ORCL 10-K & 10-Q changes, risk factors and insider trading

We operate in rapidly changing economic and technological environments that present numerous risks, many of which are driven by factors that we cannot control or predict. The following discussion, as well as our discussion in Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations, highlights some of these risks. The risks described below are not exhaustive and you should carefully consider these risks and uncertainties before investing in our securities. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially and adversely affect our business, financial condition or operating results in the future. If any of the following risks occur, our business, operating results, financial condition, and prospects could be materially and adversely affected.

We may be unsuccessful in developing and selling new products and services, integrating acquired products and services and enhancing our existing products and services. Our industry is characterized by rapid technological advances, intense competition, changing delivery models, evolving standards in communications infrastructure, increasingly sophisticated customer needs and frequent new product introductions and enhancements. We have continued to refresh and release new offerings of our cloud products and services, but if we are unable to develop new or sufficiently differentiated products and services, enhance and improve our product offerings and support services in a timely manner or position and price our products and services to meet demand, customers may not purchase or subscribe to our license,software, hardware or cloud offerings or renew licensesoftware support, hardware support or cloud subscriptions contracts. Renewals of these contracts are important to our future success. In addition, we cannot provide any assurance that the standards on which we choose to develop new products will allow us to compete effectively for business opportunities in emerging areas.

we are unable to accurately anticipate, pay for, plan for and manage future data center capacity needs in a timely manner to meet current or expected customer demand;

sanctions, tariffs, export controls, geopolitical instabilityinstability, strained economic relationships between countries and related market disruptions or other regulatory, legislative or other trade and non-tariff barriers, including retaliatory measures, impede or prevent us from serving certain customers based on their location, jurisdiction of incorporation, ownership, control or other ties to restricted jurisdictions, or restrict us or our customers from operating in specific jurisdictions;

inflation, trade policy, geopolitical conditions and other macroeconomic factors reduce customer demand or their ability to pay for our products and services or cause us to be unable to meet current or expected customer demand;

In addition, our profitability and revenues could be adversely impacted if we lose one or more of our key customers for any reason, including as a result of any of the factors discussed above.above, or if one or more of our key customers experiences insolvency, bankruptcy or other issues impacting their creditworthiness. Any such loss could also limit or reduce our growth in future periods.

Our AI products may not operate as anticipated, which could adversely affect our reputation, revenues and profitability. Machine learning and AI, including generative AI, agentic AI and LLMs, are increasingly driving innovations in technology, and AI technology and services are highly competitive and rapidly evolving. We are building AI into many of our product offerings and we are also making AI available for our customers to use in solutions that they build. We have invested,made significant investments in AI initiatives, including investments in infrastructure and headcount, and we expect to continue to invest,invest significant resources to build and support our AI products.products in support of our growth strategy. In addition, we rely on partners and suppliers to produce some of our AI products. If we are unable to introduce new AI productsproducts, or if our AI products fail to operate as anticipated or as well as competing products or otherwise do not meet customer needs, or if our competitors’ AI products achieve higher market acceptance than ours, or if we incur costs higher than expected to build and support our AI products, we may fail to recoup our investments in AI and our business and reputation may be harmed. Further, if we do not continue to invest significant resources to develop and support our AI products, we may fall behind technological developments and evolving industry standards, which would likewise harm our ability to compete. In addition, AI technologies are rapidly changing and present evolving legal, regulatory and ethical issues, including claims of bias, discrimination, a perceived lack of transparency, as well as sometimes unpredictable behaviors or improper use of copyrighted or other protected material, such as personal and patient health information, any of which could expose us or our customers to reputational or legal risk and inhibit adoption of our AI products. Regulatory uncertainty, including the lack of comprehensive federal legislation and a patchwork of existing and proposed frameworks and regulatory initiatives in numerous jurisdictions, may expose us to compliance challenges and uncertainties. Our failure to adapt to these changes, or any failure by our employees, contractors, partners, suppliers or agents to comply with laws and regulations applicable to our AI products or our related policies and procedures, could result in legal, financial and reputational consequences including, but not limited to, being required to adjust or limit our product offerings or our use of AI in certain jurisdictions to comply with new and evolving AI laws and regulations.

If we do not successfully execute our Oracle Cloud strategy, including our offerings of Oracle Cloud Services,Cloud, our revenues and profitability may decline. We provide our cloud and other offerings to customers worldwide via a variety of deployment models, including via our cloud-based OCA and OCI offerings. As these business models continue to evolve, we may not be able to compete effectively, generate significant revenues or maintain the profitability of our cloud offerings. Additionally, the increasing prevalence of various cloud offering models by us and our competitors may unfavorably impact the pricing of our cloud and licensesoftware offerings. If we do not successfully execute our cloud computing strategy or anticipate the cloud computing needs of our customers, our reputation as a cloud services provider could be harmed and our revenues and profitability could decline.

As customer demand for our cloud offerings increases, we experience volatility in our reported revenues and operating results due to the differences in timing of revenue recognition between our cloud license and on-premisesoftware license and hardware product arrangements relative to our cloud offering arrangements. Customers predominantly purchase our cloud offerings on a subscription basis, and revenues from these offerings are generally recognized ratably or as services are consumed over the terms of the subscriptions. Consequently, any deterioration in sales activity associated with our cloud offerings may not be immediately observable in our consolidated statements of operations. This is in contrast to revenues associated with our license and hardware product arrangements, which are generally recognized in full at the time of delivery of the related licenses and hardware products. In addition, we may not be able to accurately anticipate customer transitions fromfrom, or be able to sufficiently backfill reduced customer demand forfor, our license,software, hardware and support offerings relative to the expected increase in customer adoption of and demand for our Oracle Cloud Services,Cloud, which could adversely affect our revenues and profitability.

If we are unable to secure data center capacity at affordable rates or do not accurately plan for and manage our infrastructure capacity requirements, our profitability may decline. AsTo a part ofgrow our OracleOCI Cloudbusiness, strategy,which requires increased computing capacity, we planmust ourincur investmentsignificant levels based on estimates of future revenuescapital and customeroperating demand and future anticipated rates of growth. In recent periods, our cloud services and license support expenses have grown to meet current and expected demand for our cloud offerings, including investmentsexpenditures to increase our existing data center capacity and to establish data centers in new geographic locations. In connection with these investments, we have entered, and expect to continue to enter, into long-term lease commitments with third-party data center providers and other significant commitments with suppliers of chips and other data center infrastructure. If we underestimate customer demand or our data center capacity needs, we may face shortages of available infrastructure, limiting our ability to support customer growth and potentially causing us to lose business to competitors. Conversely, if we overestimate customer demand or any of our datakey centercustomers capacityare needs,unable to pay or otherwise perform under their contracts with us, we could be locked into multi-year commitments for excess data center space,space resultingand related capital expenditures, as well as associated financings, without receiving corresponding revenue. In addition, the terms, renewal options and pricing adjustments in lower profitability and cash flows because our third-partylong-term data center vendorsleases generallytypically requiredo usnot align with the duration and pricing of customer contracts, and if customers do not renew their contracts, we may be unable to payre-lease, significantrepurpose contractor termination fees to early exitassign such obligations. Data centers in geographies that we relycapacity on mayacceptable alsoterms, be unavailable on commercially reasonable terms orif at all. Moreover,Our webusiness do not control the operation of these third-party data centers, and they may suffer interruptions in service from events beyond our control, including from acts of government, natural events, power loss, break-ins or misconduct by those third parties. We have faced,is, and may continue to face,be, risingexposed coststo forrisks dataof centercustomer energynon-payment demands.and non-performance. Our customer base and our policies and procedures to manage our exposure to credit risk, including through receipt of prepayments under some of our committed contracts, credit analysis and monitoring procedures, cannot fully eliminate customer credit risk, and to the extent our policies and procedures prove to be inadequate, it could negatively affect our business, operating results and financial condition. In addition, wesome relyof onour third-partycustomers suppliersmay be highly leveraged and subject to providetheir equipmentown operating and componentsregulatory requiredrisks toand, outfiteven theseif dataour centerscredit onreview and analysis mechanisms work properly, we may experience risks of non-payment and non-performance in our dealings with such parties. In certain OCI offerings, we are more concentrated among a timely basis. Ongoing or future delays or the inability to meet customer demand could cause the lossnumber of additionallarge sales, delay our revenue recognition or increase our costs, all ofcustomers, which could adversely affect the margins of our business. We typically depreciateincrease these assets over their estimated useful lives, which could be shortened should our cloud strategies change, which could adversely affect our profitability.risks.

Oracle provides products and services that addressbuild, run and support enterprise information technology (IT) needs.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 on-premise,cloud-based, cloud-basedon-premise and hybrid deploymentsdeployments. (anWe approach that combines both on-premise and cloud-based deployments). Accordingly, we offerprovide choice and flexibility to our customers andas facilitateto the product, servicewhen and deploymenthow combinationsthey thatdeploy bestOracle suitapplications ourand customers’infrastructure needs.technologies. Through our worldwide sales force and Oracle Partner Network, we sell to customers all over the worldworld, including businesses of manyvarious sizes,sizes and industries, government agencies, educational institutions and resellers.

We have three businesses: cloud and software (formerly referred to as cloud and license); hardware; and services; each of which comprisesis 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 OfficerOfficers and Chief Technology Officer, view our operating results and allocate resources.

Cloud and LicenseSoftware Business

Our cloud and licensesoftware business, which represented 86%87% and 84%86% of our total revenues in fiscal 20252026 and 2024,2025, respectively, markets, sells and delivers a broad spectrum of enterprise applications and infrastructure technologies through our cloud and licensesoftware offerings. Revenue streams included in our cloud and licensesoftware business are:

o cloud servicesCloud 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 ServicesApplications and Oracle Cloud Infrastructure (collectively Oracle Cloud) arrangements generally: are billed in advance of the cloud services being delivered; have durations of one to fourfive 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 o license supportSoftware revenues, which are earned by providing Oracle license support services to customers that have elected to purchase support services in connection with the purchase of Oracle applications and infrastructure software licenses for use in cloud, on-premise and other IT environments. Substantially all license 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 license support customers are entitled to receive. License support contracts are generallyinclude: priced as a percentage of the net fees paid by the customer to purchase a cloud license and/or on-premise 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.

Cloudo license and on-premisesoftware license revenues, which includeare revenuesgenerated from the licensing of our software productsproducts, including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, whichfor deployment by our customers deploy withinin cloud-based, on-premise or other IT environments. Our cloud license and on-premisesoftware 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 cloud licenses and on-premisesoftware 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 substantially affect our quarterly software license revenues due to the point-in-time nature of revenue recognition for license transactions, which is different than the typical revenue recognition pattern for our cloud services andsoftware license supporttransactions. revenues in which revenues are recognized over time. Cloud license and on-premiseSoftware license customers have the option to purchase and renew licensesoftware support contracts, as further described above.below; and o software 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.

Providing 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 Services 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 licensesoftware 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 services revenues relative to our total revenues has increased and we expect this trend to continue. Cloud services revenues represented 43%, 37%51% and 32%43% of our total revenues during fiscal 2025, 20242026 and 2023,2025, respectively.

Our cloud and licensesoftware 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 services and licensesoftware support customer contracts by the customer contract base; substantially all customers continuing to purchase licensesoftware support contracts in connection with their license purchases; the pricing of licensesoftware support contracts sold in connection with the sales of licenses; the pricing, amounts and volumes of licensescloud services and cloud serviceslicenses sold; our ability to manage Oracle Cloud capacity requirements to meet existing and prospective customer demand; and foreign currency rate fluctuations.

On a constant currency basis, we expect that our total cloud and licensesoftware revenues generally will continue to increase due to:

expected growth in our cloud services offerings; and continued demand for our cloud license and on-premise license and license supportsoftware offerings.

We believe these factors should contribute to future growth in our cloud and licensesoftware 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 licensesoftware 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.

Our cloud and licensesoftware 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 licensesoftware 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 licensesoftware business’ revenues over the course of the four quarters within a particular fiscal year is primarily due to the addition of new cloud services and licensesoftware support contracts to the customer contract 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 services and licensesoftware 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 cloud license and on-premisesoftware 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.

Our hardware business, which represented 5% and 6% of our total revenues in each of fiscal 20252026 and 2024, respectively,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. 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. The majority of our hardware products are sold through indirect channels, including independent distributors and value-added resellers. 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 terms.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.

Our services business, which represented 9%8% and 10%9% of our total revenues in fiscal 20252026 and 2024,2025, 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). 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 licensesoftware 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 licensesoftware 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.

Our selective and active acquisition program is another important 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.

Our 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 areasarea of income taxes and non-marketable investments.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.

In addition, we discuss below the results of each of our three businesses—cloud and license,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.

Consistent 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, acquisition relatedrestructuring and other expenses, restructuring expenses, interest expense, non-operating income (expenses),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 20252026 and 2024.2025.

Comprised ofComprises Europe, the Middle East and Africa

Total revenues increased by $4.4$10.0 billion in reported currency in fiscal 20252026 relative to fiscal 20242025 due to a $4.8$9.3 billion increase in cloud and licensesoftware revenues, partially offset by a $198$510 million decreaseincrease in services revenues and a $130$148 million decreaseincrease in hardware revenues, in each case during fiscal 20252026 relative to fiscal 2024.2025. Excluding the unfavorable effects of foreign currency rate fluctuations of 1% in fiscal 2025 on total revenues, the constant currencyThe increase in our cloud and licensesoftware business revenues was primarily due to growth in our cloud services revenues as customers purchased our applications and infrastructure technologies and also renewed their related cloud contracts. In constant currency, cloud applications and cloud servicesinfrastructure contributed 16% and license support and infrastructure cloud services and license support contributed 26% and 74%,84%, respectively, ofto the growth in cloud services and license support revenues in fiscal 2025.2026. In our hardware business, the constant currency decreaseincrease in revenues inwas fiscal 2025 wasprimarily due to the emphasisgrowth wein placedrevenues onfrom theour marketingOracle Exadata and salecertain ofother ourstrategic growinghardware cloud-basedproduct infrastructure technologies.offerings. In our services business, the constant currency decreaseincrease in revenues in fiscal 2025 was attributable to aan decreaseincrease in revenues from each of our primaryconsulting services offerings.revenues. The Americas, the EMEA and the Asia Pacific regions contributed 74%,88%, 19%5% and 7%, respectively, to the constant currency total revenue growth during fiscal 2025.2026.

Total GAAP operating expenses increased by $2.1$7.0 billion in reported currency in fiscal 20252026 relative to fiscal 2024.2025. The increase in GAAP operating expenses in reported currency during fiscal 2025 relative to fiscal 2024 was primarily due to a $2.1$6.0 billion increase in cloud services and license supportsoftware expenses primarily due to higher infrastructure expenses and higher employee-related expenses, including higher expenses relating to stock-based compensation, that were incurred to support the growth in our cloud services revenues; a $945$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 $813increase in employee-related expenses and an increase in computer equipment expenses; an $86 million increase in employee-related expenses, including higher stock-based compensation expenses, and a $112 million increase in infrastructure expenses; a $377 million increase in sales and marketinghardware expenses; and a $54$16 million increase in general and administrative expensesexpenses, primarilyin dueeach case during fiscal 2026 relative to higherfiscal employee-related expenses, including higher stock-based compensation expenses.2025. These increases in GAAP operating expenses in reported currency during fiscal 2025 relative to fiscal 2024 were partially offset by a $703$636 million decrease in expenses for the amortization of intangible assets as certain of our assets were fully amortized; a $249$320 million decrease in sales and marketing expenses primarily due to lower employee related expenses; and a $20 million decrease in services expenses primarily due to decreases in external contractor and employee-related expenses; a $239 million decrease in acquisition related and other expenses due to lower asset impairment and litigation-related charges; a $109 million decrease in hardware expenses due to lower hardware product and support costs; and a $105 million decrease in restructuring expenses.

In constant currency, ourOur total operating margin andincreased totalin operatingfiscal 2026 relative to fiscal 2025 due to higher revenues as discussed above. Total margin as a percentage of revenues increasedremained flat in fiscal 20252026 relative to fiscal 2024 due to higher revenues.2025.

Our operating results reported pursuant to GAAP included the following business combination accounting adjustments and expenses related to acquisitions and certain other expenses, including stock-based compensation,items that affected our GAAP net income:

For fiscal 20252026 and 2024,2025, 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 certain acquisition related and other items,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.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 and 19.2%, instead of 10.9%, for fiscal 2024,2025, which in each case represented our effective tax rates as derived per our consolidated statements of operations.

Cloud and LicenseSoftware Business

Our cloud and licensesoftware business’ total revenues increased by $4.8$9.3 billion in reported currency in fiscal 20252026 relative to fiscal 20242025 primarily due to a $4.7 billionan increase in cloud services revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contractscontracts. Excluding the favorable impact of currency rate fluctuations of 2% in fiscal 2026, cloud applications and acloud $120infrastructure millioncontributed increase16% and 84%, respectively, to the constant currency growth in cloud license and on-premise license revenues. These increases were partially offset by an $86 million decrease in license support revenues in fiscal 2025 relative to fiscal 2024. In constant currency, applications cloud services and license support and infrastructure cloud services and license support contributed 26% and 74%, respectively, of the growth in cloud services and license support revenues in fiscal 2025.2026. The Americas, the EMEA and the Asia Pacific regions contributed 75%,87%, 19%6% and 6%,7%, respectively, to the constant currency revenue growth for this business during fiscal 2025.2026.

TotalOur cloud and licensesoftware business’ total expenses increased by $2.4$5.8 billion in reported currency in fiscal 20252026 relative to fiscal 2024.2025. Excluding the favorableunfavorable effects of currency rate fluctuations of less than 1% in fiscal 2025,2026, the constant currency increase in expenses in fiscal 2025 relative to fiscal 2024 was primarily due to a $1.6$5.7 billion increase in infrastructure expenses; a $359 million increase in employee-relatedfiscal expenses2026 for employees engaged in cloud services delivery; and a $350 million increase in sales and marketing expensesrelative to supportfiscal the increase in our cloud services revenues.2025. Our cloud services and license supportsoftware expenses have grown in recent periods, and we expect this trend to continue during fiscal 20262027 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.

Excluding the effects of currency rate fluctuations, our cloud and licensesoftware business’ total margin increased in fiscal 20252026 relative to fiscal 20242025 due to increases in total revenues for this business.business as discussed above. Total margin as a percentage of revenues in constant currency decreased in fiscal 20252026 relative to fiscal 20242025 due to an increase in total expenses fordriven thisby business.higher infrastructure expenses to support growth in our cloud infrastructure offering.

Total hardware revenues decreasedincreased by $130$148 million in reported currency in fiscal 20252026 relative to fiscal 2024.2025. Excluding the unfavorablefavorable impact of currency rate fluctuations of less than 1%2% in fiscal 2025,2026, the decreaseincrease in hardware revenues was primarily due to the growth in revenues from our continuedOracle emphasis on the marketingExadata and sale of our cloud-based infrastructure technologies, which resulted in reduced sales volumes of certain ofother ourstrategic hardware product lines and also impacted the volume of hardware support contracts sold in recent periods.offerings. Geographically, we experienced a constant currency hardware revenue declinesincrease in allhardware regionsrevenues in the Americas and the Asia Pacific regions, partially offset by a constant currency decrease in hardware revenues in the EMEA region in fiscal 2025.2026.

Total hardware expenses decreasedincreased by $133$49 million in reported currency in fiscal 20252026 relative to fiscal 2024. The decrease in hardware expenses aligned with lower hardware revenues.2025. Excluding the favorableunfavorable currency rate fluctuations effect of 1%3% in fiscal 2025,2026, the constant currency decreaseincrease in hardware expenses during fiscal 20252026 relative to fiscal 20242025 was due to a $106$69 million decreaseincrease in hardware product and support costscosts, andpartially anoffset $18by a $47 million decrease in sales and marketing expenses.

In constant currency, our hardware business’ total margin and total margin as a percentage of revenues increased in fiscal 20252026 relative to fiscal 20242025 due to lowerhigher total expensesrevenues for this business.business as described above.

Excludes 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.

Total services revenues decreasedincreased by $198$510 million in reported currency in fiscal 20252026 relative to fiscal 2024.2025. Excluding the effectsfavorable impact of unfavorable currency rate fluctuations of 1%2% in fiscal 2025,2026, the decreaseincrease in totalservices revenues was primarily due to increases in our consulting services revenues in fiscal 20252026 relative to fiscal 2024 was due to a decrease in revenues in each of our primary services offerings.2025. The constant currency decreaseincrease in services revenues in the Americas region was partially offset by a constant currency increasedecrease in services revenues in the EMEA and the Asia Pacific regions in fiscal 2025.2026.

Total services expenses decreased by $275$30 million in reported currency in fiscal 20252026 relative to fiscal 2024.2025. Excluding the favorableunfavorable effects of currency rate fluctuations of less than 1% in fiscal 2025,2026, the constant currency decrease in services expenses in fiscal 2025 relative to fiscal 2024 was primarily due to a $158 million decrease in external contractor expenses and an $81$54 million decrease in employee-related expenses.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.

In constant currency, our services business’ total margin and total margin as a percentage of revenues increased in fiscal 20252026 relative to fiscal 20242025 due to higher total revenues and lower total expenses for this business.business as described above.

Total research and development expenses increased by $945$412 million in reported currency in fiscal 20252026 relative to fiscal 2024.2025. Excluding the favorable effects of currency rate fluctuations of less than 1% in fiscal 2025,2026, the constant currency increase in research and development expenses was primarily due to ana $234 million increase in employee-related expenses, including higher stock-based compensationcompensation, expenses.and a $132 million increase in computer equipment expenses in fiscal 2026 relative to fiscal 2025.

Total general and administrative expenses increased by $54$16 million in reported currency in fiscal 20252026 relative to fiscal 2024.2025. Excluding the favorableunfavorable effects of currency rate fluctuations of 1% in fiscal 2025, the increase in2026, general and administrative expenses wasin primarilyconstant duecurrency remained flat in fiscal 2026 relative to higherfiscal stock-based compensation expenses.2025.

Restructuring and Other Expenses: Restructuring expenses resulted from the execution of management-approved restructuring plans that were generally developed to improve our cost structure and/or operations, often in conjunction with our acquisition integration strategies and/or other strategic initiatives. Restructuring expenses consist of restructuring expenses for employee severance costs, contract termination costs and certain other exit costs to improve our cost structure prospectively.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.

These forward-looking statements are subjectbased toon risks,current uncertaintiesexpectations and assumptions aboutand ourare businesssubject to risks and uncertainties that could affectcause our futureactual results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included in documents we file from time to time with the United States (U.S.) Securities and Exchange Commission (the SEC), including in Part 1,I, Item 1A beginning on page 1715 of our Annual Report on Form 10-K for the fiscal year ended May 31, 20252026 as well as in other sections of such report and our other Quarterly Reports on Form 10-Q filed by us in our fiscal year 2026, which runs from June 1, 2025 to May 31, 2026.report. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations and other portions of this Quarterly Report should be read in conjunction with those filings.

Oracle provides products and services that addressbuild, run and support enterprise information technology (IT) needs.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 deploymentsdeployments. (anWe approach that combines both cloud-based and on-premise deployments). Accordingly, we offerprovide choice and flexibility to our customers andas facilitateto the product, servicewhen and deploymenthow combinationsthey thatdeploy bestOracle suitapplications ourand customers’infrastructure needs.technologies. Through our worldwide sales force and Oracle Partner Network, we sell to customers all over the worldworld, including businesses of manyvarious sizes,sizes and industries, government agencies, educational institutions and resellers.

We have three businesses: cloud and software (formerly referred to as cloud and license); hardware; and services; each of which comprisesis comprised of a single operating segment. The descriptions set forth below as a part of this Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations and the information contained within Note 9 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly 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.

Cloud 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 Services) arrangements are billed in advance or in arrears of the cloud services being delivered and 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 Software revenues, which include:

o software license revenues, which are earnedgenerated by providing thefrom licensing of our software productsproducts, including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, whichfor deployment by our customers deploy withinin 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 substantially affect our quarterly software license revenues due to the point-in-time nature of revenue recognition for software license transactions, which is different than the typical revenue recognition pattern for our cloud and software support revenues in which revenues are recognized over time.transactions. Software license customers have the option to purchase and renew software support contracts, as further described below; and o software support revenues, which are earnedgenerated 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 for use in cloud, on-premise and other IT environments.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.

Providing 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 Services 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 52%60% and 50%48% of our total revenues for the three- and nine-monththree-month periods ended FebruaryAugust 28,31, 2026, respectively,2026 and 44% and 43% of our total revenues for the three- and nine-month periods ended February 28, 2025, respectively.

We 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.

Our 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 contract 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.

Our hardware business, which represented 5%4% of our total revenues on a trailing four-quarter basis, 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. 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. The majority of our hardware products are sold through indirect channels, including independent distributors and value-added resellers. 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 terms.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.

Our services business, which represented 9%8% of our total revenues on a trailing four-quarter basis, 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 servicesservices. (formerlyServices referredrevenues toare generally recognized over time as advanced customerthe 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.

Our selective and active acquisition program is another important 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.

Our 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 areasarea of income taxes and non-marketable investments.taxes.

During the first nine monthsquarter of fiscal 2026,2027, there were no significant changes to our critical accounting estimates. Refer to “Critical Accounting Estimates” under Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended May 31, 20252026 for a more complete discussion of our critical accounting estimates.

Consistent 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, acquisition relatedrestructuring and other expenses, restructuring expenses, interest expense, non-operating income (expenses),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 9 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly 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 condensed consolidated statements of operations for all periods presented.

Our 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 Quarterly 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, 2025,2026, 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 FebruaryAugust 28,31, 2026 and 2025, our financial statements would reflect reported revenues of $1.18$1.17 million in the first nine monthsquarter of fiscal 20262027 (using 1.181.17 as the applicable average exchange rate for the period) and $1.05$1.16 million in the first nine monthsquarter of fiscal 20252026 (using 1.051.16 as the applicable average exchange rate for the period). The constant currency presentation, however, would translate the results for each of the first nine monthsquarters of fiscal 20262027 and 20252026 using the May 31, 20252026 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.

Comprised ofComprises Europe, the Middle East and Africa

Total revenues increased by $3.1 billion and $6.7$4.4 billion in reported currency in the thirdfirst quarter andof fiscal 2027, relative to the first nine monthsquarter of fiscal 2026, respectively, relative to the corresponding prior year periods. These increases in reported currency were due to a $2.9 billion and a $6.3$4.3 billion increase in cloud and software revenues, a $11 million and a $74$104 million increase in hardware revenues and a $152 million and a $335$65 million increase in services revenues, in each case during the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof period.fiscal 2026. 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 contributed 15% and 18%infrastructure and cloud infrastructureapplications contributed 85%91% and 82%9%, respectively, to the growth in cloud revenues in the thirdfirst quarter and the first nine months of fiscal 2026, respectively.2027. 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, partially offset by the continued emphasis we have placed on the marketing and sale of our growing cloud-based infrastructure technologies. In our services business, the increase in revenues was attributable to an $88 million increase in our consulting services revenues, partially offset by a $23 million decrease in our customer success services revenues. The AmericasAmericas, regionthe contributed 87% and 86%EMEA and the EMEAAsia regionPacific regions contributed 8%90%, 6% and 9%4%, respectively, to the constant currency total revenue growth during the thirdfirst quarter and the first nine months of fiscal 2026, respectively, and the Asia Pacific region contributed 5% to the constant currency total revenue growth during each of the fiscal 2026 periods presented.2027.

Total GAAP operating expenses increased by $2.0 billion and $4.8 billion in reported currency in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof periods.fiscal 2026. The increase in GAAP operating expenses in reported currency was primarily due to a $1.9 billion and a $4.1$2.8 billion increase in cloud and software expenses primarily due to higher infrastructure expenses; a $178 million and a $452$103 million increase in research and development expenses primarily due to an increase in employee-related expenses, including stock-based compensation expenses and an increase in computer equipment expenses; and a $90 million and a $741 million increase in restructuringhardware expenses, in each case during the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof period.fiscal 2026. These increases in GAAP operating expenses in reported currency were partially offset by a $135$321 million decrease in restructuring and other expenses primarily due to lower restructuring expenses; a $524$252 million decrease in sales and marketing expenses primarily due to a decrease in employee-related expenses; a $218 million decrease in expenses for the amortization of intangible assets as certain of our assets were fully amortized; and a $67 million and an $82$90 million decrease in salesresearch and marketingdevelopment expenses; and a $47 million decrease in services expenses.

Our operating results reported pursuant to GAAP included the following business combination accounting adjustments and expenses related to acquisitions and certain other expenses, including stock-based compensation,items that affected our GAAP net income:

Represents the amortization of intangible assets, all of which were acquired in connection with our acquisitions. As of FebruaryAugust 28,31, 2026, estimated future amortization related to intangible assets was as follows (in millions):

For all periods presented, 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 certain acquisition relatedrestructuring and other items,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 the first nine monthsquarter of fiscal 2026, also after excluding the impact of the U.S. One, Big, Beautiful Bill Act related to the remeasurement of a deferred tax liability. These adjustmentsliability), resulted in effective tax rates of 17.5%16.9% and 19.7%,20.5%, instead of 15.7%15.1% and 9.9%,14.6%, for the thirdfirst quarter and the first nine months of fiscal 2027 and 2026, respectively, and 19.9% and 19.7%, instead of 14.9% and 9.9%, for the third quarter and the first nine months of fiscal 2025, respectively, which in each case represented our effective tax ratesrate as derived per our condensed consolidated statements of operations.

Our cloud and software business’ total revenues increased by $2.9 billion and $6.3$4.3 billion in reported currency in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof periods,fiscal primarily2026 due to an increase in cloud revenues as customers purchased our applications and infrastructure technologies and renewed their related cloud contracts. Excluding the favorableunfavorable impact of currency rate fluctuations of 4%less than 1% in the thirdfirst quarter of fiscal 20262027, cloud infrastructure and 2% in the first nine months of fiscal 2026, cloud applications contributed 15%91% and 18%9%, and cloud infrastructure contributed 85% and 82%respectively, to the constant currency growth in cloud revenues in the thirdfirst quarter and the first nine months of fiscal 2026, respectively.2027. The Americas region contributed 87% and 84%,Americas, the EMEA region contributed 8% and 10% and the Asia Pacific regionregions contributed 5%91%, 6% and 6%3%, respectively, to the constant currency revenue growth for this business during the thirdfirst quarter and the first nine months of fiscal 2026, respectively.2027.

Our cloud and software business’ total expenses increased by $1.8 billion and $4.1$2.6 billion in reported currency in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof periods.fiscal 2026. Excluding the unfavorable effects of currency rate fluctuations of 3%1% in the thirdfirst quarter of fiscal 2026 and 2% in the first nine months of fiscal 2026,2027, the constant currency increase in expenses was primarily due to a $1.8 billion and a $3.9$2.8 billion increase in infrastructure expenses, partially offset by a $240 million decrease in sales and marketing expenses in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof periods.fiscal 2026. Our cloud and software expenses have grown in recent periods, and we expect this trend to continue during fiscal 20262027 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.

Excluding the effects of currency rate fluctuations, our cloud and software business’ total margin increased in the first quarter of fiscal 2026 periods presented,2027, relative to the correspondingfirst priorquarter yearof periods,fiscal 2026, due to increases in total revenues for this business as discussed above. Total margin as a percentage of revenues in constant currency decreased in the first quarter of fiscal 2026 periods presented,2027, relative to the correspondingfirst priorquarter yearof periods,fiscal 2026, due to an increase in cloud and software business’ total expenses driven by higher infrastructure expenses to support growth in our cloud infrastructure offering.

Total hardware expenses decreased by $24 million and increased by $16$99 million in reported currency in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof periods.fiscal 2026. Excluding the unfavorable currency rate fluctuations effect of 4%less than 1% in the thirdfirst quarter of fiscal 2026, the constant currency decrease in hardware expenses was due to a $22 million decrease in hardware product and support costs and a $12 million decrease in sales and marketing expenses during the third quarter of fiscal 2026, relative to the corresponding prior year period. Excluding the unfavorable currency rate fluctuations effect of 2% in the first nine months of fiscal 2026, hardware expenses remained flat due to2027, the constant currency increase in hardware expenses during the first quarter of fiscal 2027 relative to the first quarter of fiscal 2026 was primarily due to a $103 million increase in hardware product and support costs, offset by the constant currency decrease in sales and marketing expenses.costs.

In constant currency, our hardware business’ total margin andincreased in the first quarter of fiscal 2027, relative to the first quarter of fiscal 2026, due to higher total revenues for this business as described above. In constant currency, total margin as a percentage of revenues increaseddecreased in the first quarter of fiscal 2026 periods presented,2027, relative to the correspondingfirst priorquarter yearof periods,fiscal 2026, due to lowerhigher total expenses for this business as described above.

Total services revenues increased by $152 million and $335$65 million in reported currency in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof periods.fiscal 2026. The increase in services revenues in reported currency was due to an $88 million increase in our consulting services revenues, partially offset by a $23 million decrease in our customer success services revenues in the first quarter of fiscal 2027 relative to the first quarter of fiscal 2026. Excluding the favorableunfavorable impact of currency rate fluctuations of 4%less than 1% in the thirdfirst quarter of fiscal 2026 and 2% in2027, the first nine months of fiscal 2026, the increase in services revenues was primarily due to increases in our consulting services revenues in the fiscal 2026 periods presented, relative to the corresponding prior year periods. The constant currency increase in services revenues in the Americas regionand the EMEA regions was partially offset by a constant currency decrease in services revenues in the EMEA and the Asia Pacific regions in the fiscal 2026 periods presented.region.

Total services expenses increased by $14 million and decreased by $31$48 million in reported currency in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof periods.fiscal 2026. Excluding the unfavorablefavorable effects of currency rate fluctuations of 3%less than 1% in the thirdfirst quarter of fiscal 2026 and 2% in the first nine months of fiscal 2026,2027, the constant currency decrease in services expenses was primarily due to a $36 million and a $23$107 million decrease in employee-related expensesexpenses, forpartially theoffset thirdby quartera and first nine months of fiscal 2026, relative to the corresponding prior year periods. A $44$28 million decreaseincrease in bad debt expenses contributedand toa the$27 constantmillion currency decreaseincrease in servicesexternal expensescontractor expenses, in each case during the first nine monthsquarter of fiscal 2026,2027 relative to the correspondingfirst priorquarter yearof period.fiscal 2026.

In constant currency, our services business’ total margin and total margin as a percentage of revenues increased in the first quarter of fiscal 2026 periods presented,2027, relative to the correspondingfirst priorquarter yearof periods,fiscal 2026, due to higher total revenues and lower total expenses for this business as described above.

Total research and development expenses increaseddecreased by $178 million and $452$90 million in reported currency in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027 relative to the correspondingfirst priorquarter yearof periods.fiscal 2026. Excluding the unfavorablefavorable effects of currency rate fluctuations of less than 1% in each of the third quarter and the first nine monthsquarter of fiscal 2026,2027, the constant currency increasedecrease in research and development expenses was primarily due to a $163$145 million and a $343 million increasedecrease in employee-related expenses, includingpartially stock-basedoffset compensation,by in the third quarter and the first nine months of fiscal 2026, respectively, relative to the corresponding prior year periods. Aa $92 million increase in computer equipment expenses further contributed to the constant currency increaseexpenses, in researcheach and development expensescase in the first ninequarter monthsof fiscal 2027 relative to the first quarter of fiscal 2026.

Amortization of intangible assets decreased by $135 million and $524$218 million in reported currency in the thirdfirst quarter and the first nine months of fiscal 2026, respectively,2027, relative to the correspondingfirst priorquarter yearof periods,fiscal 2026, due to a reduction in expenses associated with certain of our intangible assets that became fully amortized.

Restructuring and Other Expenses: Restructuring expenses resulted from the execution of management-approved restructuring plans that were generally developed to improve our cost structure and/or operations, often in conjunction with our acquisition integration strategies and/or other strategic initiatives. Restructuring expenses consist of restructuring expenses for employee severance costs, contract termination costs and certain other exit costs to improve our cost structure prospectively.prospectively resulting 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 4 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and Note 7 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2025.2026.

The 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 realized 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 expect to 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.

Interest expense increased in the first quarter of fiscal 2026 periods presented,2027, relative to the correspondingfirst priorquarter yearof periods,fiscal 2026, primarily due to higher average borrowings from the issuances of $43.0 billion of senior notes in the second and third quarters of fiscal 2026 and an aggregate of $14.0 billion of senior notes in fiscal 2025,2026, partially offset by lower interest expense due to scheduled repayments of $8.1 billion of debt made during the first nine monthsquarter of fiscal 20262027 and full year of fiscal 2025. Refer to Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional information on the issuance of senior notes during the first nine months of fiscal 2026.

Non-Operating Income (Expenses),Income, net: Non-operating income (expenses),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 lossesgains and gainslosses related to marketable and non-marketable investments, including net lossesgains and gainslosses attributable to equity method investments (primarily Ampere Computing Holdings LLC (Ampere)) 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.