Oracle Corporation Japan Aktie

[Foreign Language]

Now I'd like to turn this call over to KK, Senior Vice President, JAPAC and CFO.

Thank you, Nishio-san. Good afternoon, everyone, and welcome to Oracle Japan's Second Quarter and Fiscal Year 2026 Earnings Conference Call. We achieved excellent results this Q2, particularly in our cloud business, reinforcing our position as a leading cloud vendor.

While shifting our focus to cloud, we have also maintained steady order intake in our license business. We are pleased to share that 2 months ago, we announced our fourth alloy partner in Japan, SoftBank.

We have initiated a collaboration to offer services with data sovereignty by operating data and systems in the cloud under our country's jurisdiction. Based on this partnership, SoftBank will launch Cloud PF type A, a cloud platform service tailored for the Japanese market starting from April 2026.

In addition, AI services provided through Oracle cloud infrastructure will also be rolled out as they become available. We had a lot of cloud customers in various industries like public sector, manufacturing and financial industries. So now let me give you some examples.

Number one, ITOKI Corporation. ITOKI has developed a predictive maintenance system that detects signs of malfunctions in automated logistics warehouses. Using Oracle's AI technology, leveraging Oracle autonomous AI database and Oracle Cloud Infrastructure data science, the system collects and analyzes operational data automated warehouses with AI to identify potential issues in advance.

In the logistics industry, where automation and labor-saving measures are rapidly advancing due to labor shortages, sudden equipment downtime poses significant risk to production and planning.

To address these challenges, ITOKI has developed a predictive maintenance system, Smart Maintenance, that enables the visualization of operational status and analysis of operational data to detect signs of malfunction. This system reduces downtime and supports planned maintenance.

And now what I'm saying is going to be very important. By combining Oracle AI Vector Search, LLM and customers' proprietary data, the system delivers highly accurate responses. Additionally, it enables rapid development and deployment of machine learning models within database even at large scale. This is an extremely important development especially for Japan, and we are going to see more and more adoption across industries of these technologies.

Customer number two, Neo First Life Insurance. Neo First Life Insurance, a member of Dai-ichi Life Co. has surpassed 1 million policies by providing optimal and comprehensive coverage at affordable premiums along with fast and simple online support.

The company has adopted Oracle Database at Azure as the database foundation for its insurance policy management. By implementing Oracle Database at Azure, on Oracle Cloud Infrastructure hosted within Microsoft Azure data centers, life -- Neo First Life ensures high availability and scalability for its mission-critical policy management system, which manages over 1 million contracts while optimizing costs.

Customer number 3, Tokio Marine Holdings. Tokio Marine has achieved profit growth, particularly in its overseas businesses through operations spanning 57 countries worldwide. As they expanded, there was a growing need for a more advanced management system that could facilitate the timely collection and analysis of overseas group companies' performance to enable decision-making and support smooth communication across group companies.

To address this, the company has implemented Oracle Fusion Cloud EPM as its global management system. This allows for construction of interfaces without altering the accounting systems of the overseas group companies, enabling efficient and timely collection of information consistent with those of overseas subsidiaries. As a result, various management performance indicators can now be analyzed in accordance with the granularity of the segment information maintained by the overseas group companies.

These were just to give you a sense of the broad outreach in the market that we have with our different products and services and to undermine Oracle's presence in most mission-critical systems applications and industries.

Now let me move to the numbers. Our total revenue was JPY 134.677 billion growing at 7.5% and compared to previous year, driven by strong growth in our cloud revenue. Total cloud revenue was JPY 39.129 billion, up 38.3% and now represents 29% of the total company revenues. Infrastructure revenues had very strong momentum, which includes autonomous database. Operating income was JPY 42.659 billion, increasing 1.8%. Net income was JPY 29.913 billion, up 1.9%. Total revenue and all profit categories hit record high for the second quarter. We also have a robust pipeline for the second half of the year.

And at this point in time, I intend to stick with my revenue guidance for the year. Thank you very much.

Back to you, Nishio-san.

[Operator Instructions] [Foreign Language]

So the first question from Matthew of JPMorgan. It is about AI-related revenue and the breakdown of the percentage as well as growth rate.

Well, we don't break down revenues by AI because AI is embedded in all our products. So we can't identify sort of AI revenue separately. But the fact is that AI is driving and will drive our future growth in Japan. The segments that I have that we already split for public consumption is what you see in the supplementals, and they will continue to be the same. Thank you very much.

[Foreign Language]

The second question is from Kikuchi-san of SMBC Nikko Securities. You mentioned that the second half pipeline is robust. So could you elaborate what kind of pipeline is it? And the license in the first half was a little weak. So could you tell us that the pipeline of the license is stronger in the second half? Or is it the robustness comes from the alloy-related business?

Thank you for the question. It is a mixture of everything. We do have a strong license pipeline in the second half. And by the way, we do expect our license to decline in small percentages because the future is in cloud and growth in our cloud revenue will overcome the decline in license revenues as we go into the future. So yes, our outlook for the second half for license continues to be strong as expected, and growth will continue to come from our cloud revenues.

[Foreign Language]

Another question from Matthew from JPMorgan. So about the financing of the parent company, the Oracle Corporation, and as well as the cash flow. There are some concerns and probably that is impacting the share price of Oracle Japan. We understand that basically, they are not related. But if you can comment on the potential increase of the loan to the parent company as well as this concern about the minority shareholder, we would appreciate it.

Oracle Japan is an independent company, and we finance our own growth. We rely on the corporation for the intellectual property that it supplies to us, and it will continue to do so. So I don't think anything that happens at Oracle Corporation impacts Oracle Japan's independent business. I think I would leave it at that. Thank you.

[Foreign Language]

Another question from Kikuchi-san of SMBC Nikko. The question is that the first half expenses, the personnel cost especially increased year-on-year. But personnel cost was up from the second half of the previous year. So is it okay to forecast that this growth is smaller than the year before? And are there any other expenses which are likely to increase in the second half?

So for overall expenses at this point in time, we don't see any extraordinary increases or changes in the second half. There will be the normal increases that you would expect to correspond to a growing business. Regarding the first half personnel expenses, there was some onetime restructuring expenses. As we continue to look at our organization and refresh our people with the right skill sets to support future Oracle Corporation's growth. Some of these expenses have to be incurred at some point. So it's basically that it's a onetime expense.

[Foreign Language]

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[Foreign Language] Now I'd like to turn this call over to KK, Senior Vice President, Finance, JPAC and Japan CFO.

Thank you, Nishio-san. Good afternoon, everyone, and welcome to Oracle Japan's First Quarter Fiscal Year 2026 Earnings Conference Call. We had another excellent performance in this Q1 attributed to growth of cloud services, especially Oracle Cloud Infrastructure. The demand is substantial for our cloud business, which has led to acceleration in revenue growth.

In Software License business, we changed our list price in Q2 '25. Therefore, we anticipated that there would be a reactionary decrease due to rush demand in Q1 of last year. We announced the opening of Japan operations center to accelerate innovation in AI adoption by Japanese companies and organizations and to accelerate the adoption of sovereign cloud.

This center supports Oracle Alloy partner companies by providing operational expertise and technical assistance, enabling them to deliver a broad range of cloud and AI services and expand their business.

Regarding Oracle AI World in Las Vegas from October 13 to 16, starting this year, it will be called Oracle AI World. The new name emphasizes our commitment to help customers and partners take advantage of latest AI innovations to move faster, reduce costs, make more informed decisions and build smarter businesses. You can also participate online via streaming all live events.

We continue to add a lot of customers in various industries like public sector manufacturing, financials and information technology. Let me give you a few examples. Number one, Kubota provides products and solutions developed and produced in over 120 countries and regions worldwide across the fields of food, water and environment.

When advancing water environment projects across 3 Southeast Asian countries, information was previously managed in a decentralized manner using spreadsheet software and paper creating a risk of human error. Additionally, there was a need to strengthen internal controls and streamline redundant tasks. It was difficult to grasp information on profit and loss project performance in real time, posing challenges for rapid management decision-making.

To solve these issues, Kubota selected NetSuite, a solution that could be implemented quickly and cost effectively while offering high adaptability to change. Number two, Yamato Contact Service, which handles Contact Center and BPO operations for the Yamato Group has streamlined its customer support operations by leveraging Oracle Cloud Infrastructure generative AI service and Oracle Database 23ai.

Specifically in e-mail support operations, they have successfully increased the match rate for proposing FAQs to self resolvable inquiries to 85%, roughly double the previous rate. This has enabled Yamato to automatically process and reduce approximately 20% of e-mail inquiries relating to TA-Q-BIN delivery operations using AI.

Number three, Toyo University. Looking ahead to its 150th anniversary in 2037, Toyo University is formulating a vision for its future as a comprehensive academic institution. To achieve this, a financial accounting system, enabling data-driven management decisions and financial operations was essential. While previously using a custom developed system, the university adopted Oracle Cloud ERP to reduce operational and maintenance burdens and transition to a sustainable, highly flexible system.

Oracle Cloud ERP is valued for its extensive implementation track record at universities, both domestically and internationally and its ability to loosely integrate with university-specific peripheral systems via APIs and its flexibility to accommodate future expansion.

Number four, AEON Housing Loan Service, AEON faced challenges in its traditional on-premise environment including end-of-life hardware maintenance, delays in applying security patches, difficulties in flexible resource allocation and the need to strengthen its disaster recovery configuration. Against this backdrop, following a feasibility study and POC for cloud migration using Oracle Cloud Lift Services, they decided to proceed with a full-scale migration to Oracle Cloud Infrastructure.

With support from Oracle Consulting Services, they achieved full cloud migration in a short time frame. This was made possible by high affinity between our on-premise Oracle database environment and Oracle autonomous database on OCI, coupled with a highly reliable project structure.

This is just to give you a sense of the broad outreach in the market that we have with our different products and services and to underline Oracle's presence in most mission-critical systems, applications and industries.

Let me move to the numbers. We have made some changes to the face of our income statement to better reflect how we manage the business so you understand our cloud business dynamics more directly.

Total revenue was JPY 66,275 million, growing at 3.7% compared to previous year, driven by strong growth in our cloud revenue. Total cloud revenue was JPY 19,097 million, up 37.2% now represent 29% of the total company revenue. Infrastructure consumption revenues continue to have a strong momentum which includes autonomous database.

Operating income was JPY 21,128 million, decreasing 4.8% and net income was JPY 14,805 million, down 3.7%. Total revenue again hit a record high for the first quarter. The profit categories were down mainly due to decline in high-margin software license business. We will maintain our guidance for revenue and EPS communicated at the start of this fiscal year.

Thank you very much, and back to Nishio-san.

[Foreign Language]

[Foreign Language] [Interpreted] First question is from Kikuchi-san of SMBC Nikko. There are 2 questions, but we will go one by one. First question. This is about the revenue of cloud service in the first quarter. Year-on-year, it grew by 37% and Q-on-Q, it grew by 12%. It appears to have grown significantly Q-on-Q basis, but is there any onetime factor?

As I mentioned in my opening comments, our infrastructure revenues, especially infrastructure [Technical Difficulty] Hello. I'm back. Sorry, I think I got disconnected.

[Foreign Language]

So did you hear my answer to the question? Or should I start again?

You were cut off. Please start over again.

Okay. Let me talk about the cloud revenue. So I think we will -- we saw very strong momentum, as I said in my opening comments. This is across all product offerings, especially infrastructure and even SaaS revenue growth was strong. So -- and I think there is no one-off factor affecting this. So we should see strong momentum continuing into the fiscal year.

[Foreign Language]

[Foreign Language] [Interpreted] And second question from Kikuchi-san. This is about HR expense. The growth is quite significant. However, in terms of number of headcount, it is not increasing. So what are the reasons behind it? And if you could share with me the outlook for second quarter and onwards, that would be helpful.

Yes. Regarding the people expense, we -- there are a few factors that is affecting the increase. There was a salary increase last year that was provided. We are also constantly changing and churning our people. So new people come at higher costs, with the right skill set, and that's the whole intention of the organization.

And we also had some restructuring expense that got into the P&L. And also a little bit of stock compensation expenses got affected because the stock price also climbed significantly. So these are some of the factors that are contributing to the personnel expense.

The second question on the outlook for Q2 and beyond. As I said, for the full year, I am maintaining my guidance. We should see some bounce back in license. I would expect it to bounce back for the remainder of the year. And we'll continue to see some good momentum on our cloud revenues. So the year looks very strong for us.

[Foreign Language]

[Foreign Language] [Interpreted] We have questions from Noda-san of CLSA Securities. This is about Oracle Alloy, when will it start to contribute to the revenue of cloud service?

Sorry. Sorry, I was on mute. So all the alloys that we have booked, and we have more alloys in our pipeline that we are working on. Some of it will start showing in our numbers towards the end of this fiscal FY '26. But the consumption will really accelerate. The alloy consumption will really start accelerating more in FY '27.

[Foreign Language]

[Foreign Language] [Interpreted] Second question from Noda-san of CLSA Securities. OpenAI and Meta in the U.S. are starting to use OCI for their infrastructure to do inferencing. So -- and if these tech companies wishes to -- wish to expand their AI service in Japan. And if they start to use OCI in Tokyo region in order to ensure secure their local resources, will this become a potential upside from Oracle Japan?

So this is kind of a little -- I appreciate the question, but at this point in time, it's a little hypothetical for me. It all depends on how we contract it and what exactly the nature of work would be and whether it's an Oracle Japan contract or not. But having said that, what we have seen globally, and you -- if you have followed Oracle Corporation's earnings call, we -- a lot of the biggest training model -- or large language models do their training on by default on Oracle Cloud Infrastructure.

We also have enabled OCI to offer these large language models to our customers as a choice. For example, our customers can use our generative AI service and use any of these LLMs, whether it's OpenAI or Grok or Llama to further their AI capabilities for their organizations. So there will be some linkages. And of course, it's going to be beneficial for Oracle Japan also. But I don't think I can answer your specific -- I don't -- I have an answer to your question specifically on this one. Thank you.

[Foreign Language]

[Foreign Language]

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[Audio Gap].

Thank you very much, Nishio-san. Good afternoon, everyone, and welcome to Oracle Japan's Fourth Quarter and Fiscal Year 2025 Earnings Call.

We had another excellent performance this Q4 attributed to the growth of cloud services, and we captured stable demands on on-premise license. Demand is substantial for our cloud business, which has led to acceleration in revenue and RPO growth. We are a robust cloud vendor and OCI is a natural destination for mission-critical data of majority of Japanese companies.

We continue to expand our customer base for both OCI and Fusion. Our customers can do more but spend less with our cloud technology. We had a lot of cloud customers in various industries like financials, information technology, public sector and telecommunication industry.

Let me give you some examples. Number one, MS&AD Group. In order to standardize accounting operations at the 2 core operating companies under MS&AD Insurance Group Holdings, a new expense system used by approximately 30,000 employees is now running on Oracle Cloud ERP and Oracle Cloud Infrastructure.

This has led to improved productivity and management efficiency. With the introduction of the new system, they have achieved paperless business operation in response to the revision of the electronic bookkeeping law.

Number two, Sapporo City. The City of Sapporo has adopted OCI, Oracle Cloud Infrastructure, as a cloud service, which is selected as government cloud for its resident information system. 32 operations, including basic resident register, individual resident tax, welfare for the disabled and long-term care insurance are part of the core operational system, subject to standardization operated by the City of Sapporo.

The City of Sapporo aims to provide highly convenient administrative services by achieving both high compatibility with existing systems and cost reduction and enable a more rapid migration.

Number 3, MUFG Bank. The system infrastructure for Mitsubishi UFJ Direct and Internet banking service for individuals operated by Mitsubishi UFJ Bank renewed their Oracle Exadata database machines. Mitsubishi UFJ Direct, which is used by more than 10 million customers, is positioned at the core of bank's growth strategy and the bank is steadily advancing efforts to improve customer engagement through use of digital technology.

The renewal includes modernization to a system capable of processing about 5x the current number of transactions as well as shift to a micro service architecture and improved productivity.

Number 4, Kanematsu. Kanematsu Corporation selects Oracle Fusion Cloud Enterprise Resource Planning Solution for 33 group companies for data-driven management.

Kanematsu implements Oracle Cloud ERP for general accounting, bond obligations and managerial accounting and incorporating latest AI technologies offered by Oracle ERP.

This was just to give you a sense of our broad outreach in the market that we have with our different products and services and to underline Oracle's presence in most mission-critical system application and industries.

Now let me move to some of the main numbers. Total revenues at JPY 263.510 billion growing at 7.8% compared to previous year, driven by strong growth of our cloud revenues.

Cloud services revenue was JPY 61.962 billion, up 28.4% and now represents 23.5% of the total company revenues. Together with license support, 66% of the business is now recurring. Infrastructure consumption revenue had strong momentum, which includes autonomous database.

Operating income was JPY 86.832 billion, increasing 8.8%; and net income was JPY 60.725 billion, up 9.2%. Total revenue and all 3 margins indicated record high level for the fiscal year. With regard to my guidance through fiscal year 2026, revenue is expected to grow between 6% and 10% and EPS between JPY 490 to JPY 505.

Thank you very much, and I will turn it back to Nishio-san.

[Foreign Language].

[Foreign Language].

[Interpreted] So the first question is from Mr. Kikuchi of SMBC Nikko Securities. For fiscal year that ended the revenue turned out to be a little above the mean of company's plan. Whereas for EPS, it was above the upper guidance of the company. So it seems like that the guidance of EPS for this fiscal year seems to be rather conservative. So will there be any difference in your expense compared between last fiscal year and this fiscal year?

I think last year, we did have a strong revenue growth. We had almost like a repeat performance of the previous year. So we ended up within our guidance range for revenue. On EPS, there were a few factors. For example, the exchange rates, which are towards the end of year turned in our favor. Some of the expenses that we get from the corporation are in U.S. dollars. So that worked in our favor. So that helped the overall EPS situation for us.

Regarding this year, this is our sort of best judgment based on what we see. And hopefully, it can be more stable exchange rates that help us guide this number, basically.

[Foreign Language].

[Foreign Language] [Interpreted] The next question is from Mr. [ Watanabe ] of Sumitomo Mitsui DS. Oracle U.S. -- U.S. Oracle has announced or made a comment that in their cloud platform business, they grew 50%, but they say that they will even further grow to 70%. So now when it comes to Japan, what is the growth rate? And what would be the plan going forward? Will your momentum accelerate going forward?

The nature of [Audio Gap].

[Foreign Language].

[Foreign Language] [Interpreted] Next is from JPMorgan, Mr. Matthew Henderson. Please share with me the reasons why cloud service revenue has been strong for 2 consecutive quarters? And also, please give me updates as to the seasonality of the consumption.

Well, the reason why cloud revenue has been strong is because we are booking large deals and we -- the market is expecting a lot from Oracle. We always have been at the forefront of mission-critical systems in Japan and a lot of that has got a natural home in Oracle Cloud. So yes, our cloud revenues will accelerate.

I think the second question was on seasonality. So I think what we will find is as the cloud revenue numbers become bigger and bigger, we will find that there will be less ups and downs, and we will continue to grow that, the cloud revenue, in a very stable manner. So some of the license seasonality that you saw previously, those -- that kind of seasonality will never be there in cloud revenue.

[Foreign Language].

[Foreign Language] [Interpreted] So next question is Noda-san from CLSA Securities. The first question is about the guidance, so I will skip. And moving on to the second question. This is about the guidance for this fiscal year that's running. So the upper side is 10%. In order to achieve a revenue increase of 10% in fiscal year '26, how much of revenue increase can we expect from OCI?

I don't -- we don't split the OCI revenue growth separately, but I can tell you that it's the strongest business that we have, number one. Number two, on the on-premise sales, as you can see, this year, we did not see a decline. We hope to see similar strength in the on-premise business in the new fiscal year as well.

The reason for that is we still find customers who -- a lot of the mission-critical workloads are still on-premise. And they need -- as their data grows, they need more database licenses, so that will continue to happen. In the end, as I've said previously also, there is a possibility that our on-premise -- our cloud may cannibalize our on-premise, but with all the alloys and our own OCI that we have put -- we are setting up in this marketplace, we hope to take all our database installations, on-premise installations into our cloud, and that will be the next growth driver for Oracle in Japan.

[Foreign Language].

[Foreign Language].

[Foreign Language].

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]