Refer to Notes 6 and 10 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report for additional information. The other terms and conditions of the senior notes are set forth in, and the foregoing description of the senior notes is qualified in its entirety by reference to, the Officers’ Certificates incorporated by reference herein as Exhibits 4.17 and 4.21.\n\nCommon Stock Repurchase Program: The Board has approved a program for us to repurchase shares of our common stock. As of May 31, 2026, approximately $6.3 billion remained available for stock repurchases pursuant to our stock repurchase program. We repurchased 0.4 million shares for $93 million and 3.9 million shares for $600 million in fiscal 2026 and 2025, respectively. Our stock repurchase authorization does not have an expiration date and the pace of any future repurchase activity will depend on factors such as our working capital needs, our cash requirements for capital expenditures, 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.\n\nContractual Obligations: Our largest contractual obligations as of May 31, 2026 consisted of:\n\n•\nprincipal payments related to our senior notes and other borrowings that were included in our consolidated balance sheet and the related periodic interest payments;\n\n•\nlease liabilities that were included in our consolidated balance sheet;\n\n•\nlease commitments that have not yet commenced and were not included in our consolidated balance sheet; and\n\n•\nother contractual commitments associated with agreements that are enforceable and legally binding.\n\nIn addition, as of May 31, 2026, we had $13.2 billion of gross unrecognized income tax benefits, including related interest and penalties, recorded on our consolidated balance sheet, the nature of which is uncertain with respect to settlement or release with the relevant tax authorities. We are involved in claims and legal proceedings, which\n\n54\n\n[Table of Contents](#toc_page)\n\n \n\n \n\nare inherently uncertain with respect to outcomes. Notes 6, 9, 12 and 15 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report include additional information regarding our most material contractual obligations and contingencies.\n\nCapital Expenditures: Cash used for capital expenditures increased from $21.2 billion in fiscal 2025 to $55.7 billion in fiscal 2026 primarily due to the expansion of our data centers. We expect this upward trend to continue during fiscal 2027 and in the following fiscal years as we increase our existing data center capacity and establish data centers in new geographic locations in order to meet current and expected customer demand for our cloud offerings.\n\nWe believe that our current cash, cash equivalents and marketable securities balances, together with cash generated from operations and available financing arrangements, will be sufficient to meet our working capital, committed capital expenditures and contractual obligations for at least the next twelve months. Thereafter, we expect that our existing sources of liquidity, together with potential access to additional financing, will continue to be sufficient for the foreseeable future. Further, we have flexibility in managing the timing of certain discretionary capital expenditures.\n\nRemaining Performance Obligations from Contracts with Customers\n\nRemaining performance obligations were $638 billion and $138 billion as of May 31, 2026 and 2025, respectively. The increase in remaining performance obligations as of May 31, 2026 in comparison to May 31, 2025 was primarily attributable to certain significant cloud contracts that were entered into during the period. For more information about our remaining performance obligations, see Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.\n\nStock-Based Awards\n\nOur stock-based compensation program is a key component of the compensation package we provide to attract and retain certain of our talented employees and align their interests with the interests of existing stockholders. We recognize that stock-based awards dilute existing stockholders and have sought to control the number of stock-based awards granted while providing competitive compensation packages. Consistent with these dual goals, our cumulative potential dilution since June 1, 2023 has been an annualized rate of 1.0% per year. The potential dilution percentage is calculated as the average annualized new stock-based awards granted and assumed, net of stock-based awards forfeited by employees leaving the company, divided by the weighted-average outstanding shares during the calculation period. As of May 31, 2026, the maximum potential dilution from all outstanding stock-based awards, regardless of when granted and regardless of whether vested or unvested, was 3.5%.\n\n \n\nRecent Accounting Pronouncements\n\nFor information with respect to recent accounting pronouncements, and the impact of these pronouncements on our consolidated financial statements, see Note 1 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.\n\n55\n\n[Table of Contents](#toc_page)"}