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ORACLE CORP (ORCL) Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered accelerating cloud-driven growth: revenue $14.06B (+9% YoY), non-GAAP EPS $1.47 (+10% YoY), GAAP EPS $1.10 (+24% YoY); cloud IaaS +52% YoY on record AI demand .
  • Management said results were at the high end of guidance; non-GAAP EPS was ~$0.01 above the high end, aided by scaling OCI and disciplined OpEx; currency was essentially neutral in Q2 .
  • RPO rose to $97B (+50% cc), with cloud RPO nearing 75% of total; GPU consumption +336% and the world’s largest AI supercomputer (65,000 NVIDIA H200 GPUs) were key demand drivers .
  • Q3 FY25 guidance: total revenue +9–11% cc (+7–9% USD), total cloud revenue +25–27% cc (+23–25% USD); non-GAAP EPS $1.50–$1.54 cc ($1.47–$1.51 USD), with a ~$0.03 FX headwind and a ~$0.05 investment loss drag; base tax rate 19% .
  • Stock reaction catalysts: accelerating AI/OCI demand, Meta agreement (booked in Q3), capacity ramps in 2H, multi‑cloud expansion (Azure/Google/AWS), and improving cloud margins with scale .

What Went Well and What Went Wrong

What Went Well

  • AI-led OCI surge: IaaS revenue +52% YoY to $2.4B; GPU consumption +336%; delivery of a 65,000 H200 GPU supercomputer. “Record level AI demand drove Oracle Cloud Infrastructure revenue up 52%…” (Safra Catz) .
  • RPO momentum and visibility: RPO reached $97B (+50% cc); mgmt expects acceleration as capacity comes online and new large deals (e.g., Meta) enter backlog .
  • Profit discipline at scale: non-GAAP operating margin 43%; Catz highlighted expense discipline and rising margins in both cloud apps and infrastructure .

What Went Wrong

  • Near-term cash flow pressure: Q2 CapEx ~$4B; free cash flow was negative $2.7B for the quarter as OCI buildouts accelerated; TTM FCF still $9.5B .
  • FX headwinds returning in Q3: management now expects ~2% drag to revenue and ~$0.03 to EPS versus a Q2 tailwind in prior guidance .
  • EPS guidance drag: ~$0.05 negative impact in Q3 from an investment loss at a partially owned company, and non-GAAP tax rate above plan in Q2 (20.1% vs 19% guidance) reducing EPS by ~$0.02 .

Financial Results

MetricQ4 FY24Q1 FY25Q2 FY25
Total Revenue ($USD Billions)$14.29 $13.31 $14.06
GAAP EPS ($)$1.11 $1.03 $1.10
Non-GAAP EPS ($)$1.63 $1.39 $1.47
GAAP Operating Margin (%)33% 30% 30%
Non-GAAP Operating Margin (%)47% 43% 43%
Cloud Revenue (IaaS+SaaS) ($B)$5.3 $5.6 $5.9
Cloud Infrastructure (IaaS) Revenue ($B)$2.0 $2.2 $2.4
Cloud Applications (SaaS) Revenue ($B)$3.3 $3.5 $3.5

Segment breakdown by offering:

Offering Revenue ($USD Billions)Q4 FY24Q1 FY25Q2 FY25
Cloud Services & License Support$10.23 $10.52 $10.81
Cloud License & On-Premise License$1.84 $0.87 $1.20
Hardware$0.84 $0.66 $0.73
Services$1.37 $1.26 $1.33
Total Revenues$14.29 $13.31 $14.06

KPIs and balance sheet/cash:

KPIQ4 FY24Q1 FY25Q2 FY25
Remaining Performance Obligations (RPO) ($B)$98 $99 $97
Short-term Deferred Revenue ($B)$9.3 $11.5 $9.4
TTM Operating Cash Flow ($B)$18.67 $19.13 $20.29
TTM Free Cash Flow ($B)$11.81 $11.27 $9.54
Dividend per Share ($)$0.40 $0.40 $0.40

Notes:

  • Management cited non-GAAP tax rate at 20.1% in Q2 (vs. 19% guided) reducing EPS by ~$0.02 .
  • OCI consumption revenue +58% YoY; cloud database services annualized revenue ~$2.2B; infrastructure subscription revenues $6.0B (+17%) .

Guidance Changes

MetricPeriodPrevious Guidance (Q2 FY25 guide)Current Guidance (Q3 FY25)Change
Total Revenue Growth (YoY)Q3 FY25+7–9% cc; +8–10% USD +9–11% cc; +7–9% USD Raised cc; USD lower on FX
Total Cloud Revenue Growth (YoY)Q3 FY25+23–25% cc; +24–26% USD +25–27% cc; +23–25% USD Raised cc
Non-GAAP EPS ($)Q3 FY25$1.42–$1.46 cc; $1.45–$1.49 USD $1.50–$1.54 cc; $1.47–$1.51 USD (Ken correction) Raised ranges
FX ImpactQ3 FY25~+$0.03 EPS tailwind assumed in Q2 guide ~−$0.03 EPS and ~−2% revenue headwind Headwind
Investment Loss DragQ3 FY25N/A−$0.05 on EPS New drag
Base Non-GAAP Tax RateQ3 FY2519% 19% Maintained
DividendQ3/FY25$0.40 declared for Q1 & Q2 $0.40 declared Q2 payable Jan 23, 2025 Maintained
CapEx OutlookFY25“Double FY24” “Double FY24” reiterated; Q2 CapEx ~$4B Maintained, ramping

Earnings Call Themes & Trends

TopicQ4 FY24 (Jun)Q1 FY25 (Sep)Q2 FY25 (Dec)Trend
AI/OCI demand“Largest AI sales contracts; RPO +44% to $98B; 30+ AI contracts $12.5B; OpenAI on OCI” IaaS +46%; OCI consumption +56%; multi‑gigawatt DCs; many GPU contracts IaaS +52%; GPU consumption +336%; 65k H200 supercomputer; meta agreement signed (revenue in Q3) Accelerating
Multi‑cloud (Azure, Google, AWS)Azure interconnect expanding; Google interconnect planned AWS partnership announced; database@Azure/Google live footprint Live in 17 database@cloud regions; additional 35 planned; Meta deal Expanding footprint
Capacity & supplyOCI capacity catching up to demand Plan to double FY24 CapEx; automation and small-to-large region scaling 2H capacity ramps; expect RPO spike; modular racks, automation Ramping
MarginsNon-GAAP OM 47% Non-GAAP OM 43%; improving OCI/SaaS margins Non-GAAP OM 43%; OCI gross margins continue to improve Improving with scale
Security & automation—Autonomous DB and automation drive efficiency/security “Done with passwords,” zero‑trust packet routing; biometric auth; autonomy reduces human error Productized security
Health product performance—AI agents embedded across apps; health narratives AI agents used for EHR audio updates, diagnostics; Oracle Health advances Growing use cases
FX/macro—FX neutral to guidance FX headwind in Q3 (−2% revenue, −$0.03 EPS) New headwind

Management Commentary

  • Safra Catz: “Record level AI demand drove Oracle Cloud Infrastructure revenue up 52%... GPU consumption was up 336%... With our RPO up 50% to $97 billion, we believe our already impressive growth rates will continue to climb even higher. This fiscal year, total Oracle Cloud revenue should top $25 billion.”
  • Larry Ellison: “We just signed an agreement with Meta—for them to use Oracle’s AI Cloud Infrastructure… Oracle Cloud Infrastructure trains several of the world's most important generative AI models because we are faster and less expensive than other clouds.”
  • Safra Catz (on Q2 results): “Total revenue at the high end of my constant currency guidance, and EPS was actually $0.01 above the high end… OCI consumption revenue was up 58%… non-GAAP EPS was $1.47.”
  • Safra Catz (on margins): “Gross margins of both cloud applications and cloud infrastructure have each been trending higher… we continue to display expense discipline.”
  • Larry Ellison (on networking advantage): “As GPU clusters get bigger and faster, the critical thing is to move the data faster… we’re investing heavily… to maintain our advantage.”

Q&A Highlights

  • Architecture and scaling: Modular racks and identical services across regions enable small initial footprints and rapid scale; automation aligns CapEx to consumption (Catz/Ellison) .
  • Database migration and multi-cloud traction: Cloud DB services annualized revenue ~$2.2B; database@AWS/Azure/Google ramping to a multibillion business; dedicated regions and Cloud@Customer in high demand (Catz/Ellison) .
  • GPU scaling laws: Oracle differentiates by high‑performance networks to avoid data bottlenecks; continued performance and economic advantage in AI training (Ellison) .
  • SaaS growth and pipeline: Back‑office modernization and AI agents driving bookings acceleration; mgmt sees strong SaaS momentum (Catz) .
  • Capacity and RPO: 2H capacity coming online; expect RPO base to spike while consumption converts backlog to revenue (Catz) .
  • OCI margins: OCI gross margins continue to improve due to automation, architecture, and autonomous DB (Catz) .
  • Guidance clarification: Ken Bond corrected Q3 non‑GAAP EPS USD range to $1.47–$1.51 (from Safra’s earlier wording) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY25 and Q3 FY25 could not be retrieved due to SPGI daily request limit, so formal beat/miss vs consensus cannot be shown at this time. Values would normally be anchored to S&P Global consensus; please note unavailability here.
  • Relative performance vs company guidance: Management stated Q2 revenue was at the high end of guidance and non-GAAP EPS was ~$0.01 above the high end (positive surprise vs guidance) .

Key Takeaways for Investors

  • AI demand is a strong secular tailwind: OCI IaaS +52% YoY; GPU consumption +336%; continued AI workload wins (OpenAI, xAI, NVIDIA, Meta) support revenue acceleration into 2H and FY26 .
  • Backlog supports visibility: RPO $97B, cloud ~75% of total, with ~39% expected to be recognized within 12 months—visibility into accelerating growth as capacity ramps .
  • Multi-cloud database ubiquity is a growth lever: Database@Azure/Google/AWS expands addressable market; cloud DB services $2.2B annualized and rising .
  • Margin trajectory favorable: Non-GAAP OM 43%; OCI/SaaS margins improving with automation and autonomous DB; scale should continue to expand profitability (watch non‑GAAP tax variability) .
  • CapEx and cash dynamics: Expect elevated CapEx (double FY24) to support OCI expansion; near-term FCF pressure vs long-term monetization; TTM OCF $20.3B and TTM FCF $9.5B remain solid .
  • Near-term trading setup: Q3 guidance raised (cc), but FX headwind (~2% revenue, ~$0.03 EPS) and ~$0.05 investment loss could temper headline EPS—focus on RPO spikes, Meta booking, and capacity adds as catalysts .
  • Dividend and buybacks underpin capital returns: $0.40/share dividend maintained; ongoing repurchases signal confidence amid growth investments .
All figures and statements are sourced from Oracle’s Q2 FY25 8-K and press release, and Q2/Q1 earnings call transcripts as cited above.

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