Oracle FY 2025 10-K Review

Executive Summary

Oracle delivered another strong fiscal year, with revenues up 8% to $57.4 billion and net income of $12.4 billion (19% growth). Cloud and license revenues (86% of total) rose 11% to $49.2 billion driven by 24% constant-currency growth in cloud services and license support. Hardware and services revenues declined 4% each, reflecting a strategic shift to cloud infrastructure. Operating margin expanded to 31%, and Oracle generated $20.8 billion in operating cash flow. R&D investment reached $9.9 billion (17% of revenues). With a debt load of $92.6 billion, significant free cash flow could be used to repay debt and return capital to shareholders.

Warren.AI 💰 7.8 / 10

Investment Score: 7.8 / 10 — Oracle’s strong cloud momentum, market leadership in databases and applications, deep engineering expertise and robust cash flows support a solid long-term outlook. Risks include intense competition in cloud, high debt levels, regulatory scrutiny and supply chain pressures.

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1. Business Description (Item 1)

Oracle has three reportable segments:

1. Cloud & License (86% of FY 2025 revenues):

• Cloud Services & License Support (78% of segment): $44.0 billion, up 12% CC. Rapid expansion of Oracle Cloud Applications (OCA) and Oracle Cloud Infrastructure (OCI) drives record subscription renewals and net new business. Much of the growth came from multi-year, usage-based cloud contracts.
• Cloud Licenses & On-Premise Licenses: $5.2 billion, up 3% CC. Includes Oracle Database, Java, middleware and enterprise applications deployed in customer data centers and third-party clouds.

1. Hardware (5% of revenues): $2.9 billion, down 4% CC. Products include Engineered Systems, Exadata, servers, storage and support. Gradual shift of customer workloads to OCI has reduced hardware sales volumes.
2. Services (9% of revenues): $5.2 billion, down 3% CC. Consulting and advanced customer services help customers implement, optimize and support Oracle products and cloud deployments.

Key Strategies:

• Cloud Migration: Incentive programs to pivot on-premise licenses and support into OCI. Cloud services accounted for 43% of total revenues, up from 32% in FY 2023.
• Engineering Investment: $9.9 billion R&D in FY 2025 (17% of revenues) on OCI, autonomous database (24% of cloud services growth came from autonomous offerings), AI/ML, cybersecurity and next-generation infrastructure.
• Selective M&A: Acquisitions to bolster OCA breadth (e.g., health, vertical-market apps) and OCI capabilities. Recent focus on AI infrastructure purchases.

Customers & Distribution:

• Direct sales force in Americas, EMEA and Asia Pacific
• Indirect channels via Oracle Partner Network (resellers, system integrators)
• Diverse customer base across industries (financial services, healthcare, government, retail, high tech)

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2. Financial Highlights

Revenue Trends:
Fiscal Year 2025 vs. 2024 (reported / constant currency)

Segment	2025 ($ B)	% ∆	% ∆ (cc)	2024 ($ B)
Cloud & License	49.23	+11%	+11%	44.46
• Cloud services & support	44.03	+12%	+12%	39.38
• Cloud & on-premise licenses	5.20	+2%	+3%	5.08
Hardware	2.94	-4%	-4%	3.07
Services	5.23	-4%	-3%	5.43
Total Revenue	57.40	+8%	+9%	52.96

Profitability & Margins:

• Operating Income: $17.68 B, +15% (+16% CC)
• Operating Margin: 31% vs. 29% in FY 2024
• Net Income: $12.44 B, +19%
• Effective Tax Rate: 12.1%

Balance Sheet & Cash Flow:

• Cash & Marketable Securities: $11.2 B
• Total Debt: $92.6 B (maturities through 2065)
• Operating Cash Flow: $20.8 B (+12%)
• Capital Expenditures: $21.2 B, largely in OCI data centers
• Free Cash Flow: –$0.4 B, due to heavy cloud infrastructure capital spending
• Dividend: $1.70 per share ($4.7 B total in FY 2025)
• Share Repurchases: $0.6 B; $6.4 B authorization remains

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3. Segment Analysis (Item 8 & 13)

Cloud & License

• Revenues: $49.23 B, +11% (cc)
• Expenses (excluding SBC & amortization): $18.30 B, +15% (cc)
• Segment Margin: $30.93 B, 63% margin (vs. 64% prior year)
• Drivers: 24% CC growth in cloud services & support; 26% of growth from enterprise apps, 74% from infrastructure (OCI, autonomous database).

Hardware

• Revenues: $2.94 B, -4% (cc)
• Expenses (excl. SBC & amort.): $1.02 B, -12% (cc)
• Segment Margin: $1.92 B, 65% margin (vs. 62% prior year)
• Drivers: Strategic shift to cloud, inventory optimization.

Services

• Revenues: $5.23 B, -4% (cc)
• Expenses (excl. SBC): $4.24 B, -6% (cc)
• Segment Margin: $0.99 B, 19% margin (vs. 17% prior year)

R&D & G&A (central functions)

• R&D: $9.86 B, +8% (cc) (17% of revenues)
• G&A (excl. SBC): $1.16 B, –2% (cc)

Stock-Based Compensation & Amortization

• Total SBC: $4.67 B
• Annual RSU dilution rate: 1.7% of shares (net of forfeitures)
• Amortization of intangible assets: $2.31 B (vs. $3.01 B)

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4. Liquidity & Capital Resources

Sources of Cash:

• Operating cash flow: $20.8 B
• Issuance of senior notes (net): $13.9 B
• Commercial paper issuances (net): $1.9 B

Uses of Cash:

• Capital expenditures: $21.2 B (OCI capacity expansion)
• Senior note repayments: $15.8 B
• Dividends: $4.7 B
• Share repurchases: $0.6 B
• Term loan repayments: $0.2 B

Working Capital: –$8.1 B (orders billed in advance, hardware financing liabilities)

Capital Structure & Ratings:

• Moody’s Aa3, S&P A+, Fitch A+
• Net leverage remains high; debt maturities extended through 2065.

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5. Risk Factors (Item 1A)

Key Risks:

1. Intense Competition: AWS, Microsoft Azure, Google Cloud, SAP, Salesforce, IBM all invest heavily in cloud, AI, databases and apps. Pricing pressure and feature gaps in OCI could hamper growth.
2. Macro/Geo Uncertainty: Elevated inflation, interest rates, bank stress, trade policies and geopolitical tensions (China-Taiwan, Middle East) may deter customer spending and slow enterprise IT budgets.
3. Supply Chain & Costs: Reliance on single-source components for hardware and cloud data center build-out (GPUs, networking chips) and rising energy costs can pressure margins.
4. Regulatory & Legal: Antitrust, tech policies, data privacy (GDPR, CCPA), AI regulations, healthcare and government contracting rules add compliance burden and risk of fines.
5. Cybersecurity Threats: Large target due to scale of customer data (health, financial) and cloud platform – potential breaches could harm reputation and incur remediation costs.
6. Interest & Currency: ~$92 B debt portfolio sensitive to interest rate changes; non-U.S. revenues and cash flows subject to FX volatility.

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6. Accounting Policies & Estimates

Revenue Recognition: ASC 606

• Cloud & support: ratable over term
• Licenses: point-in-time when software is released
• Hardware: point-in-time at delivery
• Services: over time as performed

Goodwill & Intangibles: Annual impairment testing (no charges in FY 2025 or ’24 or ’23)

Leases: ASC 842 (ROU assets of $11.5 B; operating lease liabilities $11.5 B)

Taxes: ASC 740 uncertain tax positions of $12.0 B recorded; reserves for tax audits and incl. IRS transition tax.

Investments: Marketable securities at fair value; equity method for Ampere ($1.6 B carrying value)

Stock-Based Compensation: ASC 718; 158 M awards outstanding (5.6% dilution)

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7. Outlook & Dividend

Oracle enters FY 2026 with robust cloud deals, a deep pipeline for OCI and OCA and ongoing investments in AI, cybersecurity and data center expansion. Management expects constant-currency cloud & support revenue growth of 15-20% in FY 2026 and further margin expansion as scale offsets rising infrastructure costs. Capital spending will remain elevated to build cloud capacity but is expected to moderate after FY 2026. The Board declared a quarterly dividend of $0.50 per share.

Key Metrics FY 2025 | FY 2024 | Trend | — | — | — | | Cloud & License Rev. | $49.23 B | $44.46 B | +11% cc | | OCI & Apps Growth | +24% cc | +17% cc | Acceleration | | Operating Margin | 31% | 29% | Expansion | | R&D / Rev. | 17% | 17% | Stable | | Operating CF / NI | 167% | 178% | High Cash |-| | Debt / EBITDA | ~3.0× | ~2.7× | Higher Leverage |

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Conclusion: Oracle remains a cloud infrastructure and applications powerhouse. Its transition to subscription cloud revenue, combined with strong cash generation, strategic R&D and AI investments, underpins sustainable growth. Investors should monitor: OCI adoption vs. hyperscalers; margin impact of data center build-out; debt reduction pace; and execution in AI and autonomous database capabilities. A score of 7.8 reflects Oracles strong core franchises, resilient financial profile and enhanced cloud portfolio, balanced against cloud competition, regulatory complexity and debt leverage.