UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☒		~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended ~~February 28, 2018~~August 31, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐		~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the transition period from ____________ to ____________

Commission File Number:001-35992

Oracle Corporation

(Exact name of registrant as specified in its charter)

Delaware
~~Delaware~~		54-2185193
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~500~~2300 Oracle ~~Parkway~~ ~~Redwood City, California~~Way Austin, Texas		~~94065~~ 78741
(Address of principal executive offices)		(Zip Code)

~~(650)506-7000~~

(737) 867-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

3.125% senior notes due July 2025

ORCL

—

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
~~(Do not check if a smaller reporting company)~~
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of registrant’s common stock outstanding as of ~~March 15, 2018~~September 6, 2021 was: ~~4,082,313,000.~~2,738,179,000.

Table of Contents

ORACLE CORPORATION

FORM10-Q QUARTERLY REPORT

TABLE OF CONTENTS


			Page
~~PART I.~~	~~FINANCIAL INFORMATION~~
PART I.	FINANCIAL INFORMATION		3

Item 1.	Financial Statements (Unaudited)			3

	Condensed Consolidated Balance Sheets as of ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017~~2021			3

		Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~February 28, 2018~~August 31, 2021 and ~~2017~~2020			4

		Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three ~~and Nine~~ Months Ended ~~February 28, 2018~~August 31, 2021 and ~~2017~~2020			5

		Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the Three Months Ended August 31, 2021 and 2020		6

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~February 28, 2018~~August 31, 2021 and ~~2017~~2020			6	7

	Notes to Condensed Consolidated Financial Statements			7	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			26	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			46	40

Item 4.	Controls and Procedures			46
		40
~~PART II.~~	~~OTHER INFORMATION~~
PART II.	OTHER INFORMATION		41

Item 1.	Legal Proceedings			48	41

Item 1A.	Risk Factors			48	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			48	41

Item 6.	Exhibits			49	42

	Signatures			50	43

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Cautionary Note on Forward-Looking Statements

For purposes of this Quarterly Report, the terms “Oracle,” “we,” “us” and “our” refer to Oracle Corporation and its consolidated subsidiaries. This Quarterly Report on Form10-Q contains statements that are not historical in nature, are predictive in nature, or that depend upon or refer to future events or conditions or otherwise contain forward-looking statements within the meaning of Section 21 of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These include, among other things, statements regarding:

•

our expectations regarding the impacts on our business as a result of the global COVID-19 pandemic;

•

our expectation that we may acquire companies, products, services and technologies to further our corporate strategy as compelling opportunities become available;

•

our expectation that, on a constant currency basis, our total cloud and license revenues generally will continue to increase due to expected growth in our cloud services and our license support offerings, and continued demand for our cloud license and on-premise license offerings;

•

our expectation that substantially all of our customers will renew their license support contracts annually;

•

our expectation that our hardware business will have lower operating margins as a percentage of revenues than our cloud and license business;

•

our expectation that we will continue to make significant investments in research and development, and our belief that research and development efforts are essential to maintaining our competitive position;

•

our expectation that our international operations will continue to provide a significant portion of our total revenues and expenses;

•

our expectation that variable expenditures that were curtailed primarily in response to COVID-19 may normalize in future periods provided global economic and health conditions improve;

•

our expectation that the proportion of our cloud services and license support revenues relative to our cloud license and on-premise license revenues, hardware revenues and services revenues will continue to increase;

•

the sufficiency of our sources of funding for working capital, capital expenditures, contractual obligations, acquisitions, dividends, stock repurchases, debt repayments and other matters;

•

our belief that we have adequately provided under U.S. generally accepted accounting principles for outcomes related to our tax audits and that the final outcome of our tax-related examinations, agreements or judicial proceedings will not have a material effect on our results of operations, and our belief that our net deferred tax assets will likely be realized in the foreseeable future;

•

our belief that the outcome of certain legal proceedings and claims to which we are a party will not, individually or in the aggregate, result in losses that are materially in excess of amounts already recognized, if any;

•

the possibility that certain legal proceedings to which we are a party could have a material impact on our financial position, future cash flows and results of operations;

•

the timing and amount of expenses we expect to incur;

•

the cost savings we expect to realize pursuant to our 2022 Restructuring Plan;

•

declarations of future cash dividend payments and the timing and amount of future stock repurchases, including our expectation that the levels of our future stock repurchase activity may be modified in comparison to past periods in order to use available cash for other purposes;

Table of Contents

~~our expectations regarding the impacts of the U.S. 2017 Tax Cuts and Jobs Act on our tax position and ability to access and use cash and other balances held by certain of our foreign subsidiaries;~~
•
our expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements;

•

our expectation that, to the extent customers renew support contracts or cloud SaaS and IaaS contracts from companies that we have acquired, we will recognize revenues for the full contracts’ values over the respective renewal periods;

•

our ability to predict revenues, particularly certain cloud license and on-premise license revenues and hardware revenues;

•

the percentages of remaining performance obligations that we expect to recognize as revenues over respective future periods;

~~our expectation that we will continue to acquire companies, products, services and technologies to further our corporate strategy;~~

our belief that our acquisitions enhance the products and services that we can offer to customers, expand our customer base, provide greater scale to accelerate innovation, grow our revenues and earnings, and increase stockholder value;

~~our expectation that, on a constant currency basis, our total cloud andon-premise~~ software revenues generally will continue to increase due to expected growth from our cloud software as a service (SaaS) and cloud platform as a service (PaaS) and infrastructure as a service (IaaS) offerings, continued demand for our software products and related support offerings, and contributions from acquisitions;

our expectation that we will continue to place significant strategic emphasis on growing our cloud SaaS and cloud PaaS and IaaS offerings, which has affected the growth of our new software license revenues and hardware revenues and to a lesser extent, has also affected the growth of our software license updates and product support revenues;

~~our intention that we will renew our cloud SaaS and cloud PaaS and IaaS contracts when they are eligible for renewal;~~

~~our expectation that our hardware business will have lower operating margins as a percentage of revenues than our cloud andon-premise~~ ~~software business;~~

our expectation that we will continue to make significant investments in research and development and related product opportunities, including those related to hardware products and services, and our belief that research and development efforts are essential to maintaining our competitive position;

~~our expectation that our international operations will continue to provide a significant portion of our total revenues and expenses;~~

~~the sufficiency of our sources of funding for working capital, capital expenditures, contractual obligations, acquisitions, dividends, stock repurchases, debt repayments and other matters;~~

our belief that we have adequately provided under U.S. generally accepted accounting principles for outcomes related to our tax audits and that the final outcome of our tax related examinations, agreements or judicial proceedings will not have a material effect on our results of operations, and our belief that our net deferred tax assets will be realized in the foreseeable future;

~~the possibility that certain legal proceedings to which we are a party could have a material impact on our future cash flows and results of operations;~~

~~our expectations regarding the timing and amount of expenses relating to the Fiscal 2017 Oracle Restructuring Plan and the improved efficiencies in our operations that such plan will create;~~

the timing and amount of our stock repurchases, including our expectation that the levels of our future stock repurchase activity may be modified in comparison to past periods in order to use available cash for other purposes;

~~our expectations regarding the impact of recent accounting pronouncements on our consolidated financial statements;~~

our expectation that to the extent customers renew support contracts or cloud SaaS and cloud PaaS and IaaS contracts from companies that we have acquired, we will recognize revenues for the full contracts’ values over the respective renewal periods;

~~our ability to predict quarterly hardware revenues;~~

as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may be preceded by, followed by or include the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “strives,” “endeavors,” “estimates,” “will,” “should,” “is designed to” and similar expressions. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about our business that could affect our future 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 U.S. Securities and Exchange Commission (the SEC), including our Annual Report on Form10-K for our fiscal year ended May 31, ~~2017~~2021 and our other Quarterly Reports on Form10-Q to be filed by us in our fiscal ~~year 2018,~~2022, which runs from June 1, ~~2017~~2021 to May 31, ~~2018.~~2022.

We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. New information, future events or risks could cause the forward-looking events we discuss in this Quarterly Report not to occur. You should not place undue reliance on these forward-looking statements, which reflect our expectations only as of the date of this Quarterly Report.

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PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

ORACLE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

As of ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017~~2021

(Unaudited)


(in millions, except per share data)	February 28, 2018			May 31, 2017			August 31, 2021			May 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	19,487		$	21,784		$	23,059		$	30,098
Marketable securities		50,968			44,294			16,251			16,456
Trade receivables, net of allowances for doubtful accounts of $365 and $319 as of February 28, 2018 and May 31, 2017, respectively		3,902			5,300
Inventories		496			300
Trade receivables, net of allowances for doubtful accounts of $402 and $373 as of August 31, 2021 and May 31, 2021, respectively								4,482			5,409
Prepaid expenses and other current assets		2,879			2,837			3,325			3,604

Total current assets		77,732			74,515			47,117			55,567

Non-current assets:
Property, plant and equipment, net		5,904			5,315			7,610			7,049
Intangible assets, net		6,400			7,679			2,181			2,430
Goodwill, net		42,965			43,045			43,862			43,935
Deferred tax assets		1,815			1,143			13,391			13,636
Othernon-current assets		3,385			3,294			8,763			8,490

Totalnon-current assets		60,469			60,476			75,807			75,540

Total assets	$	138,201		$	134,991		$	122,924		$	131,107

LIABILITIES AND EQUITY
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Notes payable and other borrowings, current	$	4,491		$	9,797
Notes payable, current							$	6,748		$	8,250
Accounts payable		603			599			749			745
Accrued compensation and related benefits		1,498			1,966			1,470			2,017
Deferred revenues		8,003			8,233			10,011			8,775
Other current liabilities		3,373			3,583			4,093			4,377

Total current liabilities		17,968			24,178			23,071			24,164

Non-current liabilities:
Notes payable and other borrowings,non-current		56,224			48,112			75,970			75,995
Income taxes payable		13,296			5,681			12,315			12,345
Deferred tax liabilities								7,648			7,864
Othernon-current liabilities		2,441			2,774			5,050			4,787

Totalnon-current liabilities		71,961			56,567			100,983			100,991

Commitments and contingencies
Oracle Corporation stockholders’ equity:
Preferred stock, $0.01 par value—authorized: 1.0 shares; outstanding: none		—			—
Common stock, $0.01 par value and additional paid in capital—authorized: 11,000 shares; outstanding: 4,093 shares and 4,137 shares as of February 28, 2018 and May 31, 2017, respectively		29,048			27,065
Retained earnings		20,037			27,598
Oracle Corporation stockholders’ (deficit) equity:
Preferred stock, $0.01 par value—authorized: 1.0 shares; outstanding: NaN								0			0
Common stock, $0.01 par value and additional paid in capital—authorized: 11,000 shares; outstanding: 2,743 shares and 2,814 shares as of August 31, 2021 and May 31, 2021, respectively								25,534			26,533
Accumulated deficit								(25,679	)		(20,120	)
Accumulated other comprehensive loss		(1,296	)		(803	)		(1,396	)		(1,175	)

Total Oracle Corporation stockholders’ equity		47,789			53,860
Total Oracle Corporation stockholders’ (deficit) equity								(1,541	)		5,238
Noncontrolling interests		483			386			411			714

Total equity		48,272			54,246

Total liabilities and equity	$	138,201		$	134,991

Total stockholders’ (deficit) equity								(1,130	)		5,952
Total liabilities and stockholders’ (deficit) equity							$	122,924		$	131,107

See notes to condensed consolidated financial statements.

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three ~~and Nine~~ Months Ended ~~February 28, 2018~~August 31, 2021 and ~~2017~~2020

(Unaudited)


	Three Months Ended February 28,						Nine Months Ended February 28,						Three Months Ended August 31,
(in millions, except per share data)	2018			2017			2018			2017			2021			2020
Revenues:
Cloud software as a service	$	1,151		$	865		$	3,340		$	2,247
Cloud platform as a service and infrastructure as a service		415			324			1,212			964

Total cloud revenues		1,566			1,189			4,552			3,211

New software licenses		1,388			1,414			3,706			3,792
Software license updates and product support		5,027			4,762			14,932			14,331

Totalon-premise software revenues		6,415			6,176			18,638			18,123

Total cloud andon-premise software revenues		7,981			7,365			23,190			21,334

Hardware revenues		994			1,028			2,878			3,037
Services revenues		796			812			2,511			2,464

Cloud services and license support													$	7,371		$	6,947
Cloud license and on-premise license														813			886
Hardware														763			814
Services														781			720
Total revenues		9,771			9,205			28,579			26,835			9,728			9,367

Operating expenses:
Cloud software as a service⁽¹⁾		398			330			1,168			930
Cloud platform as a service and infrastructure as a service⁽¹⁾		275			175			743			463
Software license updates and product support⁽¹⁾		223			270			738			786
Cloud services and license support⁽¹⁾														1,214			1,011
Hardware⁽¹⁾		394			437			1,119			1,214			245			246
Services⁽¹⁾		712			680			2,134			2,073
Services														644			623
Sales and marketing⁽¹⁾		2,033			2,004			6,106			5,883			1,854			1,854
Research and development		1,498			1,521			4,547			4,551			1,684			1,589
General and administrative		340			241			982			859			298			295
Amortization of intangible assets		394			397			1,205			1,010			303			345
Acquisition related and other		3			30			32			84			21			19
Restructuring		91			161			506			346			38			174

Total operating expenses		6,361			6,246			19,280			18,199			6,301			6,156

Operating income		3,410			2,959			9,299			8,636			3,427			3,211

Interest expense		(533	)		(450	)		(1,477	)		(1,317	)		(705	)		(614	)
Non-operating income, net		423			189			929			437

Non-operating expenses, net														(41	)		(2	)
Income before provision for income taxes		3,300			2,698			8,751			7,756			2,681			2,595

Provision for income taxes		7,324			459			8,333			1,653			224			344

Net income (loss)	$	(4,024	)	$	2,239		$	418		$	6,103

Earnings (loss) per share:
Net income													$	2,457		$	2,251
Earnings per share:
Basic	$	(0.98	)	$	0.55		$	0.10		$	1.49		$	0.89		$	0.74

Diluted	$	(0.98	)	$	0.53		$	0.10		$	1.45		$	0.86		$	0.72

Weighted average common shares outstanding:
Basic		4,122			4,107			4,146			4,110			2,769			3,041

Diluted		4,122			4,204			4,268			4,207			2,861			3,107

Dividends declared per common share	$	0.19		$	0.15		$	0.57		$	0.45

⁽¹⁾	Exclusive of amortization of intangible assets, which is shown separately.

See notes to condensed consolidated financial statements.

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

For the Three ~~and Nine~~ Months Ended ~~February 28, 2018~~August 31, 2021 and ~~2017~~2020

(Unaudited)

   Three Months Ended
February 28,    Nine Months Ended
February 28,
(in millions)
         2018            2017            2018            2017
Net income (loss)
   $ (4,024 )    $ 2,239    $ 418    $ 6,103
Other comprehensive income (loss), net of tax:

Net foreign currency translation gains (losses)
   31    32    29    (39 )
Net unrealized gains on defined benefit plans
   8    9    26    16
Net unrealized gains (losses) on marketable securities
   (439 )    96    (567 )    (117 )
Net unrealized gains on cash flow hedges
   6    4    19    25








Total other comprehensive income (loss), net
   (394 )    141    (493 )    (115 )








Comprehensive income (loss)
   $ (4,418 )    $ 2,380    $ (75 )    $ 5,988

~~See notes to condensed consolidated financial statements.~~

~~ORACLE CORPORATION~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~For the Nine Months Ended February 28, 2018 and 2017~~

~~(Unaudited)~~

Nine Months Ended
February 28,
(in millions)
2018 2017
Cash flows from operating activities:

Net income
$ 418 $ 6,103
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation
878 722
Amortization of intangible assets
1,205 1,010
Deferred income taxes
(613 ) 111
Stock-based compensation
1,211 1,017
Other, net
(63 ) 96
Changes in operating assets and liabilities, net of effects from acquisitions:

Decrease in trade receivables, net
1,484 1,673
Increase in inventories
(195 ) (178 )
Decrease in prepaid expenses and other assets
76 308
Decrease in accounts payable and other liabilities
(606 ) (862 )
Increase (decrease) in income taxes payable
7,444 (10 )
Decrease in deferred revenues
(513 ) (330 )

Net cash provided by operating activities
10,726 9,660

Cash flows from investing activities:

Purchases of marketable securities and other investments
(24,496 ) (15,571 )
Proceeds from maturities and sales of marketable securities and other investments
17,069 11,825
Acquisitions, net of cash acquired
— (10,406 )
Capital expenditures
(1,358 ) (1,496 )

Net cash used for investing activities
(8,785 ) (15,648 )

Cash flows from financing activities:

Payments for repurchases of common stock
(6,421 ) (3,067 )
Proceeds from issuances of common stock
2,116 1,309
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards
(467 ) (237 )
Payments of dividends to stockholders
(2,362 ) (1,844 )
Proceeds from borrowings, net of issuance costs
9,945 13,932
Repayments of borrowings
(7,300 ) (4,094 )
Distributions to noncontrolling interests
(34 ) (200 )

Net cash (used for) provided by financing activities
(4,523 ) 5,799

Effect of exchange rate changes on cash and cash equivalents
285 (215 )

Net decrease in cash and cash equivalents
(2,297 ) (404 )
Cash and cash equivalents at beginning of period
21,784 20,152

Cash and cash equivalents at end of period
$ 19,487 $ 19,748

Non-cash investing and financing transactions:

Fair values of restricted stock-based awards and stock options assumed in connection with acquisitions
$ — $ 90
Change in unsettled repurchases of common stock
$ 80 $ (69 )
Change in unsettled investment purchases
$ (299 ) $ 5

	Three Months Ended August 31,
(in millions)	2021			2020
Net income	$	2,457		$	2,251
Other comprehensive (loss) income, net of tax:
Net foreign currency translation (losses) gains		(223	)		325
Net unrealized gains on defined benefit plans		2			46
Net unrealized gains on marketable securities		0			3
Net unrealized gains on cash flow hedges		0			5
Total other comprehensive (loss) income, net		(221	)		379
Comprehensive income	$	2,236		$	2,630

See notes to condensed consolidated financial statements.

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

For the Three Months Ended August 31, 2021 and 2020

(Unaudited)

	Three Months Ended August 31,
(in millions, except per share data)	2021			2020
Common stock and additional paid in capital
Balance, beginning of period	$	26,533		$	26,486
Common stock issued		148			567
Stock-based compensation		545			428
Repurchases of common stock		(872	)		(765	)
Other, net		(820	)		(478	)
Balance, end of period	$	25,534		$	26,238
Accumulated deficit
Balance, beginning of period	$	(20,120	)	$	(12,696	)
Repurchases of common stock		(7,128	)		(4,235	)
Cash dividends declared		(887	)		(730	)
Net income		2,457			2,251
Other, net		(1	)		0
Balance, end of period	$	(25,679	)	$	(15,410	)
Other stockholders’ (deficit) equity, net
Balance, beginning of period	$	(461	)	$	(1,073	)
Other comprehensive (loss) income, net		(221	)		379
Other, net		(303	)		6
Balance, end of period	$	(985	)	$	(688	)
Total stockholders’ (deficit) equity	$	(1,130	)	$	10,140
Cash dividends declared per common share	$	0.32		$	0.24

See notes to condensed consolidated financial statements.

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ORACLE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended August 31, 2021 and 2020

(Unaudited)

	Three Months Ended August 31,
(in millions)	2021			2020
Cash flows from operating activities:
Net income	$	2,457		$	2,251
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		454			356
Amortization of intangible assets		303			345
Deferred income taxes		(15	)		173
Stock-based compensation		545			428
Other, net		(27	)		78
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in trade receivables, net		852			1,077
Decrease in prepaid expenses and other assets		270			380
Decrease in accounts payable and other liabilities		(713	)		(294	)
Decrease in income taxes payable		(221	)		(586	)
Increase in deferred revenues		1,486			1,745
Net cash provided by operating activities		5,391			5,953
Cash flows from investing activities:
Purchases of marketable securities and other investments		(7,671	)		(10,678	)
Proceeds from sales and maturities of marketable securities and other investments		8,002			1,459
Acquisitions, net of cash acquired		(50	)		0
Capital expenditures		(1,062	)		(436	)
Net cash used for investing activities		(781	)		(9,655	)
Cash flows from financing activities:
Payments for repurchases of common stock		(7,995	)		(4,945	)
Proceeds from issuances of common stock		148			567
Shares repurchased for tax withholdings upon vesting of restricted stock-based awards		(820	)		(478	)
Payments of dividends to stockholders		(887	)		(730	)
Repayments of borrowings		(1,500	)		(1,000	)
Other, net		(414	)		93
Net cash used for financing activities		(11,468	)		(6,493	)
Effect of exchange rate changes on cash and cash equivalents		(181	)		232
Net decrease in cash and cash equivalents		(7,039	)		(9,963	)
Cash and cash equivalents at beginning of period		30,098			37,239
Cash and cash equivalents at end of period	$	23,059		$	27,276
Non-cash financing activities:
Change in unsettled repurchases of common stock	$	5		$	55

See notes to condensed consolidated financial statements.

Table of Contents

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~February 28, 2018~~August 31, 2021

(Unaudited)

1.	BASIS OF PRESENTATION, ~~AND~~ RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER

Basis of Presentation

We have prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures herein are adequate to ensure the information presented is not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form10-K for the fiscal year ended May 31, ~~2017.~~2021.

We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for our fiscal year ending May 31, ~~2018. Certain prior year balances have been reclassified to conform to the current year’s presentation. Such reclassifications did not affect total revenues, operating income or net income (loss).~~2022.

During the first ~~nine months~~quarter of fiscal ~~2018,~~2022, we adopted Accounting Standards Update (ASU)~~2017-04,~~~~Intangibles—Goodwill and Other~~ 2019-12, Income Taxes (Topic ~~350)~~740): Simplifying the ~~Test~~Accounting for ~~Goodwill Impairment~~Income Taxes (ASU 2019-12),which did not have a material impact to our ~~reported~~current or historical condensed consolidated financial ~~position or results of operations.~~statements. There have been no ~~significant changes in our reported financial position or results of operations and cash flows as a result of our adoption of new accounting pronouncements or~~ changes to our significant accounting policies ~~that were~~as disclosed in our Annual Report onForm 10-K for the fiscal year ended May 31, ~~2017.~~

~~Impacts of the U.S. 2017 Tax Cuts and Jobs Act~~

~~The comparability of~~2021 that had a significant impact on our ~~operating results in the third quarter and first nine months of fiscal 2018 compared to the corresponding prior year periods, and of our~~condensed consolidated ~~balance sheets~~financial statements or notes thereto as of February 28, 2018 relative to May 31, 2017, was impacted by the U.S. 2017 Tax Cuts and Jobs Act (the Act), which was signed into law on December 22, 2017. Effective January 1, 2018, the Act reduces the U.S. federal corporate tax rate from 35% to 21%; creates a quasi-territorial tax system that a) generally allows, among other provisions, companies to repatriate certain foreign source earnings without incurring additional U.S. income tax for such earnings generated after December 31, 2017 and b) generally requires companies to pay a~~one-time~~ transition tax on certain foreign subsidiary earnings generated prior to December 31, 2017 that, in substantial part, were previously tax deferred; creates new taxes on certain foreign sourced earnings; limits deductibility of certain future compensation arrangements to certain highly compensated employees; and provides tax incentives for the exportation of U.S. products to foreign jurisdictions and for the ~~purchase of qualifying capital equipment, among other provisions.~~three months ended August 31, 2021.

~~Because we have a May 31 fiscal year end, our fiscal 2018 blended U.S. federal statutory tax rate will be approximately 29%.~~

During the third quarter and first nine months of fiscal 2018, our provision for income taxes increased and affected our net income (loss), primarily as a result of the following items related to the enactment of the Act:

~~a $7.6 billion expense related to the application of theone-time~~ ~~transition tax to certain foreign subsidiary earnings that were generated prior to December 31, 2017, which expense was substantially recorded tonon-current~~ ~~income taxes payable in our consolidated balance sheet and which corresponds to the amount we currently expect to periodically settle over an eight year period as provided by the Act;~~

~~partially offset by:~~

~~a $744 million benefit related to the remeasurement of our net deferred tax liabilities based on the rates at which they are expected to reverse in the future; and~~

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

~~the net favorable impacts of the Act on our tax profile and effective tax rate beginning on January 1, 2018, which we generally expect will continue into future periods.~~

The net expense related to the enactment of the Act has been accounted for during the third quarter and first nine months of fiscal 2018 based on provisional estimates pursuant to the SEC Staff Accounting Bulletin No. 118. Subsequent adjustments, if any, will be accounted for in the period such adjustments are identified. The provisional estimates incorporate, among other factors, assumptions made based on interpretations of the Act and existing tax laws, and a range of historical and forecasted financial and~~tax-specific~~ facts and information, including, without limitation, the amount of cash and other specified assets anticipated to be held by the Company’s foreign subsidiaries on relevant dates and estimates of deferred tax balances during interim periods pending finalization of those balances.

Cash, Cash Equivalents and Restricted Cash

Restricted cash that was included within cash and cash equivalents as presented within our condensed consolidated balance sheets as of ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017~~2021 and our condensed consolidated statements of cash flows for the ~~nine~~three months ended ~~February 28, 2018~~August 31, 2021 and ~~2017~~2020 was nominal.

~~Acquisition Related~~Remaining Performance Obligations from Contracts with Customers

Trade receivables, net of allowance for doubtful accounts, and ~~Other Expenses~~deferred revenues are reported net of related uncollected deferred revenues in our condensed consolidated balance sheets as of August 31, 2021 and May 31, 2021. The revenues recognized during the three months ended August 31, 2021 and 2020, respectively, that were included in the opening deferred revenues balances as of May 31, 2021 and 2020, respectively, were approximately $3.7 billion and $3.4 billion, respectively. Revenues recognized from performance obligations satisfied in prior periods and impairment losses recognized on our receivables were immaterial in each of the three months ended August 31, 2021 and 2020.

~~Acquisition related~~Remaining performance obligations, as defined in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021, were $38.7 billion as of August 31, 2021, approximately 60% of which we expect to recognize as revenues over the next twelve months, 29% over the subsequent month 13 to month 36, and ~~other expenses consist~~the remainder thereafter.

Table of personnel related costs and stock-based compensation for transitional and certain other employees, integration related professional services, certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net.Contents

   Three Months Ended
February 28, Nine Months Ended
February 28,
(in millions)
   2018 2017 2018 2017
Transitional and other employee related costs
   $ 9 $ 15 $ 32 $ 31
Stock-based compensation
   — 22 1 33
Professional fees and other, net
   (8 ) (2 ) (1 ) 26
Business combination adjustments, net
   2 (5 ) — (6 )


Total acquisition related and other expenses
   $ 3 $ 30 $ 32 $ 84

~~Non-Operating~~ ~~Income, net~~

~~Non-operating~~ income, net consists primarily of interest income, net foreign currency exchange losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Japan) and net other income, including net realized gains and losses related to all of our investments and net unrealized gains and losses related to the small portion of our investment portfolio that we classify as trading.

   Three Months Ended
February 28, Nine Months Ended
February 28,
(in millions)
   2018 2017 2018 2017
Interest income
   $ 313 $ 197 $ 849 $ 578
Foreign currency losses, net
   (35 ) (20 ) (46 ) (102 )
Noncontrolling interests in income
   (37 ) (20 ) (111 ) (95 )
Other income, net
   182 32 237 56


Totalnon-operating income, net
   $ 423 $ 189 $ 929 $ 437

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—~~STATEMENTS—(Continued)

~~February 28, 2018~~August 31, 2021

(Unaudited)

Sales of Financing Receivables

We offer certain of our customers the option to acquire certain of our ~~software products,~~cloud and license, hardware ~~products~~ and services offerings through separate long-term payment contracts. We generally sell these contracts that we have financed for our customers on anon-recourse basis to financial institutions within 90 days of the contracts’ dates of execution. We record the transfers of amounts due from customers to financial institutions as sales of financing receivables because we are considered to have surrendered control of these financing receivables. Financing receivables sold to financial institutions were ~~$360~~$656 million and ~~$1.3 billion~~$677 million for the three ~~and nine~~ months ended ~~February 28, 2018, respectively,~~August 31, 2021 and ~~$296 million~~2020, respectively.

Acquisition Related and ~~$1.3 billion~~Other Expenses

Acquisition related and other expenses primarily consist of personnel related costs for transitional and certain other employees, certain business combination adjustments including adjustments after the ~~three~~measurement period has ended, and ~~nine months ended February 28, 2017, respectively.~~certain other operating items, net.

	Three Months Ended August 31,
(in millions)	2021		2020
Transitional and other employee related costs	$	2	$	2
Business combination adjustments, net		3		1
Other, net		16		16
Total acquisition related and other expenses	$	21	$	19

Non-Operating Expenses, net

Non-operating expenses, 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) and net other income and expenses, including net realized gains and losses related to all of our investments, net unrealized gains and losses related to the small portion of our investment portfolio related to our deferred compensation plan, net unrealized gains and losses related to equity securities and non-service net periodic pension income and losses.

	Three Months Ended August 31,
(in millions)	2021			2020
Interest income	$	20		$	31
Foreign currency losses, net		(35	)		(50	)
Noncontrolling interests in income		(47	)		(38	)
Other, net		21			55
Total non-operating expenses, net	$	(41	)	$	(2	)

Table of Contents

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2021

(Unaudited)

Recent Accounting Pronouncements

~~Comprehensive Income:~~ Financial Instruments:In ~~February 2018,~~March 2020, the Financial Accounting Standards Board (FASB) issued ASU~~2018-02,~~ ~~Income Statement—Reporting Comprehensive Income~~ 2020-04, Reference Rate Reform (Topic ~~220)~~848): ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~~~(ASU2018-02),~~which allows companies to reclassify stranded tax effects resulting from the Act, from accumulated other comprehensive income to retained earnings. The guidance also requires certain new disclosures regardlessFacilitation of the ~~election. ASU2018-02~~ ~~is effective for us in the first quarter~~Effects of ~~fiscal 2020, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU2018-02~~ ~~on our consolidated financial statements.~~

~~Derivatives and Hedging:~~ ~~In August 2017, the FASB issued ASU2017-12,~~~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~ ~~(ASU2017-12),~~ ~~which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. ASU2017-12~~ ~~is effective for us in the first quarter of fiscal 2020, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU2017-12~~ ~~on our consolidated financial statements.~~

~~Retirement Benefits:~~ ~~In March 2017, the FASB issued ASU2017-07,~~~~Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~ ~~(ASU2017-07),~~ ~~which provides guidance on the capitalization, presentation and disclosure of net benefit costs. ASU2017-07~~ ~~is effective for us in the first quarter of fiscal 2019. We are currently evaluating the impact of our pending adoption of ASU2017-07~~ ~~on our consolidated financial statements.~~

~~Income Taxes:~~ ~~In October 2016, the FASB issued ASU2016-16,~~~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~~~(ASU2016-16),~~ ~~which changes the timing of when certain intercompany transactions are recognized within the provision for income taxes. ASU2016-16~~ ~~is effective for us in our first quarter of fiscal 2019 on a modified retrospective basis, and earlier adoption is permitted. We are currently evaluating the impact of our pending adoption of ASU2016-16~~ ~~on our consolidated financial statements.~~

~~Financial Instruments:~~ ~~In June 2016, the FASB issued ASU2016-13,~~~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses~~Reference Rate Reform on Financial ~~Instruments~~Reporting (ASU~~2016-13),~~ ~~which requires measurement~~ 2020-04)and ~~recognition of expected credit losses for financial assets held. ASU2016-13~~ is effective for us in our first quarter of fiscal 2021, and earlier adoption is permitted beginning in the first quarter of fiscal 2020. We are currently evaluating the impact of our pending adoption of ASU~~2016-13~~ ~~on our consolidated financial statements.~~

~~In January 2016, the FASB issued ASU2016-01,~~~~Financial Instruments—Overall (Subtopic825-10):~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~ ~~(ASU2016-01),~~ ~~which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU2016-01~~ ~~is effective for us in our first quarter of fiscal 2019, and earlier adoption is not permitted except for certain provisions. We currently do not expect that our pending adoption of ASU2016-01~~ ~~will have a material effect on our consolidated financial statements.~~

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

~~Leases:~~~~In February 2016, the FASB issued ASU2016-02,~~~~Leases~~~~(Topic 842)~~ ~~and~~also issued subsequent amendments to the initial guidance ~~in September 2017 within ASU2017-13~~(collectively, Topic ~~842)~~848). Topic ~~842 requires companies~~848 provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to ~~generally recognize on the balance sheet operating and financing lease liabilities and correspondingright-of-use~~ ~~assets.~~be discontinued. We will adopt Topic ~~842 is effective for us in~~848 when our ~~first quarter of fiscal 2020 on a~~relevant contracts are modified ~~retrospective basis, and earlier adoption is permitted.~~upon transition to alternative reference rates. We ~~are currently evaluating the impact of~~do not expect our ~~pending~~ adoption of Topic ~~842~~848 to have a material impact on our consolidated financial statements. ~~We currently expect that most of our operating lease commitments will be subject to the new standard~~

2.	ACQUISITIONS

Fiscal 2022 and ~~recognized as operating lease liabilities andright-of-use~~ ~~assets upon our adoption of Topic 842, which will increase our total assets and total liabilities that we report relative to such amounts prior to adoption.~~2021 Acquisitions

~~Revenue Recognition:~~ ~~In May 2014, the FASB issued ASU2014-09,~~~~Revenue from Contracts with Customers: Topic 606~~ ~~and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, December 2016, May 2017, September 2017 and November 2017 within ASU2015-14,ASU 2016-08,~~ ~~ASU2016-10,~~ ~~ASU2016-12,~~ ~~ASU2016-20,~~ ~~ASU2017-10,~~ ~~ASU2017-13~~ ~~and ASU2017-14,~~ respectively (collectively, Topic 606). Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. Topic 606 also provides guidance on the recognition of costs related to obtaining customer contracts. Topic 606 is effective for us as of our first quarter of fiscal 2019 using either of two methods: (1) retrospective application of Topic 606 to each prior reporting period presented with the option to elect certain practical expedients as defined within Topic 606 or (2) retrospective application of Topic 606 with the cumulative effect of initially applying Topic 606 recognized at the date of initial application and providing certain additional disclosures as defined per Topic 606. The accounting for the recognition of costs related to obtaining customer contracts under Topic 606 is significantly different than our current capitalization policy. The adoption of Topic 606 will result in additional types of costs that will be capitalized. Additionally, it is possible that amounts capitalized will be amortized over a period longer than our current policy. We plan to adopt Topic 606 inDuring the first quarter of fiscal ~~2019 pursuant to the aforementioned adoption method (1)~~2022 and we do not believe there will be a material impact to our revenues upon adoption. We are continuing to evaluate the impact to our revenues and costs related to our pending adoption of Topic 606 and our preliminary assessments are subject to change.

2.	~~ACQUISITIONS~~

~~Fiscal 2018 Proposed Acquisitions~~

~~During the first nine months of~~full year fiscal ~~2018, we entered into certainnon-material~~ ~~agreements to acquire certain companies and expect these proposed acquisitions to close during the fourth quarter of fiscal 2018.~~

~~Fiscal 2017 Acquisition of NetSuite Inc., a Related Party~~

On November 7, 2016, we completed our acquisition of NetSuite Inc. (NetSuite), a provider of cloud-based enterprise resource planning (ERP) software and related applications and a related party to Oracle. We acquired NetSuite to, among other things, expand our cloud software as a service offerings with a complementary set of cloud ERP and related cloud software applications for customers.

Lawrence J. Ellison, Oracle’s Chairman of the Board and Chief Technology Officer and Oracle’s largest stockholder, is an affiliate of NetSuite’s largest stockholder, NetSuite Restricted Holdings LLC (a single member

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

LLC investment entity whose interests are beneficially owned by a trust controlled by Mr. Ellison), which owned approximately 40% of the issued and outstanding NetSuite Shares immediately prior to the conclusion of the merger.

The total purchase price for NetSuite was approximately $9.1 billion, which consisted of approximately $9.0 billion in cash and $78 million for the fair values of restricted stock-based awards and stock options assumed. In allocating the purchase price based on estimated fair values, we recorded approximately $6.7 billion of goodwill, $3.2 billion of identifiable intangible assets and $763 million of net tangible liabilities. Goodwill generated from our acquisition of NetSuite was primarily attributable to synergies expected to arise after the acquisition. See Note 2 of Notes to Consolidated Financial Statements included in our Annual Report on Form~~10-K~~ ~~for the fiscal year ended May 31, 2017 for additional information regarding our acquisition of NetSuite.~~

~~Other Fiscal 2017 Acquisitions~~

~~During fiscal 2017,~~ 2021, we acquired certain companies and purchased certain technology and development assets primarily to expand our ~~cloud-based offerings.~~products and services offerings. These acquisitions were not significant individually or in the aggregate. We have included the financial results of the acquired companies in our condensed consolidated financial statements from their respective acquisition dates, and the results from each of these companies were not individually materialaggregate to our condensed consolidated financial statements. The total of the purchase prices, certain of which were preliminary, for these acquisitions was approximately $3.0 billion, which consisted of approximately $3.0 billion in cash and $13 million for the fair values of restricted stock-based awards and stock options assumed. As of February 28, 2018, we recorded $243 million of net tangible assets and $948 million of identifiable intangible assets, based on their estimated fair values, and $1.8 billion of residual goodwill related to our fiscal 2017 acquisitions. Certain amounts included in these totals were preliminary and subject to change during the respective measurement periods (up to one year from the respective acquisition dates) as we obtain additional information for the preliminary fair value estimates of the assets acquired and liabilities assumed. The primary areas of those preliminary estimates that are not yet finalized related to certain tangible assets and liabilities acquired, identifiable intangible assets, certain legal matters, income and~~non-income~~ ~~based taxes and residual goodwill.~~

~~Unaudited Pro Forma Financial Information~~

The unaudited pro forma financial information in the table below summarizes the combined results of operations for Oracle, NetSuite and certain other companies that we acquired since the beginning of fiscal 2017 that were considered relevant for the purposes of unaudited pro forma financial information disclosure as if the companies were combined as of the beginning of fiscal 2017. The unaudited pro forma financial information for all periods presented included the business combination accounting effects resulting from these acquisitions, including amortization charges from acquired intangible assets (certain of which are preliminary), stock-based compensation charges for unvested restricted stock-based awards and stock options assumed, if any, and the related tax effects as though the aforementioned companies were combined as of the beginning of fiscal 2017. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of fiscal 2017.

The unaudited pro forma financial information for the three and nine months ended February 28, 2018 presented the historical results of Oracle for the three and nine months ended February 28, 2018 as we did not complete any material acquisitions during the first nine months of fiscal 2018.

The unaudited pro forma financial information for the three and nine months ended February 28, 2017 combined the historical results of Oracle for the three and nine months ended February 28, 2017, the historical results of NetSuite for the three and nine months ended September 30, 2016 (adjusted due to differences in reporting periods and considering the date we acquired NetSuite) and the historical results of certain other companies that

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

we acquired since the beginning of fiscal 2017 based upon their respective previous reporting periods and the dates these companies were acquired by us, and the effects of the pro forma adjustments listed above. The unaudited pro forma financial information was as follows:

   Three Months Ended
February 28,    Nine Months Ended
February 28,
(in millions, except per share data)
         2018         2017            2018            2017
Total revenues
   $ 9,771 $ 9,241    $   28,579    $   27,366
Net income (loss)
   $ (4,024 ) $ 2,220    $ 418    $ 5,772
Basic earnings (loss) per share
   $ (0.98 ) $ 0.54    $ 0.10    $ 1.40
Diluted earnings (loss) per share
   $ (0.98 ) $ 0.53    $ 0.10    $ 1.37

3.	FAIR VALUE MEASUREMENTS

We perform fair value measurements in accordance with FASB Accounting Standards Codification (ASC) 820,Fair Value Measurement. ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at their fair values, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the assets or liabilities, such as inherent risk, transfer restrictions and risk of nonperformance.

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:

•

Level 1: quoted prices in active markets for identical assets or liabilities;

•

Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

•

Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

Table of Contents

~~Level 1: quoted prices in active markets for identical assets or liabilities;~~

~~Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.~~

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—~~STATEMENTS—(Continued)

~~February 28, 2018~~August 31, 2021

(Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities measured at fair value on a recurring basis ~~excluding accrued interest components,~~ consisted of the following (Level 1 and Level 2 inputs are defined above):


	February 28, 2018						May 31, 2017						August 31, 2021						May 31, 2021
	Fair Value Measurements Using Input Types						Fair Value Measurements Using Input Types						Fair Value Measurements Using Input Types						Fair Value Measurements Using Input Types
(in millions)	Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Money market funds													$	5,269	$	0	$	5,269	$	12,263	$	0	$	12,263
Corporate debt securities and other	$	755	$	47,268	$	48,023	$	580	$	41,038	$	41,618		2,204		9,450		11,654		1,250		8,220		9,470
Commercial paper debt securities		—		4,487		4,487		—		5,053		5,053		0		9,510		9,510		0		11,712		11,712
Money market funds		5,775		—		5,775		3,302		—		3,302
Derivative financial instruments		—		—		—		—		40		40		0		35		35		0		73		73

Total assets	$	6,530	$	51,755	$	58,285	$	3,882	$	46,131	$	50,013	$	7,473	$	18,995	$	26,468	$	13,513	$	20,005	$	33,518

Liabilities:
Derivative financial instruments	$	—	$	84	$	84	$	—	$	191	$	191

We classify our marketable securities as available-for-sale debt securities at the time of purchase and reevaluate such classification as of each balance sheet date. Our marketable securities investments consist of money market funds, Tier 1 commercial paper debt securities, corporate debt securities and certain other securities. Marketable securities as presented per our condensed consolidated balance sheets included securities with original maturities at the time of purchase greater than three months and the remainder of the securities were included in cash and cash equivalents. As of ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017, approximately 28% and 32%, respectively,~~2021, substantially all of our marketable securities investments mature within one ~~year and 72% and 68%, respectively, mature within one to six years.~~year. Our valuation techniques used to measure the fair values of our ~~marketable securities~~instruments that were classified as Level 1 in the table above were derived from quoted market prices and active markets for these instruments that exist. Our valuation techniques used to measure the fair values of Level 2 instruments listed in the table above ~~the counterparties to which have high credit ratings,~~ were derived from the following:non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data including ~~LIBOR-based~~reference rate yield curves, among others.

Based on the trading prices of the ~~$60.9~~$82.7 billion and ~~$54.0~~$84.2 billion of senior notes and the related fair value hedges that ~~were~~we had outstanding as of ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017,~~2021, respectively, the estimated fair values of the senior notes and the related fair value hedges using Level 2 inputs at ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017~~2021 were ~~$62.0~~$90.2 billion and ~~$56.5~~$89.6 billion, respectively.

4.	~~INVENTORIES~~

~~Inventories consisted~~

Table of ~~the following:~~Contents

(in millions)
   February 28,
         2018            May 31,
         2017
Raw materials
   $ 328    $ 186
Work-in-process
   36    42
Finished goods
   132    72




Total inventories
   $ 496    $ 300

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—~~STATEMENTS—(Continued)

~~February 28, 2018~~August 31, 2021

(Unaudited)

INTANGIBLE ASSETS AND GOODWILL

The changes in intangible assets for fiscal ~~2018~~2022 and the net book value of intangible assets as of ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017~~2021 were as follows:


	Intangible Assets, Gross							Accumulated Amortization									Intangible Assets, Net				Intangible Assets, Gross							Accumulated Amortization									Intangible Assets, Net				Weighted Average Useful Life⁽²⁾
(Dollars in millions)		May 31, 2017		Additions & Adjustments, net			February 28, 2018		May 31, 2017			Expense			February 28, 2018			May 31, 2017		February 28, 2018	May 31, 2021		Additions & Adjustments, net⁽¹⁾			August 31, 2021		May 31, 2021			Expense			August 31, 2021			May 31, 2021		August 31, 2021		Weighted Average Useful Life⁽²⁾
Developed technology	$	5,397	$	(214	)	$	5,183	$	(2,295	)	$	(562	)	$	(2,857	)	$	3,102	$	2,326	$	4,237	$	59		$	4,296	$	(3,621	)	$	(127	)	$	(3,748	)	$	616	$	548		3
SaaS, PaaS and IaaS agreements and related relationships		4,105		122			4,227		(1,089	)		(450	)		(1,539	)		3,016		2,688
Software support agreements and related relationships		1,565		—			1,565		(559	)		(93	)		(652	)		1,006		913
Cloud services and license support agreements and related relationships																						5,497		(5	)		5,492		(3,834	)		(155	)		(3,989	)		1,663		1,503	N.A.
Other		1,998		18			2,016		(1,443	)		(100	)		(1,543	)		555		473		1,269		0			1,269		(1,118	)		(21	)		(1,139	)		151		130	N.A.

Total intangible assets, net	$	13,065	$	(74	)	$	12,991	$	(5,386	)	$	(1,205	)	$	(6,591	)	$	7,679	$	6,400	$	11,003	$	54		$	11,057	$	(8,573	)	$	(303	)	$	(8,876	)	$	2,430	$	2,181

Total amortization expense related to our intangible assets was $394 million and $1.2 billion for the three and nine months ended February 28, 2018, respectively, and $397 million and $1.0 billion for the three and nine months ended February 28, 2017, respectively.

⁽¹⁾	Amounts also include any changes in intangible asset balances for the periods presented that resulted from foreign currency translations.

⁽²⁾	Represents weighted-average useful lives (in years) of intangible assets acquired during fiscal 2022.

As of ~~February 28, 2018,~~August 31, 2021, estimated future amortization expenses related to intangible assets were as follows (in millions):

Remainder of fiscal 2018
   $ 387
Fiscal 2019
   1,411
Fiscal 2020
   1,210
Fiscal 2021
   1,023
Fiscal 2022
   918
Fiscal 2023
   567
Thereafter
   884


Total intangible assets, net
   $     6,400

Remainder of fiscal 2022	$	834
Fiscal 2023		716
Fiscal 2024		473
Fiscal 2025		124
Fiscal 2026		24
Fiscal 2027		6
Thereafter		4
Total intangible assets, net	$	2,181

The changes in the carrying amounts of goodwill, net, which is generally not deductible for tax purposes, for our operating segments for the ~~nine~~three months ended ~~February 28, 2018~~August 31, 2021 were as follows:


(in millions)	Cloud and On-Premise Software			Hardware		Services		Total Goodwill, net			Cloud and License		Hardware		Services			Total Goodwill, net
Balances as of May 31, 2017	$	38,791		$	2,367	$	1,887	$	43,045
Balances as of May 31, 2021											$	39,786	$	2,367	$	1,782		$	43,935
Goodwill adjustments, net⁽¹⁾		(80	)		—		—		(80	)		186		0		(259	)		(73	)

Balances as of February 28, 2018	$	38,711		$	2,367	$	1,887	$	42,965

Balances as of August 31, 2021											$	39,972	$	2,367	$	1,523		$	43,862

⁽¹⁾

~~Pursuant to our business combinations accounting policy, we recorded~~Amounts include any changes in goodwill ~~adjustments~~balances for the ~~effects on goodwill~~period presented that resulted from foreign currency translations and the realignment of ~~changes to net assets acquired during the period that such a change is identified, provided that any such change is within the measurement period (up to one year from the date of the acquisition).~~an operating segment component.

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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS—~~STATEMENTS—(Continued)

~~February 28, 2018~~August 31, 2021

(Unaudited)

~~NOTES PAYABLE AND OTHER BORROWINGS~~RESTRUCTURING ACTIVITIES

~~Senior Notes~~

~~In November 2017, we issued $10.0 billion, par value, of fixed-rate senior notes comprised of the following as of February 28, 2018:~~

      February 28, 2018
(Dollars in millions)
   Date of
Issuance        Amount     Effective Interest
Rate
$1,250, 2.625%, due February 2023
   November 2017    $ 1,250 2.637%
$2,000, 2.95%, due November 2024
   November 2017    2,000 2.975%
$2,750, 3.25%, due November 2027
   November 2017    2,750 3.263%
$1,750, 3.80%, due November 2037
   November 2017    1,750 3.827%
$2,250, 4.00%, due November 2047
   November 2017    2,250 4.027%


Total fixed rate senior notes
      $ 10,000


Unamortized discount/issuance costs
      (55 )


Total fixed rate senior notes, net
      $ 9,945

We issued the senior notes for general corporate purposes, which may include stock repurchases, payment of cash dividends on our common stock, repayment of indebtedness and future acquisitions. The interest is payable semi-annually. We may redeem some or all of the senior notes of each series prior to their maturity, subject to certain restrictions, and the payment of an applicable make-whole premium in certain instances.

The senior notes rank pari passu with any other existing and future unsecured and unsubordinated indebtedness of Oracle Corporation. All existing and future indebtedness and liabilities of the subsidiaries of Oracle Corporation are or will be effectively senior to the senior notes. We were in compliance with all debt-related covenants at February 28, 2018.

~~There have been no other significant changes in our notes payable or other borrowing arrangements that were disclosed in our Annual Report on Form10-K~~ ~~for the fiscal year ended May 31, 2017.~~

7.	~~RESTRUCTURING ACTIVITIES~~

Fiscal ~~2017~~2022 Oracle Restructuring Plan

During the first quarter of fiscal ~~2017,~~2022, our management approved, committed to and initiated plans to restructure and further improve efficiencies in our operations due to our ~~recent~~ acquisitions and certain other operational activities ~~(2017~~(2022 Restructuring Plan). ~~In the first quarter of fiscal 2018, our management supplemented the 2017 Restructuring Plan to reflect additional actions that we expect to take.~~ The total estimated restructuring costs associated with the ~~2017~~2022 Restructuring Plan are up to ~~$1.1 billion~~$353 million and will be recorded to the restructuring expense line item within our condensed consolidated statements of operations as they are incurred. We recorded ~~$516~~$55 million of restructuring expenses in connection with the ~~2017~~2022 Restructuring Plan in the first ~~nine~~three months of fiscal ~~2018~~2022 and we expect to incur the majority of the estimated remaining ~~$112~~$298 million through the end of fiscal ~~2018.~~2023. Any changes to the estimates of executing the ~~2017~~2022 Restructuring Plan will be reflected in our future results of operations.

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

Summary of All Plans

Accrued
May 31,
2017⁽²⁾ Nine Months Ended February 28, 2018 Accrued
February 28,
2018⁽²⁾ Total
Costs
Accrued
to Date Total
Expected
Program
Costs
(in millions)
Initial
Costs⁽³⁾ Adj. to
Cost⁽⁴⁾ Cash
Payments Others⁽⁵⁾
Fiscal 2017 Oracle Restructuring Plan⁽¹⁾

Cloud andon-premise software
$ 85 $ 111 $ (8 ) $ (129 ) $ 6 $ 65 $ 281 $ 300
Hardware
31 146 (7 ) (89 ) 4 85 227 241
Services
25 40 (3 ) (45 ) 2 19 95 130
Other
44 230 7 (159 ) (4 ) 118 399 443

Total Fiscal 2017 Oracle Restructuring Plan
$ 185 $ 527 $ (11 ) $ (422 ) $ 8 $ 287 $ 1,002 $ 1,114

Total other restructuring plans⁽⁶⁾
$ 79 $ 1 $ (11 ) $ (30 ) $ 5 $ 44

Total restructuring plans
$ 264 $ 528 $ (22 ) $ (452 ) $ 13 $ 331

			Three Months Ended August 31, 2021											Accrued August 31, 2021⁽²⁾		Total Costs Accrued to Date		Total Expected Program Costs
(in millions)	Accrued May 31, 2021⁽²⁾		Initial Costs⁽³⁾		Adj. to Cost⁽⁴⁾			Cash Payments			Others⁽⁵⁾			Accrued August 31, 2021⁽²⁾		Total Costs Accrued to Date		Total Expected Program Costs
2022 Restructuring Plan⁽¹⁾
Cloud and license	$	0	$	37	$	0		$	(13	)	$	0		$	24	$	37	$	247
Hardware		0		3		0			(2	)		0			1		3		26
Services		0		4		0			(1	)		0			3		4		37
Other⁽⁶⁾		0		11		0			(2	)		0			9		11		43
Total 2022 Restructuring Plan	$	0	$	55	$	0		$	(18	)	$	0		$	37	$	55	$	353
Total other restructuring plans⁽⁷⁾	$	225	$	0	$	(17	)	$	(50	)	$	(6	)	$	152
Total restructuring plans	$	225	$	55	$	(17	)	$	(68	)	$	(6	)	$	189

⁽¹⁾	Restructuring costs recorded for individual line items primarily related to employee severance costs.

⁽²⁾

~~The balances at February 28, 2018~~As of August 31, 2021 and May 31, ~~2017 included $298 million and $242 million, respectively,~~2021, substantially all restructuring liabilities have been recorded in other current liabilities ~~and $33 million and $22 million, respectively, recorded in othernon-current~~ ~~liabilities.~~within our condensed consolidated balance sheets.

⁽³⁾	Costs recorded for the respective restructuring plans during the current period presented.

⁽⁴⁾	All plan adjustments were changes in estimates whereby increases and decreases in costs were generally recorded to operating expenses in the period of adjustments.

⁽⁵⁾⁽⁵⁾

Represents foreign currency translation and certain other adjustments.

⁽⁶⁾⁽⁶⁾

Represents employee related severance costs for functions that are not included within our operating segments and certain other restructuring costs.

⁽⁷⁾

Other restructuring plans presented in the table above included condensed information for other Oracle based plans and other plans associated with certain of our acquisitions whereby we continued to make cash outlays to settle obligations under these plans during the period presented but for which the periodic impact to our condensed consolidated statements of operations was not significant.

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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2021

(Unaudited)

DEFERRED REVENUES

Deferred revenues consisted of the following:


(in millions)	February 28, 2018		May 31, 2017		August 31, 2021		May 31, 2021
Software license updates and product support	$	5,562	$	5,952
Cloud SaaS, PaaS and IaaS		1,348		1,192
Cloud services and license support					$	9,033	$	7,728
Hardware		590		640		599		618
Services		439		382		318		399
New software licenses		64		67

Cloud license and on-premise license						61		30
Deferred revenues, current		8,003		8,233		10,011		8,775

Deferred revenues,non-current (in othernon-current liabilities)		607		602		773		679

Total deferred revenues	$	8,610	$	8,835	$	10,784	$	9,454

Deferred ~~software~~cloud services and license ~~updates and product~~ support revenues and deferred hardware revenues substantially represent customer payments made in advance for cloud or support contracts that are typically billed ~~on a per annum basis~~ in advance with corresponding revenues generally being recognized ratably over the ~~support~~contractual periods. Deferred cloud software as a service (SaaS) and deferred cloud platform as a service (PaaS) and infrastructure as a service (IaaS) revenues generally resulted from customer payments made in advance for our cloud-based offerings that are recognized over the corresponding contractual term. Deferred services revenues include prepayments for our services business and revenues for these services are generally recognized as the services are performed.

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

Deferred ~~new software licenses~~cloud license and on-premise license revenues typically resulted from customer payments that ~~relate~~related to undelivered products and services or specified ~~enhancements, customer specific acceptance provisions, time-based license arrangements and software license transactions that cannot be separated from undelivered consulting or other services.~~

In connection with our acquisitions, we have estimated the fair values of the cloud SaaS, cloud PaaS and IaaS and software license updates and product support obligations, among others, assumed from our acquired companies. We generally have estimated the fair values of these obligations assumed using a cost~~build-up~~ ~~approach. The costbuild-up~~ approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the amount that we would be required to pay a third party to assume these acquired obligations. These aforementioned fair value adjustments recorded for obligations assumed from our acquisitions reduced the cloud SaaS, cloud PaaS and IaaS, software license updates and product support, and hardware deferred revenues balances that we recorded as liabilities from these acquisitions and also reduced the resulting revenues that we recognized or will recognize over the terms of the acquired obligations during the post-combination periods.enhancements.

9.	~~DERIVATIVE FINANCIAL INSTRUMENTS~~

~~We held certain derivative andnon-derivative~~ ~~instruments that were accounted for pursuant to ASC 815,~~~~Derivatives and Hedging~~ ~~(ASC 815) and that were utilized in a consistent manner as of February 28, 2018 and May 31, 2017 and during the three and nine months ended February 28, 2018 and 2017. These instruments include:~~

interest rate swap agreements, which are used to protect us against changes in the fair values of certain of our fixed-rate borrowings due to benchmark interest rate movements and are accounted for as fair value hedges;

cross-currency swap agreements, which are used to manage foreign currency exchange risk by converting certain of our fixed-rate Euro-denominated borrowings to fixed-rate U.S. Dollar denominated debt and are accounted for as cash flow hedges; and

foreign currency borrowings, which are used to reduce the volatility in stockholders’ equity caused by the changes in the foreign currency exchange rates of the Euro with respect to the U.S. Dollar and are accounted for as net investment hedges.

We also held certain foreign currency contracts that were not designated as hedges pursuant to ASC 815. As of February 28, 2018 and May 31, 2017, the notional amounts of such forward contracts we held to purchase U.S. Dollars in exchange for other major international currencies were $4.5 billion and $3.4 billion, respectively, and the notional amount of forward contracts we held to sell U.S. Dollars in exchange for other major international currencies were $1.6 billion and $1.4 billion, respectively. The fair values of our outstanding foreign currency forward contracts were nominal as of February 28, 2018 and May 31, 2017. The cash flows related to these foreign currency contracts are classified as operating activities. Net gains or losses related to these forward contracts are included in~~non-operating~~ ~~income, net.~~

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

~~See Note 11 of Notes to Consolidated Financial Statements included in our Annual Report on Form10-K~~ ~~for the fiscal year ended May 31, 2017 for additional information regarding the purpose, accounting and classification of our derivative andnon-derivative~~ instruments with the exception of the fair value hedge related to our $1.5 billion of senior notes due January 2019, which as of February 28, 2018 is classified within other current liabilities. None of our derivative instruments are used for trading purposes. The effects of derivative and~~non-derivative~~ instruments designated as hedges on certain of our condensed consolidated financial statements were as follows as of or for each of the respective periods presented below (amounts presented exclude any income tax effects):

~~Fair Values of Derivative andNon-Derivative~~ ~~Instruments Designated as Hedges in Condensed Consolidated Balance Sheets~~

   Fair Value as of
(in millions)

Balance Sheet Location
   February 28,
         2018         May 31,
         2017
Interest rate swap agreements designated as fair value hedges

Other current liabilities
   $ (7 ) $ —


Interest rate swap agreements designated as fair value hedges

Other non-current (liabilities) assets
   $ (47 ) $ 40


Cross-currency swap agreements designated as cash flow hedges

Other non-current liabilities
   $ (30 ) $ (191 )


Foreign currency borrowings designated as net investment hedge

Notes payable,non-current
   $ (1,079 ) $ (980 )

~~Effects of Derivative andNon-Derivative~~ ~~Instruments Designated as Hedges on Income and Other Comprehensive Income (OCI) or Loss (OCL)~~

Amount of Gain (Loss)
Recognized in Accumulated
OCI or OCL (Effective Portion)
Location and Amount of Gain (Loss) Reclassified from
Accumulated OCI or OCL into Income (Effective Portion)

Three Months Ended
February 28, Nine Months Ended
February 28, Three Months Ended
February 28, Nine Months Ended
February 28,
(in millions)
2018 2017 2018 2017 2018 2017 2018 2017
Cross-currency swap agreements designated as cash flow hedges
$ 57 $ 6 $ 161 $ (44 ) Non-operating income (expense), net $ 51 $ 2 $ 142 $ (69 )

Foreign currency borrowings designated as net investment hedge
$ (31 ) $ (1 ) $ (85 ) $ 42 Not applicable $ — $ — $ — $ —

Location and Amount of Gain
(Loss) Recognized in Income on Derivative Location and Amount of Gain (Loss) on Hedged Item
Recognized in Income Attributable to Risk Being Hedged
Three Months Ended
February 28, Nine Months Ended
February 28, Three Months Ended
February 28, Nine Months Ended
February 28,
(in millions)
2018 2017 2018 2017 2018 2017 2018 2017
Interest rate swap agreements designated as fair value hedges
Interest expense $ (47 ) $ (31 ) $ (94 ) $ (99 ) Interest expense $ 47 $ 31 $ 94 $ 99

~~10.~~

STOCKHOLDERS’ (DEFICIT) EQUITY

Common Stock Repurchases

Our Board of Directors has approved a program for us to repurchase shares of our common stock. ~~During the first nine months of fiscal 2018, our Board of Directors approved expansions of our stock repurchase program totaling $24.0 billion.~~ As of ~~February 28, 2018,~~August 31, 2021, approximately ~~$22.8~~$7.6 billion remained available for stock repurchases pursuant to our stock repurchase program. We repurchased ~~131.6~~94.0 million shares for ~~$6.5~~$8.0 billion during the ~~nine~~three months ended ~~February 28, 2018~~August 31, 2021 (including ~~2.1~~0.8 million shares for ~~$105~~$71 million that were repurchased but not settled) and ~~74.6~~89.8 million shares for ~~$3.0~~$5.0 billion during the ~~nine~~three months ended ~~February 28, 2017~~August 31, 2020 under the stock repurchase program.

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchases of our debt, our stock price, and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule10b5-1 plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

Dividends on Common Stock

~~During the nine months ended February 28, 2018, our Board of Directors declared cash dividends of $0.57 per share of our outstanding common stock, which we paid during the same period.~~

In ~~March 2018,~~September 2021, our Board of Directors declared a quarterly cash dividend of ~~$0.19~~$0.32 per share of our outstanding common stock. The dividend is payable on ~~May 1, 2018~~October 26, 2021 to stockholders of record as of the close of business on ~~April 17, 2018.~~October 12, 2021. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.

Fiscal ~~2018 Stock-Based~~2022 Stock‑Based Awards Activity ~~Valuation~~ and Compensation Expense

During the first ~~nine months~~quarter of fiscal ~~2018,~~2022, we issued 4147 million restricted stock-based ~~awards and 77 million stock options (consisting of 8 million service-based stock options (SOs) and 69 million performance-based and market-based stock options (PSOs)). Substantially~~units (RSUs), substantially all of ~~the awards~~which were issued as a part of our annual stock-based award process and are subject to service-based vesting ~~restrictions, with the PSOs primarily having performance-based and market-based vesting~~ restrictions. ~~Our~~These fiscal ~~2018~~2022 stock-based ~~awards~~award issuances were partially offset by stock-based award forfeitures and cancellations of 162 million shares during the first ~~nine months~~quarter of fiscal ~~2018.~~2022.

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ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2021

(Unaudited)

The RSUs ~~and SOs~~ that were granted during the ~~nine~~three months ended ~~February 28, 2018~~August 31, 2021 have vesting restrictions, valuations and contractual lives of a similar nature to those described in Note 1413 of Notes to Consolidated Financial Statements included in our Annual Report on Form10-K for the fiscal year ended May 31, ~~2017.~~2021.

~~The~~Further, during the first quarter of fiscal ~~2018 PSOs granted consist~~2022, the Compensation Committee of ~~seven numerically equivalent vesting tranches that potentially may vest. Each~~our Board of ~~six~~Directors approved an amendment to the terms of the ~~individual vesting~~performance-based stock options (PSOs) granted on July 20, 2017 to our Chief Executive Officer and Chief Technology Officer. The amendment extends the term of the performance period for each of the 6 tranches ~~are governed by an “all or nothing” vesting schedule requiring~~of the PSOs that require the attainment of both a performance metric and a market capitalization metric ~~which may be achieved at any time, in order for each individual~~by three additional fiscal years from May 31, 2022 to May 31, 2025. A 7th PSO tranche ~~to fully vest during a five year performance period, assuming continued employment and service through the date the Compensation Committee of the Board of Directors certifies~~ that ~~the last of the two metrics for a particular tranche is attained. The seventh vesting tranche requires attainment of~~was based upon a market-based metric ~~to be~~was achieved atand accordingly the tranche vested in the first quarter of fiscal 2022 without any ~~time during a five year~~amendment. If any of the remaining operational and market capitalization performance ~~period and continued employment and service through the vesting date. The PSOs have contractual lives of eight years in comparison to the ten year contractual lives for the fiscal 2018 SOs issued. We~~goals are achieved before May 31, 2025 additional tranches may vest. Upon amendment, we estimated the revised fair values of the six unvested tranches of the PSOs using a Monte Carlo simulation ~~approach with the following assumptions: risk-free interest rate of 2.14%, expected term of 7 years, expected volatility of 22.44% and dividend yield of 1.49%. Stock-based~~approach. We will recognize incremental stock-based compensation expense ~~is to be recognized for each~~if any of the ~~six performance-based and market-based~~remaining unvested tranches ~~once each vesting tranche~~ becomes probable of achievement over the longer of the (a) estimated implicit service period for performance-metric achievement, or (b) derived service period for market-based metric achievement. We have preliminarily estimated service periods for those tranches that have been deemed probable of achievement to be approximately three to ~~five~~four years. Stock-based compensation for the market-based tranche will be recognized using the derived service period for the market-based metric achievement, which we have initially estimated to be approximately three years.

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

Stock-based compensation expense is included in the following operating expense line items in our condensed consolidated statements of operations:


	Three Months Ended February 28,				Nine Months Ended February 28,				Three Months Ended August 31,
(in millions)	2018		2017		2018		2017		2021		2020
Cloud SaaS	$	11	$	6	$	31	$	17
Cloud PaaS and IaaS		3		1		7		3
Software license updates and product support		7		6		20		18
Cloud services and license support									$	40	$	30
Hardware		2		3		8		9		3		3
Services		13		14		41		31		14		12
Sales and marketing		87		96		275		228		95		71
Research and development		221		191		693		574		344		276
General and administrative		45		32		135		104		49		36
Acquisition related and other		—		22		1		33

Total stock-based compensation	$	389	$	371	$	1,211	$	1,017	$	545	$	428

~~11.~~

INCOME TAXES

Our effective tax rates for each of the periods presented are the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. In the third quarter of fiscal 2018 the Act was signed into law. The more significant provisions of the Act as applicable to us are described in Note 1 above under “Impacts of the U.S. 2017 Tax Cuts and Jobs Act”. Our provision for income taxes ~~for the fiscal 2018 periods presented~~ varied from the 21% U.S. statutory rate imposed by the Act due primarily to the January 1, 2018 effective date of the Act, the impacts of the Act upon adoption, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation and the U.S. domestic production activity deduction. Prior to the January 1, 2018 effective date of the Act, our provision for income taxes historically differed from the tax computed at the ~~previous~~ U.S. federal statutory income tax rate for the periods presented primarily due ~~primarily~~ to ~~certain~~ earnings ~~considered as indefinitely reinvested~~ in foreign operations, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation, the Foreign Derived Intangible Income deduction and the ~~U.S. domestic production activity deduction.~~tax effect of Global Intangible Low-Taxed Income. Our effective tax rates were ~~222.0%~~8.4% and ~~95.2%~~13.3% for the three ~~and nine~~ months ended ~~February 28, 2018, respectively,~~August 31, 2021 and ~~17.0% and 21.3% for the three and nine months ended February 28, 2017,~~2020, respectively.

Table of Contents

ORACLE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

August 31, 2021

(Unaudited)

Our net deferred tax assets were ~~$1.6~~$5.7 billion and ~~$683 million~~$5.8 billion as of ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017,~~2021, respectively. We believe that it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credit carryforwards. The amount of net deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal ~~2016.~~2020. Our U.S. federal income tax returns have been examined for all years prior to fiscal ~~2007,~~2010 and, with some exceptions, we are no longer subject to audit for those periods. Our U.S. state income tax returns, with some exceptions, have been examined for all years prior to fiscal ~~2004,~~2007, and we are no longer subject to audit for those periods.

Internationally, tax authorities for numerousnon-U.S. jurisdictions are also examining returns affecting our unrecognized tax benefits. With some exceptions, we are generally no longer subject to tax examinations innon-U.S. jurisdictions for years prior to fiscal ~~1997.~~

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

~~On July 27, 2015, in~~~~Altera Corp. v. Commissioner~~, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision has yet to be issued by the Tax Court due to other outstanding issues related to the case. At this time, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation from its regulations. We have reviewed this case and its impact on Oracle and concluded that no adjustment to the consolidated financial statements is appropriate at this time. We will continue to monitor ongoing developments and potential impacts to our consolidated financial statements.2001.

We are under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, Australia, Brazil, Canada, India, Indonesia, Israel, Mexico, New Zealand, Pakistan, Saudi Arabia, South Korea ~~Spain~~ and ~~the United Kingdom,~~Spain, where the amounts under controversy are significant. In some, although not all, cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by, or any negotiated agreements with, these tax authorities or final outcomes in judicial proceedings, and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state, and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense.

We believe that we have adequately provided under GAAP for outcomes related to our tax audits. However, there can be no assurances as to the possible outcomes or any related financial statement effect thereof.

~~12.~~

SEGMENT INFORMATION

ASC 280,Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or ~~decision making~~decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision makers (CODMs) are our Chief Executive ~~Officers~~Officer and Chief Technology Officer. We are organized by line of business and geographically. While our CODMs evaluate results in a number of different ways, the line of business management structure is the primary basis for which the allocation of resources and financial results are assessed. ~~In recent periods, customer demand has increased at a greater rate for cloud-based IT deployment models relative toon-premise~~ IT deployment models. Our CODMs view the operating results of our three businesses and allocate resources in a manner that is consistent with the changing market dynamics that we have experienced. As a result, in the fourth quarter of fiscal 2017, we updated our operating segments. The ~~footnote~~tabular information below presents the financial information provided to our CODMs for their review and assists our CODMs with evaluating the company’s performance and allocating company resources.

We have ~~three~~3 businesses—cloud and~~on-premise~~ ~~software,~~ license, hardware and services—each of which is comprised of a single operating segment. All 3 of our businesses market and sell our offerings globally to businesses of many sizes, government agencies, educational institutions and resellers with a worldwide sales force positioned to offer the combinations that best meet customer needs.

Our cloud and~~on-premise~~ ~~software line~~ license business engages in the sale, marketing and delivery of ~~business markets, sells and delivers a broad spectrum of~~our enterprise applications ~~platform~~ and infrastructure technologies through cloud and on-premise deployment models including our cloud services and

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(Unaudited)

license support offerings; and our cloud license and on-premise license offerings. Cloud services and license support revenues are generated from offerings that are typically contracted with customers directly, billed to customers in advance, delivered to customers over time with our revenue recognition occurring over the contractual terms, and ~~software offerings. Our Oracle~~renewed by customers upon completion of the contractual terms. Cloud ~~SaaS~~services and ~~Cloud PaaS and IaaS offerings deliver certain of our~~license support contracts provide customers with access to the latest updates to the applications ~~platform~~ and infrastructure technologies ~~on a subscription basis via cloud-based deployment models that we host, manage~~as they become available and ~~support. Our IaaS offerings~~for which the customer contracted and also include ~~Oracle Managed~~related technical support services over the contractual term. Cloud ~~Services, which are designed to provide comprehensive software~~license and ~~hardware management, maintenance and security services for~~on-premise ~~cloud-based or hybrid IT infrastructures. Our cloud andon-premise~~ ~~software business also~~ license revenues represent fees earned from granting customers licenses, ~~our software products,~~ generally on a perpetual basis, ~~including Oracle Applications, Oracle Database, Oracle Fusion Middleware~~to use our database and ~~Java, among~~

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

~~others, for~~middleware and our applications software products within cloud and ~~other~~on-premise IT environments. ~~Customers that~~We generally recognize revenues at the point in time the software is made available to the customer to download and use, which typically is immediate upon signature of the license contract. In each fiscal year, our ~~software have~~cloud and license business’ contractual activities are typically highest in our fourth fiscal quarter and the option to purchase software license updates and product support contracts, which provide customers with rights to unspecified software product upgrades and maintenance releases, patch releases, internet access to technical content,related cash flows are typically highest in the following quarter (i.e., in the first fiscal quarter of the next fiscal year) as ~~well as internet and telephone access to technical support personnel during the support period.~~we receive payments from these contracts.

Our hardware business provides infrastructure technologies including Oracle Engineered Systems, servers, storage, industry-specific hardware, ~~virtualization software,~~ operating systems, ~~including the Oracle Solaris operating system~~virtualization, management and ~~management~~other hardware-related software to support diverse IT environments. Our hardware business also ~~includes~~offers hardware support, which provides customers with software updates for the software components that are essential to the functionality of ~~the~~their hardware products ~~such as Oracle Solaris and certain other software,~~ and can also include product repairs, maintenance services and technical support services.

Our services business provides services to customers and partners to help maximize the performance of their investments in Oracle applications ~~platform~~ and infrastructure technologies.

We do not track our assets for each business. Consequently, it is not practical to show assets by operating segment.

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The following table presents summary results for each of our three ~~businesses (fiscal 2017 results have been recast to conform to the current year’s presentation):~~businesses:


	Three Months Ended February 28,				Nine Months Ended February 28,				Three Months Ended August 31,
(in millions)	2018		2017		2018		2017		2021		2020
Cloud andon-premise software:
Revenues⁽¹⁾	$	7,986	$	7,434	$	23,229	$	21,455
Cloud SaaS, PaaS and IaaS expenses		649		491		1,844		1,349
Software license updates and product support expenses		206		253		686		733
Cloud and license:
Revenues⁽¹⁾									$	8,184	$	7,834
Cloud services and license support expenses										1,153		958
Sales and marketing expenses		1,736		1,680		5,196		4,909		1,626		1,633

Margin⁽²⁾	$	5,395	$	5,010	$	15,503	$	14,464

Margin⁽²⁾									$	5,405	$	5,243
Hardware:
Revenues⁽¹⁾	$	994	$	1,028	$	2,878	$	3,038
Revenues									$	763	$	814
Hardware products and support expenses		388		428		1,097		1,189		238		239
Sales and marketing expenses		153		195		479		597		89		98

Margin⁽²⁾	$	453	$	405	$	1,302	$	1,252

Margin⁽²⁾									$	436	$	477
Services:
Revenues	$	796	$	812	$	2,511	$	2,464	$	781	$	720
Services expenses		676		645		2,023		1,978		609		585

Margin⁽²⁾	$	120	$	167	$	488	$	486

Margin⁽²⁾									$	172	$	135
Totals:
Revenues⁽¹⁾	$	9,776	$	9,274	$	28,618	$	26,957
Revenues⁽¹⁾									$	9,728	$	9,368
Expenses		3,808		3,692		11,325		10,755		3,715		3,513

Margin⁽²⁾	$	5,968	$	5,582	$	17,293	$	16,202

Margin⁽²⁾									$	6,013	$	5,855

⁽¹⁾

Cloud and~~on-premise~~ ~~software and hardware~~ license revenues presented for management reporting included revenues related to cloud~~on-premise~~ ~~software~~ and ~~hardware~~license obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. ~~See Note 8 for an explanation of these adjustments and the~~The table below ~~for~~provides a reconciliation of our total operating segment revenues to our total ~~consolidated~~ revenues as reported in our condensed consolidated statements of operations.

⁽²⁾

The margins reported reflect only the direct controllable costs of each line of business and do not include allocations of ~~product~~research and development, general and administrative and certain other allocable expenses, net. Additionally, the margins reported above do not reflect amortization of intangible assets, acquisition related and other expenses, restructuring expenses, stock-based compensation, interest expense or certain othernon-operating ~~income,~~ expenses, net.

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~~February 28, 2018~~August 31, 2021

(Unaudited)

The following table reconciles total operating segment revenues to total revenues as well as total operating segment margin to income before provision for income taxes:

   Three Months Ended
February 28, Nine Months Ended
February 28,
(in millions)
     2018     2017     2018     2017
Total revenues for operating segments
   $ 9,776 $ 9,274 $ 28,618 $ 26,957
Cloud andon-premise software revenues⁽¹⁾
   (5 ) (69 ) (39 ) (121 )
Hardware revenues⁽¹⁾
   — — — (1 )


Total revenues
   $ 9,771 $ 9,205 $ 28,579 $ 26,835


Total margin for operating segments
   $   5,968 $   5,582 $ 17,293 $ 16,202
Cloud andon-premise software revenues⁽¹⁾
   (5 ) (69 ) (39 ) (121 )
Hardware revenues⁽¹⁾
   — — — (1 )
Research and development
   (1,498 ) (1,521 ) (4,547 ) (4,551 )
General and administrative
   (340 ) (241 ) (982 ) (859 )
Amortization of intangible assets
   (394 ) (397 ) (1,205 ) (1,010 )
Acquisition related and other
   (3 ) (30 ) (32 ) (84 )
Restructuring
   (91 ) (161 ) (506 ) (346 )
Stock-based compensation for operating segments
   (123 ) (126 ) (382 ) (306 )
Expense allocations and other, net
   (104 ) (78 ) (301 ) (288 )
Interest expense
   (533 ) (450 ) (1,477 ) (1,317 )
Non-operating income, net
   423 189 929 437


Income before provision for income taxes
   $ 3,300 $ 2,698 $ 8,751 $ 7,756

	Three Months Ended August 31,
(in millions)	2021		2020
Total revenues for operating segments	$	9,728	$	9,368
Cloud and license revenues⁽¹⁾		0		(1	)
Total revenues	$	9,728	$	9,367

Total margin for operating segments	$	6,013		$	5,855
Cloud and license revenues⁽¹⁾		0			(1	)
Research and development		(1,684	)		(1,589	)
General and administrative		(298	)		(295	)
Amortization of intangible assets		(303	)		(345	)
Acquisition related and other		(21	)		(19	)
Restructuring		(38	)		(174	)
Stock-based compensation for operating segments		(152	)		(116	)
Expense allocations and other, net		(90	)		(105	)
Interest expense		(705	)		(614	)
Non-operating expenses, net		(41	)		(2	)
Income before provision for income taxes	$	2,681		$	2,595

⁽¹⁾

Cloud and~~on-premise~~ ~~software~~license revenues ~~and hardware revenues~~ presented for management reporting included revenues related to cloud~~on-premise~~ ~~software~~ and ~~hardware~~license obligations that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. ~~See Note 8 for an explanation of these adjustments and this~~This table ~~for~~includes a reconciliation of our total operating segment revenues to our total ~~consolidated~~ revenues as reported in our condensed consolidated statements of operations.

Disaggregation of Revenues

We have considered information that is regularly reviewed by our CODMs in evaluating financial performance, and disclosures presented outside of our financial statements in our earnings releases and used in investor presentations to disaggregate revenues to depict how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. The principal category we use to disaggregate revenues is the nature of our products and services as presented in our condensed consolidated statements of operations, the total of which is reconciled to revenues from our reportable segments as per the preceding tables of this footnote.

The following table is a summary of our total revenues by geographic region. The relative proportion of our total revenues between each geographic region as presented in the table below was materially consistent across each of our operating segments’ revenues for the periods presented.

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	Three Months Ended August 31,
(in millions)	2021		2020
Americas	$	5,321	$	5,068
EMEA⁽¹⁾		2,784		2,738
Asia Pacific		1,623		1,561
Total revenues	$	9,728	$	9,367

~~13.~~

⁽¹⁾

~~EARNINGS (LOSS) PER SHARE~~Comprised of Europe, the Middle East and Africa

Thefollowing table presents our cloud services and license support revenues by applications and infrastructure ecosystems.

	Three Months Ended August 31,
(in millions)	2021		2020
Applications cloud services and license support	$	3,041	$	2,816
Infrastructure cloud services and license support		4,330		4,131
Total cloud services and license support revenues	$	7,371	$	6,947

10.	EARNINGS PER SHARE

Basic earnings ~~(loss)~~ per share is computed by dividing net income ~~(loss)~~ for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings ~~(loss)~~ per share is computed by dividing net income ~~(loss)~~ for the period by the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding restricted stock-based awards, stock options, and shares issuable under the employee stock purchase plan as applicable pursuant to the treasury stock method. The following table sets forth the computation of basic and diluted earnings ~~(loss)~~ per share:


	Three Months Ended February 28,					Nine Months Ended February 28,				Three Months Ended August 31,
(in millions, except per share data)	2018			2017		2018		2017		2021		2020
Net income (loss)	$	(4,024	)	$	2,239	$	418	$	6,103

Net income										$	2,457	$	2,251
Weighted average common shares outstanding		4,122			4,107		4,146		4,110		2,769		3,041
Dilutive effect of employee stock plans		—			97		122		97		92		66

Dilutive weighted average common shares outstanding		4,122			4,204		4,268		4,207		2,861		3,107

Basic earnings (loss) per share	$	(0.98	)	$	0.55	$	0.10	$	1.49
Diluted earnings (loss) per share	$	(0.98	)	$	0.53	$	0.10	$	1.45
Basic earnings per share										$	0.89	$	0.74
Diluted earnings per share										$	0.86	$	0.72
Shares subject to anti-dilutive restricted stock-based awards and stock options excluded from calculation⁽¹⁾		190			76		60		75		30		36

⁽¹⁾

~~These~~Substantially all of these weighted shares ~~relate~~are related to ~~anti-dilutive restricted service based stock-based awards and stock options (as calculated using the treasury stock method) and~~ contingently issuable shares ~~under~~related to PSO ~~and PSU arrangements. Such shares~~arrangements that could be dilutive in the future.

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~~February 28, 2018~~August 31, 2021

(Unaudited)

~~14.~~

11.

LEGAL PROCEEDINGS

Hewlett-Packard Company Litigation

On June 15, 2011, Hewlett-Packard Company, now Hewlett Packard Enterprise Company (HP), filed a complaint in the California Superior Court, County of Santa Clara against Oracle Corporation alleging numerous causes of action including breach of contract, breach of the covenant of good faith and fair dealing, defamation, intentional interference with prospective economic advantage, and violation of the California Unfair Business Practices Act. The complaint alleged that when Oracle announced on March 22 and 23, 2011 that it would no longer develop future versions of its software to run on HP’s Itanium-based servers, it breached a settlement agreement signed on September 20, 2010 (the HP Settlement Agreement), resolving litigation between HP and ~~Mark Hurd (the Hurd Settlement Agreement),~~one of Oracle’s former CEOs who ~~is our Chief Executive Officer and was both~~had previously acted as HP’s ~~former~~ chief executive officer and chairman of HP’s board of directors. HP sought a judicial declaration of the parties’ rights and obligations under the ~~Hurd~~HP Settlement Agreement and other equitable and monetary relief.

Oracle answered the complaint and filed cross-claims.

After a ~~cross-complaint, which was amended~~bench trial on ~~December 2, 2011. The amended cross-complaint alleged claims including violation~~the meaning of the ~~Lanham Act. Oracle alleged that~~ HP ~~had secretly agreed to pay Intel to continue to develop and manufacture~~Settlement Agreement, the ~~Itanium microprocessor, and had misrepresented to customers~~court found that the ~~Itanium microprocessor had a long roadmap, among other claims. Oracle sought equitable rescission of the Hurd Settlement Agreement, and other equitable and monetary relief.~~

The court bifurcated the trial and tried HP’s causes of action for declaratory relief and promissory estoppel without a jury in June 2012. The court issued a final statement of decision on August 28, 2012, finding that the HurdHP Settlement Agreement required Oracle to continue to develop certain of its software products for use on HP’s Itanium-based servers ~~and to port such products~~ at no cost to ~~HP for as long as HP sells those servers (the Phase One Ruling). A~~HP. The case proceeded to a jury trial ~~began on~~in May ~~23,~~ 2016. On June 30, 2016, the jury returned a verdict in favor of HP on its claims for breach of contract and breach of the implied covenant of good faith and fair dealing and against Oracle on its ~~claim for violation of the Lanham Act (the Phase Two Jury Verdict).~~cross-claims. The jury awarded HP ~~damages in the amount of~~ $3.0 billion ~~and~~in damages. Under the court’s rulings, HP is entitled to post-judgment interest, but not pre-judgment interest, on this award. ~~On August 30, 2016,~~

After the trial court denied ~~HP’s motion forpre-judgment~~ ~~interest. Judgment was entered on October 20, 2016. Oracle posted certain court-mandated surety bonds with the court in order to proceed with its~~Oracle’s motion for a new trial, ~~and entered into related indemnification agreements with each of the surety bond issuing companies.~~ Oracle filed a ~~motion for a new trial on November 14, 2016, which was denied.~~

~~Oracle filed its~~ notice of appeal on January 17, ~~2017, specifying that it was appealing the trial court’s Phase One Ruling and Phase Two Jury Verdict.~~2017. On February 2, 2017, HP filed a notice of appeal of the trial court’s denial ofpre-judgment interest. NoOral argument was held on May 27, 2021. On June 14, 2021, the Court of Appeal affirmed both the judgment against Oracle noted above, and the denial of pre-judgment interest. Oracle has posted a mandated surety bond with the trial court for the amounts owing. On June 29, 2021, Oracle filed a Petition for Rehearing with the Court of Appeal, which was denied on July 8, 2021. On July 26, 2021, Oracle filed a Petition for Review with the California Supreme Court, and briefing on that Petition is now complete. NaN amounts have been paid or recorded to our results of ~~operations either prior to or subsequent to~~operations. If the ~~Phase One Ruling or Phase Two Jury Verdict.~~ Court of Appeal’s judgment is ultimately affirmed, we would be liable for the amount of the jury award that is described above plus post-judgment interest.

We continue to believe that we have meritorious defenses against HP’s claims and we intend to present these defenses to the appellate court. Among the arguments we expect to make on appeal are the following: the trial court misapplied fundamental principles of contract law and misinterpreted the Hurd Settlement Agreement, including by disregarding the context of the Hurd Settlement Agreement and the evidence of the parties’ mutual intentions; that HP’s breach of contract claim should fail as a matter of law because HP does not claim and did not prove that Oracle failed to deliver any software under the trial court’s interpretation of the contract; that awarding HP both damages for breach of the Hurd Settlement Agreement and specific performance of that agreement constitutes an improper double recovery; and that the damages award is excessive, unsupported by the evidence, and contrary to law. vigorously defend against them.

We cannot currently estimate a reasonably possible range of loss for this action due to the complexities and uncertainty surrounding ~~the appeal~~this process and the nature of the claims. Litigation is inherently unpredictable, and the outcome of the ~~appeal~~ process related to this action is uncertain. It is possible that the resolution of this action could have a material impact toon our future cash flows and results of operations.

~~ORACLE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~February 28, 2018~~

~~(Unaudited)~~

Derivative Litigation Concerning Oracle’s NetSuite Acquisition

On May 3 and July 18, 2017, ~~a stockholder~~two alleged stockholders filed separate derivative ~~lawsuit was filed~~lawsuits in the Court of Chancery of the State of ~~Delaware. The derivative suit is brought by an alleged stockholder of Oracle,~~Delaware, purportedly on Oracle’s ~~behalf,~~behalf. Thereafter, the court consolidated the two derivative cases and designated the July 18, 2017 complaint as the operative complaint. The consolidated lawsuit was brought against ~~Oracle,~~all the then-current members and one former member of our ~~Chairman of the~~ Board of Directors, ~~and Chief Technology Officer in his capacities as a director, officer and an alleged controlling stockholder, one of our Chief Executive Officers (who is also a director), three other directors,~~ and Oracle as a nominal defendant. Plaintiff ~~alleges~~alleged that the defendants breached their fiduciary duties by causing Oracle to agree to purchase NetSuite Inc. (NetSuite) at an excessive price. ~~Plaintiff seeks declaratory relief, an order rescinding or reforming~~The complaint sought (and the NetSuite transaction, unspecified monetary damages (including interest), attorneys’ fees and costs, and disgorgement of various unspecified profits, fees, compensation, and benefits. On July 19, 2017, defendants movedoperative complaint continues to ~~dismiss this complaint.~~

On July 18, 2017, a second stockholder derivative lawsuit was filed in the Court of Chancery of the State of Delaware, brought by another alleged stockholder of Oracle, purportedly on Oracle’s behalf. The suit is brought against all current members and one former member of our Board of Directors, and Oracle as a nominal defendant. Plaintiff alleges that the defendants breached their fiduciary duties by causing Oracle to agree to purchase NetSuite at an excessive price. Plaintiff seeksseek) declaratory relief, unspecified monetary damages (including interest), and attorneys’ fees and costs.

On August 9, 2017, the court consolidated the two derivative cases, and vacated the scheduling order relating to defendants’ motion to dismiss the first case. In a September 7, 2017 order, the court appointed plaintiff’s counsel in the second case as lead plaintiffs’ counsel and designated the July 18, 2017 complaint as the operative complaint. The defendants filed a motion to dismiss, on October 27, 2017, and the plaintiffs filed an opposition on December 15, 2017. The defendants filed their reply on January 9, 2018, and the court heard oral argument on January 25, 2018. On March 19, 2018,which the court denied on March 19, 2018.

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On May 4, 2018, our Board of Directors established a Special Litigation Committee (the SLC) to investigate the allegations in this ~~motion. The court ordered supplemental briefing~~derivative action. Three non-employee directors served on the ~~issue whether all~~SLC. On August 15, 2019, the SLC filed a letter with the court, stating that the SLC believed that plaintiff should be allowed to proceed with the derivative litigation on behalf of Oracle. After the ~~defendants,~~SLC advised the Board that it had fulfilled its duties and obligations, the Board withdrew the SLC’s authority, except that the SLC maintained certain authority to respond to discovery requests in the litigation.

After plaintiff filed the July 18, 2017 complaint, an additional plaintiff joined the case. Plaintiffs filed several amended complaints, and filed their most recent amended complaint on December 11, 2020. The operative complaint asserts claims for breach of fiduciary duty against our Chief Executive Officer, our Chief Technology Officer, the estate of Mark Hurd (our former Chief Executive Officer who passed away on October 18, 2019), and two other members of our Board of Directors. Oracle is named as a nominal defendant. On December 11, 2020, the estate of Mark Hurd and the two other members of our Board of Directors moved to dismiss this complaint, and a hearing on this motion was held on February 16, 2021. On June 21, 2021, the court granted this motion as to the estate of Mark Hurd and one Board member and denied the motion as to the other Board member, who filed an answer to the complaint on August 9, 2021. On December 28, 2020, our Chief Executive Officer, our Chief Technology Officer, and ~~one of our Chief Executive Officers, should be dismissed from this case.~~Oracle as a nominal defendant filed answers to the operative complaint.

The parties are conducting discovery. Trial is scheduled to commence on July 18, 2022.

While Oracle continues to evaluate these claims, we do not believe this litigation will have a material impact on our financial position or results of operations.

Securities Class Action and Derivative Litigation Concerning Oracle’s Cloud Business

On August 10, 2018, a putative class action, brought by an alleged stockholder of Oracle, was filed in the U.S. District Court for the Northern District of California against us, our Chief Technology Officer, our then-two Chief Executive Officers, two other Oracle executives, and one former Oracle executive. As noted above, Mr. Hurd, one of our then-two Chief Executive Officers, passed away on October 18, 2019. On March 8, 2019, plaintiff filed an amended complaint. Plaintiff alleges that the defendants made or are responsible for false and misleading statements regarding Oracle’s cloud business. Plaintiff further alleges that the former Oracle executive engaged in insider trading. Plaintiff seeks a ruling that this case may proceed as a class action, and seeks damages, attorneys’ fees and costs, and unspecified declaratory/injunctive relief. On April 19, 2019, defendants moved to dismiss plaintiff’s amended complaint. On December 17, 2019, the court granted this motion, giving plaintiffs an opportunity to file an amended complaint, which plaintiff filed on February 17, 2020. On April 23, 2020, defendants filed a motion to dismiss, and the court held a hearing on this motion on September 24, 2020. On March 22, 2021, the court granted in part and denied in part this motion. The court dismissed the action as to one Oracle executive and the former Oracle executive. The court permitted plaintiff to proceed with only a narrow omissions theory against the remaining defendants. On April 21, 2021, defendants filed an answer to the complaint. Trial is scheduled to commence on November 6, 2023. We believe that we have meritorious defenses against this action, and we will continue to vigorously defend it.

On February 12 and May 8, 2019, two stockholder derivative lawsuits were filed in the United States District Court for the Northern District of California. The cases were consolidated, and on July 8, 2019, a single plaintiff filed a consolidated complaint. The consolidated complaint brought various claims relating to the 10b-5 class action described immediately above. The parties agreed to stay the derivative case pending resolution of defendants’ motion to dismiss the securities case, which the court granted in part and denied in part on March 22, 2021.

Plaintiff filed an amended complaint on June 4, 2021. The derivative suit is brought by an alleged stockholder of Oracle, purportedly on Oracle’s behalf, against our Chief Technology Officer, our Chief Executive Officer, and the

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(Unaudited)

estate of Mark Hurd. Plaintiff claims that the alleged actions described in the class action discussed above caused harm to Oracle, and that defendants violated their fiduciary duties of candor, good faith, loyalty, and due care by failing to prevent this alleged harm. Plaintiff also brings derivative claims for violations of federal securities laws. Plaintiffs seek a ruling that this case may proceed as a derivative action, a finding that defendants are liable for breaching their fiduciary duties, damages, an order directing defendants to enact corporate reforms, attorneys’ fees and costs, and unspecified relief. On June 14, 2021, the court “so ordered” a stipulation from the parties, staying this case pending resolution of the 10b-5 action.

While Oracle continues to evaluate these claims, we do not believe this litigation will have a material impact on our financial position or results of operations.

Derivative Litigation Concerning Oracle’s Board Composition and Hiring Practices

On July 2 and 10, 2020, two alleged stockholders filed derivative lawsuits in the U.S. District Court for the Northern District of California, purportedly on Oracle’s behalf, and thereafter, filed a consolidated complaint on August 21, 2020. On July 30, 2020, a third alleged stockholder filed a derivative lawsuit in the same court. On October 16, 2020, defendants moved to consolidate all these actions, and the court granted this motion on November 30, 2020.

On December 7, 2020, plaintiffs filed a consolidated derivative complaint against all members of our Board of Directors, and Oracle as a nominal defendant, seeking declaratory and injunctive relief, monetary damages, interest, corporate governance changes, disgorgement, restitution, punitive damages, and an award of attorneys’ fees, expert fees, and costs. Plaintiffs allege that: (a) defendants breached their fiduciary duties by permitting Oracle to violate anti-discrimination laws and Oracle’s own policies, failing to ensure sufficient diversity on the board, failing to ensure an independent board chairman, rehiring Ernst & Young LLP as Oracle’s auditors, and by breaching the HP Settlement Agreement (discussed above); (b) defendants made false and misleading statements in Oracle’s proxy statements; (c) defendants received unjust compensation and were unjustly enriched; (d) defendants aided and abetted this conduct; and (e) our Chief Technology Officer and our Chief Executive Officer are liable for abuse of control. On January 6, 2021, defendants moved to dismiss the complaint. On May 24, 2021, the court granted defendants’ motion. Regarding the claims concerning Oracle’s proxy statements, the court granted plaintiffs leave to file an amended complaint within 30 days. Plaintiffs did not file an amended complaint within 30 days. On September 3, 2021, the court entered judgment for defendants on these claims. Regarding the remaining claims, the court granted plaintiffs leave to re-file those claims in Delaware Chancery Court.

While Oracle continues to evaluate these claims, we do not believe this litigation will have a material impact on our financial position or results of operations.

Other Litigation

We are party to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business, including proceedings and claims that relate to acquisitions we have completed or to companies we have acquired or are attempting to acquire. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our businesses and significant trends. This overview is followed by a summary of our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.

Business Overview

Oracle ~~Corporation~~ provides products and services that address ~~all aspects of corporate~~enterprise information technology (IT) ~~environments—applications, platform~~environments. Our products and ~~infrastructure. Our~~services include enterprise applications ~~platform~~ and infrastructure offerings that are delivered ~~to customers~~ worldwide through a variety of flexible and interoperable IT deployment models. These models ~~including cloud based,~~include on-premise or deployments, cloud-based deployments, and hybrid ~~which enable customer~~deployments (an approach that combines both on-premise and cloud-based deployment) such as our Oracle Cloud@Customer offering (an instance of Oracle Cloud in a customer’s own data center). Accordingly, we offer choice and ~~flexibility. We market~~flexibility to our customers and facilitate the product, service and deployment combinations that best suit our customers’ needs. Through our worldwide sales force and Oracle Partner Network, we sell ~~our offerings globally~~ to customers all over the world including businesses of many sizes, government agencies, educational institutions and ~~resellers with a sales force positioned to offer the combinations that best meet customer needs.~~resellers.

Our Oracle Cloud offerings provide a comprehensive and fully integrated stack of applications, platform, compute, storage and networking services in all three primary layers of the cloud: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). We also offer Oracle Applications, Oracle Database and Oracle Fusion Middleware software, among others; hardware products including Oracle Engineered Systems, servers, storage and industry-specific products, among others; and related support and services.

Our comprehensive and fully integrated stack of Oracle Cloud SaaS, PaaS and IaaS offerings integrate the software, hardware and services on the customers’ behalf in IT environments that we deploy, support and manage for the customer. Our integrated Oracle Cloud offerings are designed to be rapidly deployable to enable customers shorter time to innovation; easily maintainable to reduce integration and testing work; connectable among differing deployment models to enable interchangeability and extendibility between cloud and~~on-premise~~ ~~IT environments; compatible to easily move workloads betweenon-premise~~ IT environments and the Oracle Cloud; cost-effective by requiring lower upfront customer investment; and to be secure, standards-based and reliable. We are a leader in the core technologies of cloud IT environments, including database and middleware software as well as enterprise applications, virtualization, clustering, large-scale systems management and related infrastructure. Our products and services are the building blocks of our Oracle Cloud services, our partners’ cloud services and our customers’ cloud IT environments.

In addition to providing a broad spectrum of cloud offerings, we develop and sell our applications, platform and infrastructure products and services to our customers worldwide for use in cloud-based IT environments and other IT environments. An important element of our corporate strategy is to continue our investments in, and innovation with respect to, our products and services that we offer through our cloud and~~on-premise~~ software, hardware and services businesses. We have a deep understanding as to how applications, platform and infrastructure technologies interact and function with one another within IT environments. We focus our development efforts on improving the performance, security, operation and integration of these differing technologies to make them more cost-effective and easier to deploy, manage and maintain for our customers and to improve their computing performance relative to our competitors. After the initial purchase of Oracle products and services, our customers can continue to benefit from our research and development efforts and deep IT expertise by electing to purchase and renew Oracle support offerings for their software and hardware deployments, which may include unspecified product enhancements that we periodically deliver to our products, and by renewing their cloud SaaS, PaaS and IaaS contracts with us.

As customers deploy with the Oracle Cloud, many are adopting a hybrid IT model whereby certain of their IT instances are deployed using the Oracle Cloud, while other of their IT instances are deployed using Oracle~~on-premise~~ offerings, with both instances designed with capabilities to be managed as though they are a single instance. Our Oracle Cloud at Customer program provides another deployment option for customers to utilize the Oracle Cloud Machine and Oracle Database Exadata Cloud Machine to bring certain Oracle Cloud SaaS, PaaS and IaaS offerings to a customer’s~~on-premise~~ ~~IT environment to meet data sovereignty, data residency, data protection and regulatory business policy requirements, among others, while benefiting from the many advantages of a cloud service.~~

A selective and active acquisition program is another important element of our corporate strategy. We believe that our acquisitions enhance the products and services that we can offer to customers, expand our customer base, provide greater scale to accelerate innovation, grow our revenues and earnings, and increase stockholder value. In recent years, we have invested billions of dollars to acquire a number of companies, products, services and technologies that add to, are complementary to, or have otherwise enhanced our existing offerings. We expect to continue to acquire companies, products, services and technologies to further our corporate strategy.

~~In recent periods, customer demand has increased at a greater rate for cloud-based IT deployment models relative toon-premise~~ IT deployment models. To address this demand, we have increased our investments in and focus on the development, marketing and sale of our cloud-based applications, platform and infrastructure technologies resulting in higher growth of our cloud SaaS and cloud PaaS and IaaS revenues as customer preferences have pivoted to the Oracle Cloud for new deployments and as customers migrate to and expand with the Oracle Cloud for their existing~~on-premise~~ workloads. We expect these trends to continue. We believe that offering customers broad, comprehensive, flexible and interoperable deployment models for our applications, platform and infrastructure technologies is important to our growth strategy and better address customer needs relative to our competitors, many of whom provide fewer offerings and more restrictive deployment models. We enable our customers to evolve and transform to substantially any IT deployment model at whatever pace is most appropriate for them.

We have three businesses: cloud and~~on-premise~~ ~~software;~~ license; hardware; and services; each of which comprises a single operating segment. ~~Our chief operating decision makers (CODMs), which include our Chief Executive Officers~~The descriptions set forth below as a part of this Item 2 Management’s Discussion and ~~Chief Technology Officer, view the operating results~~Analysis of ~~our three businesses~~Financial Condition and ~~allocate resources in a manner that is consistent with the changing market dynamics that we have experienced in recent periods. As a result, during the fourth quarter~~Results of fiscal 2017, we updated our operating segments. The discussion and analysis of financial condition and results of operations presented below provides the current view that is utilized by our CODMs to evaluate performance and determine resource allocationsOperations and the ~~prior periods’ results presented below were recast to conform to the current periods’ presentation. In addition to the discussion below,~~information contained within Note 129 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report ~~provides~~provide additional information related to our businesses and operating segments ~~including~~and align to how our chief operating decision makers (CODMs), which include our Chief Executive Officer and Chief Technology Officer, view our operating results and allocate resources.

Impacts of the ~~recasting~~COVID-19 Pandemic on Oracle’s Business

For a discussion of the impacts on and risks to our ~~segments’ financial~~business from COVID-19, please refer to “Impacts of the COVID-19 Pandemic on Oracle’s Business” included in Item 1 Business and certain risk factors included in Item 1A Risk Factors in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021; and the information ~~from prior periods to conform to the current year’s presentation.~~presented below in Results of Operations as a part of this Item 2 of this Quarterly Report.

Cloud and~~On-Premise~~ ~~Software~~ License Business

Our cloud and~~on-premise~~ ~~software line of~~ license business, which represented ~~81%~~84% of our total revenues on a trailing4-quarter basis, markets, sells and delivers a broad spectrum of enterprise applications ~~platform~~ and infrastructure technologies through our cloud and~~on-premise~~ ~~software~~ license offerings. Revenue streams included in our cloud and license business are:

•

Cloud services and license support revenues, which include:

license support 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 generally priced as a percentage of the net fees paid by the customer to purchase a cloud license and/or on-premise license; are generally billed in advance of the support services being performed; are generally renewed at the customer’s option; and are generally recognized as revenues ratably over the contractual period that the support services are provided, which is generally one year; and

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cloud services revenues, which provide 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 Services arrangements are generally billed in advance of the cloud services being performed; generally have durations of one to three years; are generally renewed at the customer’s option; and are generally 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.

•

Cloud license and on-premise license revenues, which include revenues from the licensing of our software products including Oracle Applications, Oracle Database, Oracle Middleware and Java, among others, which our customers deploy within cloud-based, on-premise and other IT environments. Our cloud license and on-premise 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-premise licenses are recognized at the point in time when the software end user usage occurs. The timing of a few large license transactions can substantially affect our quarterly 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 and license support revenues in which revenues are generally recognized ratably over the contractual terms. Cloud license and on-premise license customers have the option to purchase and renew license support contracts, as further described above.

Providing choice and flexibility to our customers as to when and how they deploy Oracle ~~Cloud SaaS, PaaS and IaaS offerings deliver~~ applications ~~platform~~ and infrastructure technologies ~~via cloud-based deployment models that we host, manage~~are important elements of our corporate strategy. In recent periods, customer demand for our applications and ~~support and that customers access by entering into a subscription agreement with us for a stated period. Our IaaS offerings also include~~infrastructure technologies delivered through our Oracle ~~Managed~~ Cloud Services ~~which are designed~~has increased. To address customer demand and enable customer choice, we have introduced certain programs for customers to ~~provide comprehensive software~~pivot their applications and ~~hardware management, maintenance~~infrastructure licenses and ~~security services~~the related license support to the Oracle Cloud for~~on-premise,~~ ~~cloud-based, or hybrid IT infrastructure~~ new deployments and to migrate to and expand with the Oracle Cloud for ~~a stated period.~~their existing workloads. The ~~majority~~proportion of our ~~SaaS, PaaS~~cloud services and ~~IaaS arrangements have a duration of 12~~license support revenues relative to ~~36 months~~our cloud license and on-premise license revenues, hardware revenues and services revenues has increased and we ~~strive~~expect this trend to ~~renew these contracts when they are eligible for renewal.~~

~~We offer customers~~continue. Cloud services and license support revenues represented 76% and 74% of our total revenues in the ~~ability to license our software products including Oracle Applications, Oracle Database, Oracle Fusion Middleware~~first three months of fiscal 2022 and Java, among others, for cloud-based and other IT environments. Our new software license transactions are generally perpetual in nature and are generally recognized when unrestricted access to the software license is granted provided all other revenue recognition criteria are met. The timing of a few large software license transactions can substantially affect our quarterly new software licenses revenues, which is different than the typical revenue recognition pattern for our cloud-based offerings in which revenues are generally recognized ratably over the subscription period. New software license customers have the option to purchase software license updates and product support contracts, which grant rights to unspecified product upgrades and maintenance releases and patches released during the term of the support period, as well as technical support assistance. Our software license updates and product support contracts are generally one year in duration and are generally billed in advance of the service being performed and are generally recognized as revenues as the software support services are delivered.2021, respectively.

Our cloud ~~SaaS, cloud PaaS~~ and ~~IaaS revenues and new software licenses revenues are~~license business’ revenue growth is affected by many factors, including the strength of general economic and business ~~conditions,~~conditions; governmental budgetary ~~constraints,~~constraints; the strategy for and competitive position of our ~~offerings, our acquisitions, our ability to deliver and renew~~offerings; the continued renewal of our cloud services and license support customer contracts ~~with our existing~~by the customer contract base; substantially all customers and foreign currency rate fluctuations. In recent periods, we have placed significant strategic emphasis on growing our cloud SaaS and cloud PaaS and IaaS revenues, which represented 16% of our total consolidated revenues during each of the third quarter and first nine months of fiscal 2018, and 13% and 12% of our total consolidated revenues during the third quarter and first nine months of fiscal 2017, respectively. This emphasis has affected the growth of our new software licenses revenues and, to a lesser extent, has also affected the growth of our software license updates and product support revenues. We expect these trends will continue with the mix of this business’ revenues continuing to ~~shift toward cloud-based services.~~

~~Our software~~purchase license updates and product support revenues growth is primarily influenced by four factors: (1) the percentage of our software support contract customer base that renews its software support contracts and the percentage of customers that purchase software support contracts in connection with their ~~purchase of a new software license; (2)~~license purchases; the pricing of ~~new software~~license support contracts sold in connection with the ~~sale~~sales of ~~new software~~ licenses; ~~(3)~~ the pricing, ~~of new software licenses sold;~~amounts and ~~(4) the amount~~volumes of ~~software support contracts assumed from companies we have acquired. Substantially all of our customers purchase software license updates and product support contracts when they acquireon-premise~~ ~~new software~~ licenses and ~~renew their software license updates~~cloud services sold; our ability to manage Oracle Cloud capacity requirements to meet existing and ~~product support contracts when eligible in order to benefit from Oracle’s research~~prospective customer demand; and ~~development investments that are utilized as a part of unspecified periodic software updates that may be released and that customers with current software support contracts are entitled to.~~foreign currency rate fluctuations.

On a constant currency basis, we expect that our total cloud and~~on-premise~~ ~~software~~ license revenues generally will continue to increase due to:

~~expected growth in our cloud SaaS offerings and our cloud PaaS and IaaS offerings;~~
•
expected growth in our cloud services and license support offerings; and

•

continued demand for our cloud license and on-premise license offerings.

continued demand for our software products and related software support, including the high percentage of customers that purchase and renew their software license updates and product support contracts; and

~~contributions from our acquisitions.~~

We believe ~~all of~~ these factors should contribute to future growth in our cloud and~~on-premise~~ ~~software~~ license 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 ~~improve~~expand the geographic footprint of our cloud and~~on-premise~~ ~~software~~ license products and services.

Our cloud and~~on-premise~~ ~~software~~ license 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 ~~new software licenses~~cloud and license 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 license 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 license support contracts to the

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customer contract base that 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 license support contracts over the course of each fiscal year that we generally recognize as revenues in a similar manner; and the historical upward trend of our cloud license and on-premise license revenues, which we generally recognize at a point in time upon delivery; in each case over those four fiscal quarterly periods.

Hardware Business

Our hardware business, which represented ~~10%~~8% of our total revenues on a trailing4-quarter basis, provides a broad selection of enterprise hardware products and hardware-related software products including Oracle Engineered Systems, servers, storage, industry-specific hardware ~~virtualization software,~~offerings, operating systems, virtualization, management and ~~management~~other hardware-related software, ~~that~~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 ~~as revenues upon delivery~~at the point in time that the hardware product and its related software are delivered to the customer ~~provided all other revenue recognition criteria are met,~~ and ~~also include related hardware support.~~ownership is transferred to the customer. We expect 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 ~~such as Oracle Solaris~~ and ~~certain other~~associated software ~~products, and~~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.~~

delivered over the contractual terms.

We generally expect our hardware business to have lower operating margins as a percentage of revenues than our cloud and~~on-premise~~ ~~software~~ license business due to the incremental costs we incur to produce and distribute these products and to provide support services, including direct materials and labor costs.

Our quarterly hardware revenues are difficult to predict. Our hardware revenues, cost of hardware and hardware operating margins that we report are affected ~~by:~~by many factors, including our ~~ability~~manufacturing partners’ abilities to timely manufacture or deliver a few large hardware transactions; our strategy for and the ~~competitive~~ position of our hardware products relative to competitor offerings; customer demand for competing offerings, ~~such as PaaS and IaaS;~~including cloud infrastructure offerings; the strength of general economic and business conditions; governmental budgetary constraints; whether customers decide to purchase hardware support contracts at or in close proximity to the time of hardware product sale; the percentage of our hardware support contract customer base that renews its support contracts and the close association between hardware products, which have a finite life, and customer demand for related hardware support as hardware products age; customer decisions to either maintain or upgrade their existing hardware infrastructure to newly developed technologies that are available; ~~certain of our acquisitions;~~ and foreign currency rate ~~fluctuations.~~fluctuations.

Services Business

Our services business, which represented 8% of our total revenues on a trailing 4-quarter basis, helps customers and partners maximize the performance of their investments in Oracle applications ~~platform~~ and infrastructure technologies. We believe that our services are differentiated based on our focus on Oracle technologies, extensive experience, ~~and~~ broad sets of intellectual property and best practices. Our services offerings include consulting services and advanced ~~support services and education services and represented 9% of our total revenues on a trailing4-quarter~~ ~~basis.~~customer services. Our services business has lower margins than our cloud and~~on-premise~~ ~~software~~ license and hardware businesses. Our services revenues are ~~impacted~~affected by many factors including our strategy for, and the competitive position of, our services; customer demand for our cloud and~~on-premise~~ ~~software~~ license and hardware offerings and the associated services for these offerings; ~~our strategic emphasis on growing our cloud revenues; certain of our acquisitions;~~ general economic conditions; governmental budgetary constraints; personnel reductions in our customers’ IT departments; ~~and~~ tighter controls over customer discretionary ~~spending.~~spending; and foreign currency rate fluctuations.

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Acquisitions

Our selective and active acquisition program is another important element of our corporate strategy. ~~In recent years,~~Historically, we have invested billions of dollars to acquire a number of complementary companies, products, services and ~~technologies, including NetSuite Inc.~~technologies. The pace of our acquisitions has slowed in ~~the second quarter of fiscal 2017. We expect to continue to~~recent years, but as compelling opportunities become available, we may acquire companies, products, services and technologies in furtherance of our corporate strategy. Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report provides additional information related to our recent acquisitions.

We believe that we can fund our future acquisitions with our internally available cash, cash equivalents and marketable securities, cash generated from operations, additional borrowings or from the issuance of additional securities. We estimate the financial impact of any potential acquisition with regard to earnings, operating margin, cash ~~flow~~flows and return on invested capital targets before deciding to move forward with an acquisition.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) as set forth in the Financial Accounting Standards Board’s ~~(FASB)~~ Accounting Standards Codification (ASC), and we consider the various staff accounting bulletins and other applicable guidance issued by the ~~U.S. Securities and Exchange Commission (SEC).~~SEC. GAAP, as set forth within the ASC, requires us to make certain estimates, judgments and assumptions. 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. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent that there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include:

~~Revenue Recognition;~~
•
Revenue Recognition;

~~Business Combinations;~~
•
Business Combinations;

•

Goodwill and Intangible Assets—Impairment Assessments;

•

Accounting for Income Taxes; and

•

Legal and Other Contingencies.

~~Goodwill and Intangible Assets—Impairment Assessments;~~

~~Accounting for Income Taxes; and~~

~~Legal and Other Contingencies.~~

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed our critical accounting policies and related disclosures with the Finance and Audit Committee of the Board of Directors.

During the first ~~nine months~~quarter of fiscal ~~2018,~~2022, there were no significant changes to our critical accounting policies and estimates. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form10-K for our fiscal year ended May 31, ~~2017~~2021 provides a more complete discussion of our critical accounting policies and estimates.

Results of Operations

~~Impacts of the U.S. 2017 Tax Cuts and Jobs Act~~

The comparability of our operating results in the third quarter and first nine months of fiscal 2018 compared to the corresponding prior year periods was impacted by the U.S. 2017 Tax Cuts and Jobs Act (the Act), which was signed into law on December 22, 2017. Effective January 1, 2018, the Act reduces the U.S. federal corporate tax rate from 35% to 21%; creates a quasi-territorial tax system that a) generally allows, among other provisions, companies to repatriate certain foreign source earnings without incurring additional U.S. income tax for such earnings generated after December 31, 2017 and b) generally requires companies to pay a~~one-time~~ transition tax on certain foreign subsidiary earnings generated prior to December 31, 2017 that, in substantial part, were previously tax deferred; creates new taxes on certain foreign sourced earnings; limits deductibility of certain future compensation arrangements to certain highly compensated employees; and provides tax incentives for the exportation of U.S. products to foreign jurisdictions and for the purchase of qualifying capital equipment; among other provisions.

~~Because we have a May 31 fiscal year end, our fiscal 2018 blended U.S. federal statutory tax rate will be approximately 29%.~~

~~partially offset by:~~

~~a $744 million benefit related to the remeasurement of our net deferred tax liabilities based on the rates at which they are expected to reverse in the future; and~~

~~the net favorable impacts of the Act on our tax profile and effective tax rate beginning on January 1, 2018, which we generally expect will continue into future periods.~~

We expect the enactment of the Act to generally provide greater flexibility for us to access and utilize our cash, cash equivalent and marketable securities balances held by certain of our foreign subsidiaries as of January 1, 2018, as well as for prospective assets generated by these foreign subsidiaries’ future earnings and profits. We believe we have sufficient cash, cash equivalent and marketable securities balances, as well as access to other capital resources, if required, to settle the $7.6 billion~~one-time~~ ~~transition tax described above.~~

~~Impacts of Acquisitions~~

The comparability of our operating results in the third quarter and first nine months of fiscal 2018 compared to the same periods of fiscal 2017 was impacted by our recent acquisitions, including our acquisition of NetSuite Inc. during the second quarter of fiscal 2017. In our discussion of changes in our results of operations from the third quarter and first nine months of fiscal 2018 compared to the same periods of fiscal 2017, we may qualitatively disclose the impact of our acquired products and services (for the~~one-year~~ period subsequent to the acquisition date) to the growth in certain of our businesses’ revenues where such qualitative discussions would be meaningful for an understanding of the factors that influenced the changes in our results of operations. When material, we may also provide quantitative disclosures related to such acquired products and services. Expense contributions from our recent acquisitions for each of the respective period comparisons may not be separately identifiable due to the integration of these businesses into our existing operations, and/or were insignificant to our results of operations during the periods presented.

~~We caution readers that, whilepre-~~ and post-acquisition comparisons, as well as any quantified amounts themselves, may provide indications of general trends, any acquisition information that we provide has inherent limitations for the following reasons:

any qualitative and quantitative disclosures cannot specifically address or quantify the substantial effects attributable to changes in business strategies, including our sales force integration efforts. We believe that if our acquired companies had operated independently and sales forces had not been integrated, the relative mix of products and services sold would have been different; and

although substantially all of our software license customers, including customers from acquired companies, renew their software license updates and product support contracts when the contracts are eligible for renewal, and we strive to renew cloud SaaS, PaaS and IaaS contracts and hardware support contracts, the amounts shown as cloud and~~on-premise~~ software deferred revenues and hardware deferred revenues in our “Supplemental Disclosure Related to Certain Charges” (presented below) are not necessarily indicative of revenue improvements we will achieve upon contract renewals to the extent customers do not renew.

~~Seasonality~~

Our quarterly revenues have historically been affected by a variety of seasonal factors, including the structure of our sales force incentive compensation plans, which are common in the technology industry. In each fiscal year, our total revenues and operating margins are typically highest in our fourth fiscal quarter and lowest in our first fiscal quarter. The operating margins of our businesses, in particular, our cloud and~~on-premise~~ software business and hardware business, are generally affected by seasonal factors in a similar manner as our revenues as certain expenses within our cost structure are relatively fixed in the short term.

Presentation of Operating Segment Results and Other Financial Information

In our results of operations discussion below, we provide an overview of our total consolidated revenues, total consolidated operating expenses and total consolidated operating margin, all of which are presented on a GAAP basis. We also present a GAAP-based discussion below for substantially all of the other expense items as presented in our ~~condensed~~ consolidated ~~statement~~statements of operations that are not directly attributable to our three businesses.

In addition, we discuss below the results of each of our three businesses—cloud and~~on-premise~~ ~~software,~~ license, 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 ~~business~~of our three businesses in the discussion below.

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Consistent with our internal management reporting processes, the below operating segment presentation ~~includes~~is noted to include any revenues adjustments related to cloud ~~andon-premise~~ ~~software contracts~~services and ~~hardware~~license support contracts that would have otherwise been recorded by the acquired businesses as independent entities but were not recognized in our condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. Refer to “Supplemental Disclosure Related to Certain Charges” below for additional discussion of these items and Note 129 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a reconciliation of the summations of our total operating segment revenues as presented in the discussion below to total revenues as presented per our condensed consolidated statements of operations for all periods presented.

In addition, research and development expenses, general and administrative expenses, stock-based compensation expenses, amortization of intangible assets, certain other expense allocations, acquisition related and other expenses, restructuring expenses, interest expense,non-operating ~~income,~~ expenses, 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 impractical to do so. Refer to “Supplemental Disclosure Related to Certain Charges” below for additional discussion of certain of these items and Note 129 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a reconciliation of the summations of total segment margin as presented in the discussion below to total income before provision offor income taxes as presented per our condensed consolidated statements of operations for all periods presented.

We experienced COVID-19 related impacts to our businesses during each of the first quarter of fiscal 2022 and 2021. Certain of these historical impacts on our operating results are further discussed below. Any future impacts are currently unknown.

Constant Currency Presentation

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 disclosure. 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, ~~2017,~~2021, 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 ~~February 28, 2018~~August 31, 2021 and ~~2017,~~2020, our financial statements would reflect reported revenues of ~~$1.23~~$1.17 million in the first ~~nine months~~quarter of fiscal ~~2018~~2022 (using ~~1.23~~1.17 as themonth-end average exchange rate for the period) and ~~$1.06~~$1.18 million in the first ~~nine months~~quarter of fiscal ~~2017~~2021 (using ~~1.06~~1.18 as themonth-end average exchange rate for the period). The constant currency presentation, however, would translate the results for the ~~three~~first quarter of fiscal 2022 and ~~nine months ended February 28, 2018 and 2017~~2021 using the May 31, ~~2017~~2021 exchange rate and indicate, in this example, no change in revenues during the period. In each of the tables below, we present the percent change based on actual, unrounded results in reported currency and in constant currency.

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Total Revenues and Operating Expenses


	Three Months Ended February 28,								Nine Months Ended February 28,								Three Months Ended August 31,
			Percent Change								Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018		Actual		Constant		2017		2021		Actual	Constant	2020
*Total Revenues by Geography:*
Total Revenues by Geography:
Americas	$	5,339		2%		2%	$	5,219	$	15,817		6%		5%	$	14,971	$	5,321	5%	4%	$	5,068
EMEA⁽¹⁾		2,887		13%		2%		2,558		8,228		9%		3%		7,529		2,784	2%	-1%		2,738
Asia Pacific⁽²⁾		1,545		8%		3%		1,428		4,534		5%		3%		4,335

Asia Pacific																		1,623	4%	3%		1,561
Total revenues		9,771		6%		2%		9,205		28,579		6%		4%		26,835		9,728	4%	2%		9,367
*Total Operating Expenses*		6,361		2%		-1%		6,246		19,280		6%		4%		18,199		6,301	2%	1%		6,156

*Total Operating Margin*	$	3,410		15%		9%	$	2,959	$	9,299		8%		4%	$	8,636	$	3,427	7%	5%	$	3,211

*Total Operating Margin %*		35%						32%		32%						32%	35%				34%
*% Revenues by Geography:*
% Revenues by Geography:
Americas		55%						57%		55%						56%	55%				54%
EMEA		29%						27%		29%						28%	28%				29%
Asia Pacific		16%						16%		16%						16%	17%				17%
*Total Revenues by Business:*
Cloud andon-premise software	$	7,981		8%		4%	$	7,365	$	23,190		9%		6%	$	21,334
Total Revenues by Business:
Cloud and license																	$	8,184	4%	3%	$	7,833
Hardware		994		-3%		-7%		1,028		2,878		-5%		-7%		3,037		763	-6%	-7%		814
Services		796		-2%		-6%		812		2,511		2%		0%		2,464		781	8%	7%		720

Total revenues	$	9,771		6%		2%	$	9,205	$	28,579		6%		4%	$	26,835	$	9,728	4%	2%	$	9,367

*% Revenues by Business:*
Cloud andon-premise software		82%						80%		81%						80%
% Revenues by Business:
Cloud and license																	84%				83%
Hardware		10%						11%		10%						11%	8%				9%
Services		8%						9%		9%						9%	8%				8%

⁽¹⁾	Comprised of Europe, the Middle East and Africa

⁽²⁾	~~The Asia Pacific region includes Japan~~

~~Fiscal Third Quarter 2018 Compared to Fiscal Third Quarter 2017:~~Excluding the effects of ~~favorable~~ foreign currency rate ~~variations of 4 percentage points,~~fluctuations, our total revenues increased in the ~~third~~first quarter of fiscal ~~2018 primarily~~2022, relative to the first quarter of fiscal 2021, due to growth in our cloud and~~on-premise~~ ~~software~~ license business’ revenues and services business’ revenues, which were partially offset by ~~decreases~~a decline in our hardware ~~and services~~business’ revenues. The constant currency ~~increases~~increase in our cloud and~~on-premise~~ ~~software~~ license business’ revenues during the ~~third~~first quarter of fiscal ~~2018~~2022, relative to the first quarter of fiscal 2021, was primarily attributable to growth in our cloud ~~SaaS~~services and license support revenues as customers purchased our applications and infrastructure technologies via cloud ~~PaaS~~ and ~~IaaS revenues, growth~~license deployment models and renewed their related cloud contracts and license support contracts to continue to gain access to the latest versions of our technologies and to receive support services. The constant currency increase in our ~~software license updates and product support~~services business’ revenues ~~and revenue contributions from~~during the first quarter of fiscal 2022, relative to the first quarter of fiscal 2021, was attributable to an increase in revenues for all of our ~~recent acquisitions.~~primary services offerings. The constant currency decrease in our hardware business’ revenues during the ~~third~~first quarter of fiscal ~~2018~~2022, relative to the first quarter of fiscal 2021, was due to ~~reductions in our hardware products revenues and hardware support revenues as~~the emphasis we ~~continued to place emphasis~~placed on the ~~development,~~ marketing and sale of our growing cloud-based infrastructure ~~technologies. The constant currency decrease in~~technologies and the de-emphasis of our ~~services~~sales and marketing efforts for certain of our non-strategic hardware products and related support services. All three of our businesses’ revenues were adversely impacted during each of the ~~third~~first quarter of fiscal ~~2018 was attributable~~2022 and 2021 due to ~~declines in services revenues across all~~the effects of ~~our major services categories.~~the COVID-19 pandemic. While we expect these effects to be temporary, the impacts of COVID-19 for future periods are unknown. In constant currency, total revenues growth during the first quarter of fiscal 2022 in the Americas ~~EMEA~~ and Asia Pacific regions ~~contributed 52%, 28% and 20%, respectively, to the~~was partially offset by a slight decline in total revenues growth in ~~our third quarter~~the EMEA region.

Table of ~~fiscal 2018 total revenues.~~Contents

Excluding the effects of ~~unfavorable~~ foreign currency rate ~~variations of 3 percentage points,~~fluctuations, our total operating expenses ~~decreased~~increased during the ~~third~~first quarter of fiscal ~~2018~~2022, relative to the first quarter of fiscal 2021, primarily due to ~~lower hardware products costs~~higher cloud services and ~~a related decrease in sales and marketing costs, both of which aligned to lower hardware revenues; lower software~~ license ~~updates and product~~ support expenses, ~~related~~which increased primarily due to ~~a reduction~~higher infrastructure investments that were made to support the increase in ~~certain jurisdictional specific statutory obligation~~our cloud and license business’ revenues; higher services expenses, which increased primarily due to higher external contractor expenses; ~~lower~~and higher research and development expenses, which increased primarily ~~related~~due to ~~lower~~higher employee ~~expenses; and a decrease in restructuring~~related expenses. These constant currency expense ~~decreases~~increases were partially offset by ~~higher~~lower amortization of intangible assets and lower restructuring expenses during the ~~third~~first quarter of fiscal ~~2018 related~~2022. In addition, during the first quarter of fiscal 2022, we recorded a $125 million gain on an operating asset sale, which was allocated as a benefit to ~~higher cloud SaaS~~most of our operating expense lines as presented per our condensed consolidated statement of operations during this period. During each of the first quarter of fiscal 2022 and fiscal 2021, we curtailed a number of variable expenditures across all of our lines of businesses and functions including employee travel expenses and ~~cloud PaaS~~marketing expenses, among others, primarily in response to COVID-19. We expect certain of these expenses may normalize in future periods provided global economic and IaaS expenses resulting primarily from increased headcount and infrastructure expenses to support the increases in our cloud SaaS revenues and cloud PaaS and IaaS revenues; and higher general and administrative expenses that were primarily related to higher professional fees that were legal related.health conditions improve.

In constant currency, our total operating margin and total operating margin as a percentage of total revenues increased ~~during~~in the ~~third~~first quarter of fiscal ~~2018 as our total revenues grew while our total expenses declined.~~

~~First Nine Months Fiscal 2018 Compared~~2022, relative to ~~First Nine Months Fiscal 2017:~~~~Excluding~~ the effects of foreign currency rate variations, our total revenues increased in the first nine months of fiscal 2018 due to similar reasons as those noted above for the increase in our total revenues for the third quarter of fiscal 2018.

~~Excluding the effects of foreign currency rate variations, our total operating expenses increased during the first nine months of fiscal 2018 primarily~~corresponding prior year period, due to higher cloud SaaS and cloud PaaS and IaaS expenses due to similar reasons as noted above; higher sales and marketing expenses; increased stock–based compensation expenses; increased restructuring expenses; and higher intangible asset amortization due to additional amortization from intangible assets that we acquired in connection with our acquisition of NetSuite and other recently acquired companies. These constant currency expense increases were partially offset by constant currency expense decreases during the first nine months of fiscal 2018 related to lower constant currency hardware expenses and lower constant currency software license updates and product support expenses, primarily due to similar reasons as noted above.

~~In constant currency, our total operating margin increased during the first nine months of fiscal 2018 due to the increase in our total~~ revenues and ~~operating margin as a percentage of total revenues remained flat.~~the aforementioned gain.

Supplemental Disclosure Related to Certain Charges

To supplement our condensed consolidated financial information, we believe that the following information is helpful to an overall understanding of our past financial performance and prospects for the future. ~~You should review the introduction under “Impact of Acquisitions” (above) for a discussion of the inherent limitations in comparingpre-~~ ~~and post-acquisition information.~~

Our operating results reported pursuant to GAAP included the following business combination accounting adjustments and expenses related to acquisitions and certain other expense and income items that affected our GAAP net ~~income (loss):~~income:

   Three Months Ended
February 28, Nine Months Ended
February 28,
(in millions)
       2018         2017         2018         2017
Cloud andon-premise software deferred revenues⁽¹⁾
   $ 5 $ 69 $ 39 $ 121
Hardware deferred revenues⁽¹⁾
   — — — 1
Acquired deferred sales commissions amortization⁽²⁾
   (3 ) (21 ) (20 ) (29 )
Amortization of intangible assets⁽³⁾
   394 397 1,205 1,010
Acquisition related and other⁽⁴⁾⁽⁶⁾
   3 30 32 84
Restructuring⁽⁵⁾
   91 161 506 346
Stock-based compensation, operating segments⁽⁶⁾
   123 126 382 306
Stock-based compensation, R&D and G&A⁽⁶⁾
   266 223 828 678
Income tax effects⁽⁷⁾
   (220 ) (336 ) (1,105 ) (823 )
Income tax reform⁽⁸⁾
   6,871 — 6,871 —


   $ 7,530 $ 649 $ 8,738 $ 1,694

	Three Months Ended August 31,
(in millions)	2021			2020
Cloud services and license support deferred revenues⁽¹⁾	$	—		$	1
Amortization of intangible assets⁽²⁾		303			345
Acquisition related and other⁽³⁾		21			19
Restructuring⁽⁴⁾		38			174
Stock-based compensation, operating segments⁽⁵⁾		152			116
Stock-based compensation, R&D and G&A⁽⁵⁾		393			312
Income tax effects⁽⁶⁾		(420	)		(336	)
	$	487		$	631

⁽¹⁾

In connection with our acquisitions, we have estimated the fair values of the cloud ~~SaaS~~services and ~~cloud PaaS and IaaS subscription and hardware obligations~~license support contracts assumed. Due to our application of business combination accounting rules, we did not recognize the cloud ~~SaaS~~services and ~~cloud PaaS and IaaS, and hardware~~license support revenue amounts as presented in the above table that would have otherwise been recorded by the acquired businesses as independent entities upon delivery of the contractual obligations. To the extent customers for which these contractual obligations pertain renew these contracts with us, we expect to recognize revenues for the full contracts’ values over the respective contracts’ renewal periods.

⁽²⁾⁽

Certain acquired companies capitalized sales commissions associated with subscription agreements and amortized these amounts over the related contractual terms. Business combination accounting rules generally require us to eliminate these acquired capitalized sales commissions balances as of the acquisition date and our post-combination GAAP sales and marketing expenses generally do not reflect the amortization of these acquired deferred sales commissions balances. This adjustment is intended to include, and thus reflect, the full amount of amortization related to such balances as though the acquired companies operated independently in the periods presented.²⁾

⁽³⁾
Represents the amortization of intangible assets, substantially all of which were acquired in connection with our acquisitions. As of ~~February 28, 2018,~~August 31, 2021, estimated future amortization related to intangible assets was as follows (in millions):

Remainder of fiscal 2018
   $ 387
Fiscal 2019
   1,411
Fiscal 2020
   1,210
Fiscal 2021
   1,023
Fiscal 2022
   918
Fiscal 2023
   567
Thereafter
   884


Total intangible assets, net
   $     6,400

Remainder of fiscal 2022	$	834
Fiscal 2023		716
Fiscal 2024		473
Fiscal 2025		124
Fiscal 2026		24
Fiscal 2027		6
Thereafter		4
Total intangible assets, net	$	2,181

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⁽⁴⁾⁽³⁾

Acquisition related and other expenses primarily consist of personnel related costs ~~and stock-based compensation expenses~~ for transitional and certain other employees, ~~integration related professional services,~~ certain business combination adjustments including certain adjustments after the measurement period has ended and certain other operating items, net.

⁽⁵⁾⁽⁴⁾

Restructuring expenses during the first ~~nine months~~quarter of fiscal ~~2018 and fiscal 2017~~2022 primarily related to employee severance in connection with our Fiscal ~~2017~~2022 Oracle Restructuring Plan ~~(2017~~(2022 Restructuring Plan). Restructuring expenses during the first quarter of fiscal 2021 primarily related to employee severance in connection with our Fiscal 2019 Oracle Restructuring Plan (2019 Restructuring Plan). Additional information regarding certain of our restructuring plans is provided in ~~the~~management’s discussion below under “Restructuring ~~Expenses”,~~Expenses,” in Note 75 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report, and in Note 98 of Notes to Consolidated Financial Statements included in our Annual Report on Form10-K for the fiscal year ended May 31, ~~2017.~~2021.

⁽⁶⁾⁽⁵⁾

Stock-based compensation was included in the following operating expense line items of our condensed consolidated statements of operations (in millions):

   Three Months Ended
February 28,    Nine Months Ended
February 28,
       2018            2017            2018            2017
Cloud SaaS
   $ 11    $ 6    $ 31    $ 17
Cloud PaaS and IaaS
   3    1    7    3
Software license updates and product support
   7    6    20    18
Hardware
   2    3    8    9
Services
   13    14    41    31
Sales and marketing
   87    96    275    228








Stock-based compensation, operating segments
   123    126    382    306








Research and development
   221    191    693    574
General and administrative
   45    32    135    104
Acquisition related and other
   —    22    1    33








Total stock-based compensation
   $ 389    $ 371    $ 1,211    $ 1,017

	Three Months Ended August 31,
	2021		2020
Cloud services and license support	$	40	$	30
Hardware		3		3
Services		14		12
Sales and marketing		95		71
Stock-based compensation, operating segments		152		116
Research and development		344		276
General and administrative		49		36
Total stock-based compensation	$	545	$	428

Stock-based compensation included in acquisition related and other expenses resulted from unvested stock options and restricted stock-based awards assumed from acquisitions whose vesting was accelerated generally upon termination of the employees pursuant to the terms of those stock options and restricted stock-based awards.⁽⁶⁾

⁽⁷⁾

For the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2018,~~2022 and 2021, respectively, the applicable jurisdictional tax rates applied to our income before provision for income taxes after ~~adjusting for~~excluding the tax effects of items within the table above such as for stock-based compensation, amortization of intangible assets, restructuring, and certain other acquisition related items, and for the first quarter of fiscal 2022, after excluding the net deferred tax effects associated with a previously recorded income tax ~~reform (see footnote (8) below),~~benefit that resulted from a partial realignment of our legal entity structure, resulted in effective tax rates of ~~16.1%~~18.0% and ~~21.9%~~19.1%, respectively, instead of ~~222.0%~~8.4% and ~~95.2%~~13.3%, respectively, which represented our effective tax rates as derived per our condensed consolidated statements of operations, primarily due to the exclusion of stock-based compensation expense and acquisition related items, including the tax effects of amortization of intangible assets. The income tax effects presented for the third quarter and first nine months of fiscal 2017 were calculated reflecting effective tax rates of 21.6% and 24.1%, respectively, instead of 17.0% and 21.3%, respectively, which represented our effective tax rates as derived per our condensed consolidated statements of operations, primarily due to the net tax effects of acquisition related items, including the tax effects of amortization of intangible assets, and the net tax effects of stock-based compensation.operations.

⁽⁸⁾

The income tax reform adjustments for the fiscal 2018 periods presented in the table above were due to the our enactment of the Act (refer to “Impacts of the U.S. 2017 Tax Cuts and Jobs Act” above for additional discussion), which increased our GAAP provision for income taxes during these fiscal 2018 periods.

Cloud and~~On-Premise~~ ~~Software~~ License Business

Our cloud and~~on-premise~~ ~~software~~ license business engages in the sale ~~marketing~~ and ~~delivery~~marketing of our applications and infrastructure technologies that are delivered through various deployment models and include: Oracle license support offerings; Oracle cloud ~~SaaS~~services offerings; and Oracle cloud ~~PaaS~~license and ~~IaaS offerings~~on-premise license offerings. License support revenues are typically generated through the sale of license support contracts related to cloud licenses and ~~the licensing of~~on-premise licenses; are purchased by our ~~software for cloud-based~~customers at their option; and ~~other IT environments with the option to purchase software license updates and product support contracts. Our cloud SaaS and cloud PaaS~~

~~and IaaS offerings~~ are ~~generally subscription based and~~ generally recognized as revenues ratably over the contractual term, which is generally one year. Our cloud services deliver applications and infrastructure technologies on a subscription ~~period. New software licenses~~basis via cloud-based deployment models that we develop, provide unspecified updates and enhancements for, deploy, host, manage and support. Revenues for our cloud services are generally recognized over the contractual term, which is generally one to three years, or in the case of usage model contracts, as the cloud services are consumed. Cloud license and on-premise license revenues represent fees earned from granting customers licenses, generally on a perpetual basis, to use our database and middleware and our applications software products within cloud and ~~other~~on-premise IT environments and are generally recognized up front at the point in time when ~~unrestricted access~~the software is made available to the ~~software license is granted provided all other revenue recognition criteria are met. Software license updates~~customer to download and product support revenues are typically generated through the sale of software support contracts related to new software licenses purchased by our customers at their option and are generally recognized as revenues ratably over the contractual term.use. 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 offerings through indirect channels. Costs associated with our cloud and~~on-premise~~ ~~software~~ license business are included in cloud ~~SaaS, PaaS~~services and ~~IaaS expenses, software~~ license ~~updates and product~~ support expenses, and sales and marketing expenses. These costs are largely personnel and infrastructure related including the cost of providing our cloud ~~SaaS, PaaS,~~services and ~~IaaS offerings and software~~license support offerings, salaries and commissions earned by our sales force for the sale of our cloud and ~~software~~license offerings, and marketing program costs.

Three Months Ended February 28, Nine Months Ended February 28,
Percent Change Percent Change
(Dollars in millions)
2018 Actual Constant 2017 2018 Actual Constant 2017
Cloud andOn-Premise Software Revenues:

Americas⁽¹⁾
$ 4,487 3% 3% $ 4,349 $ 13,181 7% 7% $ 12,277
EMEA⁽¹⁾
2,312 15% 4% 2,019 6,592 11% 4% 5,931
Asia Pacific⁽¹⁾
1,187 11% 6% 1,066 3,456 6% 5% 3,247

Total revenues⁽¹⁾
7,986 7% 3% 7,434 23,229 8% 6% 21,455
Expenses:

Cloud SaaS, PaaS and IaaS⁽²⁾
649 32% 29% 491 1,844 37% 35% 1,349
Software license updates and product support⁽²⁾
206 -18% -21% 253 686 -6% -8% 733
Sales and marketing⁽²⁾
1,736 3% -1% 1,680 5,196 6% 3% 4,909

Total expenses⁽²⁾
2,591 7% 3% 2,424 7,726 10% 8% 6,991

Total Margin
$ 5,395 8% 4% $ 5,010 $ 15,503 7% 5% $ 14,464

Total Margin %
68% 67% 67% 67%
% Revenues by Geography:

Americas
56% 59% 57% 57%
EMEA
29% 27% 28% 28%
Asia Pacific
15% 14% 15% 15%
Revenues by Offerings:

Cloud software as a service⁽¹⁾
$ 1,155 24% 21% $ 934 $ 3,373 42% 41% $ 2,367
Cloud platform as a service and infrastructure as a service⁽¹⁾
416 28% 24% 324 1,218 26% 24% 964
New software licenses
1,388 -2% -6% 1,414 3,706 -2% -5% 3,792
Software license updates and product support⁽¹⁾
5,027 6% 1% 4,762 14,932 4% 2% 14,332

Total cloud andon-premise software revenues⁽¹⁾
$ 7,986 7% 3% $ 7,434 $ 23,229 8% 6% $ 21,455

% Revenues by Offerings:

Cloud software as a service⁽¹⁾
15% 13% 15% 11%
Cloud platform as a service and infrastructure as a service⁽¹⁾
5% 4% 5% 4%
New software licenses
17% 19% 16% 18%
Software license updates and product support⁽¹⁾
63% 64% 64% 67%

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	Three Months Ended August 31,
			Percent Change
(Dollars in millions)	2021		Actual	Constant	2020
Cloud and License Revenues:
Americas⁽¹⁾	$	4,582	6%	5%	$	4,321
EMEA		2,297	0%	-3%		2,293
Asia Pacific		1,305	7%	6%		1,220
Total revenues⁽¹⁾		8,184	4%	3%		7,834
Expenses:
Cloud services and license support⁽²⁾		1,153	20%	19%		958
Sales and marketing⁽²⁾		1,626	0%	-2%		1,633
Total expenses⁽²⁾		2,779	7%	6%		2,591
Total Margin	$	5,405	3%	2%	$	5,243
Total Margin %	66%				67%
% Revenues by Geography:
Americas	56%				55%
EMEA	28%				29%
Asia Pacific	16%				16%
Revenues by Offerings:
Cloud services and license support⁽¹⁾	$	7,371	6%	5%	$	6,948
Cloud license and on-premise license		813	-8%	-9%		886
Total revenues⁽¹⁾	$	8,184	4%	3%	$	7,834
Cloud Services and License Support Revenues by Ecosystem:
Applications cloud services and license support⁽¹⁾	$	3,041	8%	7%	$	2,817
Infrastructure cloud services and license support⁽¹⁾		4,330	5%	3%		4,131
Total cloud services and license support revenues⁽¹⁾	$	7,371	6%	5%	$	6,948

⁽¹⁾

Includes cloud services and~~on-premise~~ ~~software~~ license support revenue adjustments related to certain cloud services and ~~software~~license support contracts that would have otherwise been recorded as revenues by the acquired businesses as independent entities but were not recognized in our GAAP-based condensed consolidated statements of operations for the periods presented due to business combination accounting requirements. Such revenue adjustments were included in our operating segment results for purposes of reporting to and review by our CODMs. See “Presentation of Operating Segment Results and Other Financial Information” above for additional information.

⁽²⁾

Excludes stock-based compensation and certain expense allocations. Also excludes amortization of intangible assets and certain other GAAP-based expenses, which were not allocated to our operating segment results for purposes of reporting to and review by our CODMs, as further described under “Presentation of Operating Segment Results and Other Financial Information” above.

Excluding the effects of foreign currency rate fluctuations, ~~total revenues from~~ our cloud and~~on-premise~~ ~~software business~~ license business’ total revenues increased in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2018,~~2022, relative to the ~~corresponding prior~~

~~year periods,~~first quarter of fiscal 2021, primarily due to growth in our cloud ~~SaaS~~services and license support revenues as customers purchased our applications and infrastructure technologies via cloud ~~PaaS~~ and ~~IaaS revenues, growth~~license deployment models and renewed their related cloud contracts and license support contracts to continue to gain access to the latest versions of our technologies and to receive support for which we delivered such cloud and support services during the periods presented. This increase in our ~~software~~first quarter of fiscal 2022 cloud and license ~~updates and product support~~business’ revenues ~~and revenue contributions from our recent acquisitions. The increases~~was partially offset by a decline in ~~our constant currency cloud SaaS and cloud PaaS and IaaS~~EMEA license revenues during the fiscal ~~2018 periods presented were primarily~~2022 period due to an exceptionally strong license result during the corresponding prior year period. The growth in our cloud and license business’ revenues was adversely impacted during each of the first quarter of fiscal 2022 and fiscal 2021 due to the ~~continued strategic emphasis we placed on selling, marketing~~COVID-19 pandemic, and ~~growing our cloud offerings and we expect these revenue trends will continue. The increases in~~the impacts of COVID-19 for future periods are unknown. In constant currency, ~~software license updates~~total revenue growth in the Americas and ~~product support revenues during the fiscal 2018 periods presented were~~Asia Pacific regions was partially offset by a ~~result of substantially all customers electing to purchase software support contracts~~decline in ~~conjunction with their purchase of new software licenses, and due to the renewal of substantially all of the software support customer base eligible for renewal during the trailing4-quarter~~ ~~period. The Americas region contributed 48% and 68%, respectively,~~total revenue growth in the EMEA region ~~contributed 28% and 21%, respectively, and the Asia Pacific region contributed 24% and 11%, respectively, of the constant currency revenues growth~~ for this business during the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2018, respectively.~~2022.

In constant currency, our total cloud and~~on-premise~~ ~~software~~ license business’ expenses increased in the first quarter of fiscal ~~2018 periods presented~~2022, relative to the corresponding prior year ~~periods primarily~~period, due to higher cloud ~~SaaS, PaaS~~services and ~~IaaS~~license support expenses ~~resulting~~during the first quarter of fiscal 2022, which were primarily ~~from increased headcount and~~attributable to higher technology infrastructure expenses ~~that were incurred~~and higher employee related expenses to support the ~~related~~increase in our cloud ~~SaaS~~ and ~~cloud PaaS and IaaS revenues increases; and higher sales and marketing expenses primarily resulting from increased headcount.~~license business’ revenues. These constant currency expense increases were partially offset by ~~a decrease in software~~lower sales and marketing expenses, which decreased primarily due to an allocation of the gain from the operating asset sale described above, partially offset by higher employee related expenses and higher marketing expenses. Our cloud services and license ~~updates and product~~ support expenses have

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grown in recent periods and we expect this growth to accelerate during ~~the~~ fiscal ~~2018 periods presented, which were primarily related~~2022 as we increase our existing data center capacity and establish data centers in new geographic locations in order to ~~a reduction in certain jurisdictional specific statutory obligation expenses.~~meet current and expected customer demand.

Excluding the effects of currency rate fluctuations, our cloud and~~on-premise~~ ~~software segment’s~~ license business’ total margin increased during the first quarter of fiscal ~~2018 periods presented~~2022 relative to the ~~corresponding prior year periods primarily~~first quarter of fiscal 2021 due to the ~~increases~~increase in ~~revenues during the fiscal 2018 periods presented. In constant currency,~~ total revenues. Total margin as a percentage of revenues ~~increased in~~for this segment decreased marginally during the ~~third~~first quarter of fiscal ~~2018 primarily~~2022 in comparison to the prior year period due to ~~the increase in revenues, and was flat in the first nine months of fiscal 2018.~~

expenses growth.

Hardware Business

Our hardware ~~business~~business’ revenues are generated from the sales of our Oracle Engineered Systems, ~~computer~~ server, storage, and industry-specific hardware ~~products~~offerings. The hardware product and related software, such as an operating system or firmware, are highly interdependent and interrelated and are accounted for ~~IT environments that~~as a combined performance obligation. The revenues for this combined performance obligation are generally recognized ~~as revenues upon delivery~~at the point in time that the hardware product is delivered to the customer ~~provided all other revenue recognition criteria are met.~~and ownership is transferred to the customer. Our hardware business also earns revenues from the sale of hardware support contracts purchased by our customers at their option and that are generally recognized as revenues ratably as the hardware support services are delivered over the contractual ~~term.~~term, which is generally one year. The majority of our hardware products are sold through indirect channels such as independent distributors and value-added resellers and we also market and sell our hardware products through our direct sales force. Operating expenses associated with our hardware business include the cost of hardware products, which consists of expenses for materials and labor used to produce these products by our internal manufacturing operations or by third-party manufacturers, warranty and related expenses and the impact of periodic changes in inventory valuation, including the impact of inventory determined to be excess and obsolete; the cost of materials used to repair customer products; the cost of labor and infrastructure to provide support services; and sales and marketing expenses, which are largely personnel related and include variable compensation earned by our sales force for the sales of our hardware offerings.


	Three Months Ended February 28,								Nine Months Ended February 28,								Three Months Ended August 31,
			Percent Change								Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018		Actual		Constant		2017		2021		Actual	Constant	2020
*Hardware Revenues:*
Americas⁽¹⁾	$	472		-8%		-8%	$	511	$	1,440		-7%		-7%	$	1,548
EMEA⁽¹⁾		324		8%		-1%		300		868		0%		-6%		869
Asia Pacific⁽¹⁾		198		-9%		-14%		217		570		-8%		-10%		621

Total revenues⁽¹⁾		994		-3%		-7%		1,028		2,878		-5%		-7%		3,038
*Expenses:*
Hardware products and support⁽²⁾		388		-10%		-14%		428		1,097		-8%		-10%		1,189
Sales and marketing⁽²⁾		153		-20%		-24%		195		479		-20%		-22%		597

Total expenses⁽²⁾		541		-13%		-17%		623		1,576		-12%		-14%		1,786

*Total Margin*	$	453		12%		7%	$	405	$	1,302		4%		2%	$	1,252

*Total Margin %*		46%						39%		45%						41%
*% Revenues by Geography:*
Hardware Revenues:
Americas		47%						50%		50%						51%	$	372	-9%	-10%	$	409
EMEA		33%						29%		30%						29%		232	5%	4%		220
Asia Pacific		20%						21%		20%						20%		159	-14%	-15%		185
Total revenues																		763	-6%	-7%		814
Expenses:
Hardware products and support⁽¹⁾																		238	0%	-2%		239
Sales and marketing⁽¹⁾																		89	-9%	-10%		98
Total expenses⁽¹⁾																		327	-3%	-4%		337
Total Margin																	$	436	-9%	-10%	$	477
Total Margin %																	57%				59%
% Revenues by Geography:
Americas																	49%				50%
EMEA																	30%				27%
Asia Pacific																	21%				23%

⁽¹⁾

Includes hardware revenue adjustments related to certain hardware contracts that would have otherwise been recorded as revenues by the acquired businesses as independent entities but were not recognized in our GAAP-based consolidated statements of operations for the periods presented due to business combination accounting requirements. Such revenue adjustments were included in our operating segment results for purposes of reporting to and review by our CODMs. See “Presentation of Operating Segment Results and Other Financial Information” above for additional information.

⁽²⁾

Excludes stock-based compensation and certain expense allocations. Also excludes amortization of intangible assets and certain other ~~GAAP-based~~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 ~~Segments~~Segment Results and Other Financial Information” above.

~~Excluding the effects~~33

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Our constant currency ~~rate fluctuations, total~~ hardware revenues ~~decreased~~declined in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2018,~~2022, relative to the ~~corresponding prior year periods,~~first quarter of fiscal 2021, primarily due to our continued emphasis on the ~~development,~~ marketing and sale of our growing cloud-based infrastructure technologies and the de-emphasis of our sales and marketing efforts for certain of our non-strategic hardware products and related support services, the net impact of which resulted in reduced sales volumes of certain of our hardware product lines and also impacted the volume of ~~customers that purchased~~ hardware support contracts sold in recent periods. Our hardware business’ revenues were also adversely impacted during each of the first quarter of fiscal 2022 and fiscal 2021 due to the impacts of the COVID-19 pandemic, and any such prospective impacts are unknown. Constant currency decreases in hardware revenue growth in the Americas and Asia Pacific regions were partially offset by a constant currency increase in hardware revenue growth in the EMEA region during the first quarter of fiscal ~~2018 periods.~~2022.

Excluding the effects of currency rate fluctuations, total hardware expenses decreased in the first quarter of fiscal ~~2018 periods presented, relative~~2022 compared to the first quarter of fiscal ~~2017 periods presented,~~2021 primarily due ~~primarily~~ to lower hardware ~~products~~product expenses, lower hardware support costs and lower ~~employee related expenses,~~sales and marketing costs, all of which aligned to lower hardware revenues.

In constant currency, our hardware business’ total margin and total margin as a percentage of revenues ~~for our hardware segment increased during~~decreased in the first quarter of fiscal ~~2018 periods presented, relative~~2022 compared to the ~~corresponding prior year periods, as expenses decreased at a rate faster than our~~first quarter of fiscal 2021 due to lower total revenues for this business.

Services Business

We offer services to customers and partners to help to maximize the performance of their investments in Oracle applications ~~platform~~ and infrastructure technologies. 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.


	Three Months Ended February 28,								Nine Months Ended February 28,									Three Months Ended August 31,
			Percent Change									Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018			Actual		Constant		2017		2021		Actual	Constant	2020
*Services Revenues:*
Services Revenues:
Americas	$	385		-10%		-10%	$	428	$	1,226			-3%		-4%	$	1,268	$	367	8%	7%	$	339
EMEA		250		5%		-6%		239		770			6%		-1%		729		255	13%	10%		225
Asia Pacific		161		11%		6%		145		515			10%		9%		467		159	2%	2%		156

Total revenues		796		-2%		-6%		812		2,511			2%		0%		2,464		781	8%	7%		720
*Total Expenses*⁽¹⁾		676		5%		0%		645		2,023			2%		0%		1,978		609	4%	2%		585

*Total Margin*	$	120		-28%		-30%	$	167	$	488			0%		-1%	$	486	$	172	28%	27%	$	135

*Total Margin %*		15%						21%		19%							20%	22%				19%
*% Revenues by Geography:*
% Revenues by Geography:
Americas		49%						53%		49%							51%	47%				47%
EMEA		31%						29%		30%							30%	33%				31%
Asia Pacific		20%						18%		21%	��						19%	20%				22%

⁽¹⁾

Excludes stock-based compensation and certain allocations. Also excludes 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 ~~Segments~~Segment Results and Other Financial Information” above.

~~Fiscal Third Quarter 2018 Compared to Fiscal Third Quarter 2017:~~Excluding the effects of currency rate fluctuations, our total services revenues ~~decreased during~~increased in the ~~third~~first quarter of fiscal ~~2018~~2022, relative to the first quarter of fiscal 2021, due to revenue ~~declines~~increases in each of our ~~consulting, advanced customer~~primary services ~~and education revenues. Constant currency decreases in our~~offerings. Our services business revenues inwere adversely affected during each of the ~~Americas and EMEA regions were partially offset by a constant currency services revenues increase in the Asia Pacific region.~~

~~Total services expenses were flat in constant currency in the third~~first quarter of fiscal ~~2018 relative~~2022 and fiscal 2021 by the impacts of COVID-19, including the impacts of consulting project delays due to customer resource constraints and in-person meeting restrictions imposed by certain jurisdictions. In constant currency, the Americas, EMEA and Asia Pacific regions contributed 48%, 47% and 5%, respectively, to the ~~corresponding prior year period.~~ constant currency revenues growth for this business in the first quarter of fiscal 2022.

In constant currency, total services expenses increased in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 primarily due to higher external contractor expenses.

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In constant currency, total margin and total margin as a percentage of total services revenues ~~decreased~~increased during the ~~third~~first quarter of fiscal ~~2018, primarily~~2022, relative to the first quarter of fiscal 2021, in each case due to ~~the decrease in~~higher total revenues for this business.

~~First Nine Months Fiscal 2018 Compared to First Nine Months Fiscal 2017:~~Excluding the effects of currency rate fluctuations, our total services revenues were flat in the first nine months of fiscal 2018. Constant currency increases in our services revenues primarily from our recent acquisitions were offset by decreases in other services revenues, primarily in the Americas and EMEA regions.

~~In constant currency, total services expenses were flat during the first nine months of fiscal 2018, while total margin and total margin as a percentage of revenues declined slightly.~~

Research and Development ~~Expenses:~~Expenses: Research and development expenses consist primarily of personnel related expenditures. We intend to continue to invest significantly in our research and development efforts because, in our judgment, they are essential to maintaining our competitive position.


	Three Months Ended February 28,								Nine Months Ended February 28,								Three Months Ended August 31,
			Percent Change								Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018		Actual		Constant		2017		2021		Actual	Constant	2020
Research and development⁽¹⁾	$	1,277		-4%		-6%	$	1,330	$	3,854		-3%		-4%	$	3,977	$	1,340	2%	1%	$	1,313
Stock-based compensation		221		16%		16%		191		693		21%		21%		574		344	25%	25%		276

Total expenses	$	1,498		-2%		-3%	$	1,521	$	4,547		0%		-1%	$	4,551	$	1,684	6%	5%	$	1,589

*% of Total Revenues*		15%						17%		16%						17%	18%				17%

⁽¹⁾	Excluding stock-based compensation

On a constant currency basis, total research and development expenses ~~decreased during~~increased in the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2018, each relative~~2022 compared to the ~~corresponding prior year periods,~~first quarter of fiscal 2021 primarily due to ~~lower fiscal 2018~~higher employee related expenses ~~related~~due to ~~lower~~increased headcount ~~resulting from the restructuring of certain of our research~~ and ~~development operations during the fiscal 2018 periods presented. These fiscal 2018 cost savings were~~higher stock-based compensation expenses, partially offset by ~~investments in~~an allocation of the ~~development of our cloud-based offerings and by higher stock-based compensation during~~gain from the ~~fiscal 2018 periods relative to the corresponding prior year periods.~~operating asset sale described above.

General and Administrative ~~Expenses:~~Expenses:General and administrative expenses primarily consist of personnel related expenditures for IT, finance, legal and human resources support functions.


	Three Months Ended February 28,								Nine Months Ended February 28,								Three Months Ended August 31,
			Percent Change								Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018		Actual		Constant		2017		2021		Actual	Constant	2020
General and administrative⁽¹⁾	$	295		41%		37%	$	209	$	847		12%		10%	$	755	$	249	-4%	-5%	$	259
Stock-based compensation		45		41%		41%		32		135		30%		30%		104		49	38%	38%		36

Total expenses	$	340		41%		37%	$	241	$	982		14%		13%	$	859	$	298	1%	0%	$	295

*% of Total Revenues*		4%						3%		3%						3%	3%				3%

⁽¹⁾	Excluding stock-based compensation

~~On a constant~~Excluding the effects of foreign currency ~~basis,~~rate fluctuations, total general and administrative expenses ~~increased~~were flat during the first quarter of fiscal ~~2018 periods presented relative~~2022 in comparison to the ~~corresponding prior year periods due primarily to higher professional services expenses that were primarily legal related, and~~first quarter of fiscal 2021 as higher stock-based ~~compensation.~~compensation expenses were offset by an allocation of the gain from an operating asset sale as described above.

Amortization of Intangible ~~Assets:~~Assets: Substantially all of our intangible assets were acquired through our business combinations. We amortize our intangible assets over, and monitor the appropriateness of, the estimated useful lives of these assets. We also periodically review these intangible assets for potential impairment based upon relevant facts and circumstances. Note 54 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report has additional information regarding our intangible assets and related amortization.


	Three Months Ended February 28,								Nine Months Ended February 28,								Three Months Ended August 31,
			Percent Change								Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018		Actual		Constant		2017		2021		Actual	Constant	2020
Developed technology	$	184		1%		1%	$	182	$	562		22%		22%	$	462	$	127	-19%	-19%	$	158
SaaS, PaaS and IaaS agreements and related relationships		149		45%		45%		103		450		79%		79%		251
Software support agreements and related relationships		31		0%		0%		31		93		-1%		-1%		94
Cloud services and license support agreements and related relationships																		155	-6%	-5%		164
Other		30		-63%		-63%		81		100		-51%		-51%		203		21	-6%	-6%		23

Total amortization of intangible assets	$	394		-1%		-1%	$	397	$	1,205		19%		19%	$	1,010	$	303	-12%	-12%	$	345

~~Fiscal Third Quarter 2018 Compared to Fiscal Third Quarter 2017:~~

Amortization of intangible assets decreased in the ~~third~~first quarter of fiscal ~~2018~~2022 due to a reduction in expenses associated with certain of our

intangible assets that became fully amortized, ~~during the trailing four quarter period. These decreases during the third quarter of fiscal 2018 were~~ partially offset by ~~additional amortization from intangible assets that we acquired since the beginning~~a smaller amount of ~~the third quarter of fiscal 2017.~~

~~First Nine Months Fiscal 2018 Compared to First Nine Months Fiscal 2017:~~ ~~Amortization of intangible assets increased during the first nine months of fiscal 2018 due to~~ additional amortization from intangible assets that we acquired in connection with our recent ~~acquisitions, primarily our acquisition~~acquisitions.

Table of ~~NetSuite.~~Contents

Acquisition Related and Other ~~Expenses:~~Expenses: Acquisition related and other expenses primarily consist of personnel related costs ~~and stock-based compensation~~ for transitional and certain other employees, ~~integration related professional services, and~~ certain business combination adjustments, including ~~certain~~ adjustments after the measurement period has ended, and certain other operating items, net. Stock-based compensation expenses included in acquisition related and other expenses resulted from unvested restricted stock-based awards and stock options assumed from acquisitions whereby vesting was accelerated generally upon termination of the employees pursuant to the original terms of those restricted stock-based awards and stock options.


	Three Months Ended February 28,										Nine Months Ended February 28,										Three Months Ended August 31,
				Percent Change										Percent Change									Percent Change
(Dollars in millions)	2018			Actual		Constant		2017			2018			Actual		Constant		2017			2021		Actual	Constant	2020
Transitional and other employee related costs	$	9			-42%		-43%	$	15		$	32			5%		2%	$	31		$	2	-6%	-6%	$	2
Stock-based compensation		—			-98%		-98%		22			1			-98%		-98%		33
Professional fees and other, net		(8	)		996%		876%		(2	)		(1	)		-105%		-105%		26
Business combination adjustments, net		2			125%		123%		(5	)		—			92%		94%		(6	)		3	182%	181%		1

Other, net																						16	-6%	-6%		16
Total acquisition related and other expenses	$	3			-89%		-90%	$	30		$	32			-63%		-63%	$	84		$	21	4%	4%	$	19

On a constant currency basis, acquisition related and other expenses ~~decreased in~~increased modestly during the first quarter of fiscal ~~2018 periods presented,~~2022, relative to the ~~corresponding prior year periods,~~first quarter of fiscal 2021, primarily due to ~~lower stock-based compensation expenses and were also offset by certain benefits we recorded to professional fees and other, net during the fiscal 2018 periods presented.~~higher business combination adjustments, net.

Restructuring ~~Expenses:~~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.~~strategies and/or other strategic initiatives. Restructuring expenses consist of employee severance costs ~~and may also include charges for duplicate facilities~~ and other contract termination costs to improve our cost structure prospectively. For additional information regarding our restructuring plans, see Note 75 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and Note 98 of Notes to Consolidated Financial Statements included in our Annual Report on Form10-K for the fiscal year ended May 31, ~~2017.~~2021.


	Three Months Ended February 28,								Nine Months Ended February 28,								Three Months Ended August 31,
			Percent Change								Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018		Actual		Constant		2017		2021		Actual	Constant	2020
Restructuring expenses	$	91		-43%		-46%	$	161	$	506		47%		41%	$	346	$	38	-78%	-78%	$	174

Restructuring expenses in the first quarter of fiscal ~~2018 and fiscal 2017 periods presented~~2022 primarily related to our ~~2017~~2022 Restructuring Plan. Restructuring expenses in the first quarter of fiscal 2021 primarily related to our 2019 Restructuring Plan, which is substantially complete. Our management approved, committed to and initiated the ~~2017~~2022 Restructuring Plan and the 2019 Restructuring Plan in order to restructure and further improve efficiencies in our operations. InWe may incur additional restructuring expenses in future periods due to the ~~first quarter~~initiation of ~~fiscal 2018, our management supplemented the 2017 Restructuring Plan to reflect additional actions that we expect to take. The total~~new restructuring plans or from changes in estimated ~~restructuring~~ costs associated with ~~the 2017 Restructuring Plan are up to $1.1 billion and will be recorded to the~~existing restructuring expense line item within our condensed consolidated statements of operations as they are incurred. The total estimated remaining restructuring costs associated with the 2017 Restructuring Plan were approximately $112 million as of February 28, 2018 and the majority of the remaining costs are expected to be incurred through the end of fiscal 2018. Our estimated costs are subject to change in future periods.plans.

The majority of the initiatives undertaken by our ~~2017~~2022 Restructuring Plan were effected to implement our continued ~~move toward~~emphasis in developing, marketing and selling our cloud-based offerings. These initiatives impacted

certain of our sales and marketing and research and development operations. ~~Cost~~Certain of the cost savings ~~that are expected to be~~ realized pursuant to our ~~2017~~2022 Restructuring Plan initiatives ~~are primarily expected to be~~were offset by investments in resources and geographies that ~~best~~better address the development, marketing, sale and ~~sale~~delivery of our ~~cloud-based~~cloud‑based offerings ~~as customer preferences pivot to the Oracle Cloud.~~including investments in our second‑generation cloud infrastructure.

Interest ~~Expense:~~Expense:


	Three Months Ended February 28,								Nine Months Ended February 28,								Three Months Ended August 31,
			Percent Change								Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018		Actual		Constant		2017		2021		Actual	Constant	2020
Interest expense	$	533		19%		18%	$	450	$	1,477		12%		12%	$	1,317	$	705	15%	15%	$	614

Interest expense increased induring the first quarter of fiscal ~~2018 periods presented~~2022, relative to the ~~corresponding prior year periods,~~first quarter of fiscal 2021, primarily due to higher average borrowings resulting from our issuance of ~~$10.0~~$15.0 billion of senior notes in ~~November 2017 (refer to Recent Financing Activities presented below for additional information), which was partially offset by a reduction in interest expense resulting from the maturity and repayment~~March 2021.

Table of ~~$3.5 billion of senior notes during the first nine months of fiscal 2018.~~Contents

Non-Operating ~~Income, net:~~ Expenses, net: Non-operating ~~income,~~ expenses, net consists primarily of interest income, net foreign currency exchange ~~gains (losses),~~losses, the noncontrolling interests in the net profits of our majority-owned subsidiaries (primarily Oracle Financial Services Software Limited and Oracle Corporation Japan) and net other income ~~(losses),~~and expenses, including net realized gains and losses related to all of our investments, ~~and~~ net unrealized gains and losses related to the small portion of our investment portfolio related to our deferred compensation plan, net unrealized gains and losses related to equity securities and non-service net periodic pension income and losses.

	Three Months Ended August 31,
				Percent Change
(Dollars in millions)	2021			Actual		Constant	2020
Interest income	$	20		-37%		-37%	$	31
Foreign currency losses, net		(35	)	-31%		-35%		(50	)
Noncontrolling interests in income		(47	)	25%		25%		(38	)
Other, net		21		-62%		-61%		55
Total non-operating expenses, net	$	(41	)		*	*	$	(2	)

^*	Not meaningful

Our non-operating expenses, net increased in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 primarily due to lower other income, net, which was primarily attributable to changes in market values associated with certain marketable equity securities that we ~~classify~~held for certain employee benefit plans and classified as ~~trading.~~

Three Months Ended February 28, Nine Months Ended February 28,
Percent Change Percent Change
(Dollars in millions)
2018 Actual Constant 2017 2018 Actual Constant 2017
Interest income
$ 313 59% 58% $ 197 $ 849 47% 47% $ 578
Foreign currency losses, net
(35 ) 76% 50% (20 ) (46 ) -55% -61% (102 )
Noncontrolling interests in income
(37 ) 85% 85% (20 ) (111 ) 16% 16% (95 )
Other income, net
182 467% 467% 32 237 320% 320% 56

Totalnon-operating income, net
$ 423 123% 126% $ 189 $ 929 113% 114% $ 437

~~On a constant currency basis,~~trading, and for which an equal and offsetting amount was recorded to our~~non-operating~~ ~~income, net increased~~ operating expenses in the same period; and due to higher losses associated with equity investments for which we follow the equity method of accounting; in each case during the first quarter of fiscal ~~2018 periods presented,~~2022 relative to the first quarter of fiscal 2017 periods presented, primarily due to an increase in other income, net related to higher net realized gains on the sale of certain marketable securities and higher interest income resulting from higher cash, cash equivalent and short-term investment balances and higher interest rates.2021.

Provision for Income ~~Taxes:~~Taxes: Our effective income tax rates for each of the periods presented were the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. In the third quarter of fiscal 2018, the Act was signed into law. The more significant provisions of the Act as applicable to us are described above under “Impacts of the U.S. 2017 Tax Cuts and Jobs Act”. Our provision for income taxes ~~for the fiscal 2018 periods presented~~ varied from the 21% U.S. statutory rate imposed by the Act due primarily to the January 1, 2018 effective date of the Act, the impacts of the Act upon adoption, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation, and the U.S. domestic production activity deduction. Prior to the January 1, 2018 effective date of the Act, our provision for income taxes historically differed from the tax computed at the ~~previous~~ U.S. federal statutory income tax rate for the periods presented primarily due ~~primarily~~ to ~~certain~~ earnings ~~considered as indefinitely reinvested~~ in foreign operations, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation, the Foreign Derived Intangible Income deduction and the ~~U.S. domestic production activity deduction.~~tax effect of Global Intangible Low-Taxed Income. Future effective tax rates could be adversely affected by an unfavorable shift of earnings weighted to jurisdictions with higher tax rates, by unfavorable changes in tax laws and regulations, by adverse rulings in tax related litigation, or by shortfalls in stock-based compensation realized by employees relative to stock-based compensation that was recorded for book purposes, among others.


	Three Months Ended February 28,								Nine Months Ended February 28,								Three Months Ended August 31,
			Percent Change								Percent Change								Percent Change
(Dollars in millions)	2018		Actual		Constant		2017		2018		Actual		Constant		2017		2021		Actual	Constant	2020
Provision for income taxes	$	7,324		1,495%		1,490%	$	459	$	8,333		404%		403%	$	1,653	$	224	-35%	-36%	$	344

*Effective tax rate*		222.0%						17.0%		95.2%						21.3%	8.4%				13.3%

Provision for income taxes ~~increased in~~decreased during the ~~third~~first quarter ~~and first nine months~~ of fiscal ~~2018,~~2022, relative to the ~~corresponding prior year periods,~~first quarter of fiscal 2021, primarily due to ~~the net unfavorable impacts due~~an increase in tax benefits related to ~~our initial accounting for the enactment of the Act on January 1, 2018 (refer to “Impacts of the U.S. 2017 Tax Cuts and Jobs Act” above for additional information) and, to a lesser extent,~~stock-based compensation partially offset by ~~the tax effect of~~ higher income before provision for income taxes (determined after taking into account the net favorable impact of the Act on our tax profile) during the fiscal 2018 periods presented; and changes in unrecognized tax benefits due to settlements with tax authorities and other events during fiscal 2017 not present in fiscal 2018. These unfavorable impacts to our provision for income taxes were partially offset by higher fiscal 2018 realized excess tax benefits related to stock-based compensation expense.taxes.

Liquidity and Capital Resources


(Dollars in millions)	February 28, 2018		Change		May 31, 2017		August 31, 2021		Change	May 31, 2021
Working capital	$	59,764		19%	$	50,337	$	24,046	-23%	$	31,403
Cash, cash equivalents and marketable securities	$	70,455		7%	$	66,078	$	39,310	-16%	$	46,554

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Working ~~capital:~~capital: The ~~increase~~decrease in working capital as of ~~February 28, 2018~~August 31, 2021 in comparison to May 31, ~~2017~~2021 was primarily due to the issuance of $10.0 billion of long-term senior notes in November 2017 (refer to Recent Financing Activities Below for additional information), the favorable impacts to our net current assets resulting from our operations during the first nine months of fiscal 2018 and proceeds from stock option exercises. These favorable working capital movements were partially offset by cash used for repurchases of our common stock, cash used to pay dividends to our stockholders and cash used for capital expenditures during the first ~~nine months~~quarter of fiscal ~~2018.~~2022. These unfavorable impacts were partially offset by the favorable impacts to our net current assets resulting from our net income during the first quarter of fiscal 2022 and cash proceeds from stock option exercises. Our working capital may be impacted by some or all of the aforementioned factors in future periods, the amounts and timing of which are variable.

Cash, cash equivalents and marketable ~~securities:~~securities: Cash and cash equivalents primarily consist of deposits held at major banks, money market funds, Tier-1 commercial paper and other securities with original maturities of 90 days or less. Marketable securities consist of~~Tier-1~~ ~~commercial paper debt securities,~~ corporate debt securities and certain other securities. The ~~increase~~decrease in cash, cash equivalents and marketable securities at ~~February 28, 2018~~August 31, 2021 in comparison to May 31, ~~2017~~2021 was primarily due to ~~the issuance of $10.0~~$8.0 billion of senior notes (refer to Recent Financing Activities Below for additional information), cash inflows generated by our operations and cash inflows from stock option exercises during the first nine months of fiscal 2018. These cash inflows were partially offset by certain cash outflows, primarily the repayment of $7.3 billion of borrowings,settled repurchases of our common stock, debt repayments, payments of cash dividends to our stockholders and cash used for capital expenditures.

~~As a result~~ These cash outflows during the first quarter of ~~the enactment of the Act on January 1, 2018, we expect greater flexibility in accessing and utilizing our cash, cash equivalent and marketable securities balances held~~fiscal 2022 were partially offset by certain ~~of our foreign subsidiaries, as well as prospective assets~~cash inflows generated by ~~these foreign subsidiaries’ future earnings~~our operations and ~~profits. We believe we have sufficient cash, cash equivalent and marketable securities balances and access to additional capital resources, if required, to settle~~from stock option exercises during the ~~$7.6 billionone-time~~ ~~transition tax described under “Impacts~~first quarter of ~~the U.S. 2017 Tax Cuts and Jobs Act” above.~~fiscal 2022.

The amount of cash, cash equivalents and marketable securities that we report in U.S. Dollars for a significant portion of the cash, cash equivalents and marketable securities balances held by our foreign subsidiaries is subject to translation adjustments caused by changes in foreign currency exchange rates as of the end of each respective reporting period (the offset to which is substantially recorded to accumulated other comprehensive loss in our condensed consolidated balance sheets and is also presented as a line item in our condensed consolidated statements of comprehensive income included elsewhere in this Quarterly Report). As the U.S. Dollar generally ~~weakened~~strengthened against certain major international currencies during the first ~~nine months~~quarter of

fiscal ~~2018,~~2022, the amount of cash, cash equivalents and marketable securities that we reported in U.S. Dollars for these subsidiaries ~~increased~~decreased on a net basis as of ~~February 28, 2018~~August 31, 2021 relative to what we would have reported using constant currency rates from the May 31, ~~2017~~2021 balance sheet date.

Days sales outstanding, which we calculate by dividing period end accounts receivable by average daily sales for the quarter, was 36 days at February 28, 2018 compared with 44 days at May 31, 2017. The days sales outstanding calculation excludes the impact of any revenue adjustments resulting from business combinations that reduced our acquired cloud,~~on-premise~~ ~~software and hardware obligations to fair value.~~

	Three Months Ended August 31,
(Dollars in millions)	2021			Change	2020
Net cash provided by operating activities	$	5,391		-9%	$	5,953
Net cash used for investing activities	$	(781	)	-92%	$	(9,655	)
Net cash used for financing activities	$	(11,468	)	77%	$	(6,493	)

   Nine Months Ended February 28,
(Dollars in millions)
   2018 Change    2017
Net cash provided by operating activities
   $   10,726 11%    $   9,660
Net cash used for investing activities
   $   (8,785 ) -44%    $   (15,648 )
Net cash (used for) provided by financing activities
   $   (4,523 ) 178%    $   5,799

Cash flows from operating ~~activities:~~activities: Our largest source of operating cash flows is cash collections from our customers following the purchase and renewal of their ~~software~~ license ~~updates and product~~ support agreements. Payments from customers for these license support agreements are generally received near the beginning of the contracts’ terms, which are generally one year in length. Over the course of a fiscal year, we also have historically generated cash from the sales of new ~~software~~ licenses, cloud ~~SaaS, PaaS and IaaS offerings,~~services, hardware offerings and other services. Our primary uses of cash from operating activities are for employee related expenditures, material and manufacturing costs related to the production of our hardware products, taxes, interest payments and leased facilities.

Net cash provided by operating activities ~~increased~~decreased during the first ~~nine months~~quarter of fiscal ~~2018~~2022 compared to the first quarter of fiscal 2021 primarily due to certain cash unfavorable working capital changes, net, partially offset by higher net income, ~~after adjusting for~~in each case in the~~one-time~~ ~~income tax accounting effects~~ first quarter of ~~our adoption~~fiscal 2022, relative to the first quarter of ~~the Act (refer to “Impacts of the U.S. 2017 Tax Cuts and Jobs Act” for additional discussion)~~fiscal 2021.

Cash flows from investing ~~activities:~~activities: The changes in cash flows from investing activities primarily relate to ~~our acquisitions,~~ the timing of our purchases, maturities and sales of our investments in marketable securities, and investments in capital and other assets, including certain intangible assets, to support our growth.

Net cash used for investing activities decreased induring the first ~~nine months~~quarter of fiscal ~~2018 relative~~2022 compared to the first ~~nine months~~quarter of fiscal ~~2017 due~~2021 primarily toresulting from a decrease in cash used for ~~acquisitions, net~~the purchases of marketable securities and other investments and an increase in cash ~~acquired,~~proceeds from sales and maturities of marketable securities and other investments, partially offset by an increase in ~~cash used~~capital expenditures, in each case during the first quarter of fiscal 2022 relative to ~~purchase marketable securities and other investments, net~~the first quarter of ~~proceeds received from sales and maturities.~~fiscal 2021.

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Cash flows from financing ~~activities:~~activities:The changes in cash flows from financing activities primarily relate to borrowings and repayments related to our debt instruments, ~~as well as~~ stock repurchases, dividend payments and net proceeds related to employee stock programs.

Net cash used for financing activities inincreased during the first ~~nine months~~quarter of fiscal ~~2018 was $4.5 billion~~2022 compared to the first quarter of fiscal 2021 primarily due to higher stock repurchases, higher payments of dividends, higher net cash used for our employee stock program and higher debt repayments, in each case during the first quarter of fiscal 2022 in comparison to ~~net cash provided by financing activities of $5.8 billion in~~ the first ~~nine months~~quarter of fiscal 2017. The decrease in financing activities cash flows during the first nine months of fiscal 2018 relative to the first nine months of fiscal 2017 was primarily due to debt related cash flows for which we had $2.6 billion of cash inflows from borrowings, net of repayments, in the first nine months of fiscal 2018 in comparison to $9.8 billion of cash inflows form borrowings, net of repayments, in the first nine months of fiscal 2017 and an increase in repurchases of common stock during the first nine months of fiscal 2018.

2021.

Free cash ~~flow:~~flow: To supplement our statements of cash flows presented on a GAAP basis, we usenon-GAAP measures of cash flows on a trailing4-quarter basis to analyze cash flows generated from our operations. We believe that free cash flow is also useful as one of the bases for comparing our performance with our competitors. The presentation ofnon-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our performance, or as an alternative to cash flows from operating activities as a measure of liquidity. We calculate free cash flow as follows:


	Trailing 4-Quarters Ended February 28,								Trailing 4-Quarters Ended August 31,
(Dollars in millions)	2018			Change		2017			2021			Change	2020
Net cash provided by operating activities	$	15,192			13%	$	13,453		$	15,325		17%	$	13,092
Capital expenditures		(1,883	)		12%		(1,676	)		(2,761	)	71%		(1,614	)

Free cash flow	$	13,309			13%	$	11,777		$	12,564		9%	$	11,478

Net income	$	3,650				$	8,917		$	13,952			$	10,249

Free cash flow as percent of net income		365%					132%		90%				112%

~~Long-Term Customer Financing:~~ We offer certain of our customers the option to acquire our software products, hardware products and services offerings through separate long-term payment contracts. We generally sell these contracts that we have financed for our customers on a~~non-recourse~~ basis to financial institutions within 90 days of the contracts’ dates of execution. We generally record the transfers of amounts due from customers to financial institutions as sales of financing receivables because we are considered to have surrendered control of these financing receivables. We financed $673 million and $509 million, respectively, or approximately 18% and 13%, respectively, of our new software licenses revenues in the first nine months of fiscal 2018 and fiscal 2017.

~~Recent Financing Activities:~~

~~Common Stock Repurchase Program~~Contractual Obligations: ~~Our Board of Directors has approved a program for us to repurchase shares of our common stock.~~ During the first ~~nine months~~quarter of fiscal 2018, our Board of Directors approved expansions of our stock repurchase program totaling $24.0 billion. As of February 28, 2018, approximately $22.8 billion remained available for stock repurchases pursuant to our stock repurchase program. Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchases of our debt, our stock price, and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule~~10b5-1~~ ~~plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.~~

~~Senior Notes: In November 2017, we issued $10.0 billion of senior notes comprised of the following:~~

~~$1.25 billion of 2.625% senior notes due February 2023;~~

~~$2.00 billion of 2.95% senior notes due November 2024;~~

~~$2.75 billion of 3.25% senior notes due November 2027;~~

~~$1.75 billion of 3.80% senior notes due November 2037; and~~

~~$2.25 billion of 4.00% senior notes due November 2047.~~

We issued the senior notes for general corporate purposes, which may include stock repurchases, payment of cash dividends on our common stock, repayment of indebtedness and future acquisitions. Additionally, during the first nine months of fiscal 2018, we repaid $3.5 billion of senior notes pursuant to their terms. Additional details regarding the senior notes are included in Note 6 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report and Note 8 of Notes to Condensed Consolidated Financial Statements included in our Annual Report on Form~~10-K~~ ~~for the fiscal year ended May 31, 2017. There have been no other significant changes in our notes payable or other borrowing arrangements that were disclosed in our Annual Report on Form10-K~~ ~~for the fiscal year ended May 31, 2017.~~

~~Contractual Obligations:~~ ~~During the first nine months of fiscal 2018,~~2022, there were no significant changes to our estimates of future payments under our fixed contractual obligations and commitments as presented in Part II, Item 7.7 Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form10-K for our fiscal year ended May 31, ~~2017.~~2021.

We believe that our current cash, cash equivalents and marketable securities and cash generated from operations will be sufficient to meet our working capital, capital expenditures and contractual obligation ~~requirements, including the $7.6 billionone-time~~ ~~transition tax described under “Impacts of the U.S. 2017 Tax Cuts and Jobs Act” above.~~requirements. In addition, we believe that we could fund our future acquisitions, dividend payments and repurchases of common stock or debt with our internally available cash, cash equivalents and marketable securities, cash generated from operations, additional borrowings or from the issuance of additional securities.

~~Off-Balance~~ ~~Sheet Arrangements:~~ ~~We do not have anyoff-balance~~ sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Restricted Stock-Based Awards and Stock Options

Our stock-based compensation program is a key component of the compensation package we provide to attract and retain certain of our talented employees and align their interests with the interests of existing stockholders.

We recognize that restricted stock-based awards and stock options dilute existing stockholders and have sought to control the number of stock-based awards granted while providing competitive compensation packages. Consistent with these dual goals, our cumulative potential dilution since June 1, ~~2014~~2018 has been a weighted-average annualized rate of ~~1.2%~~1.0% per year. The potential dilution percentage is calculated as the average annualized new restricted stock-based awards orand stock options granted and assumed, net of restricted stock-based awards and stock options forfeited by employees leaving the company, divided by the weighted-average outstanding shares during the calculation period. This maximum potential dilution will only result if all restricted stock-based awards vest and all stock options are exercised. Of the outstanding stock options at ~~February 28, 2018,~~August 31, 2021, which generally have aten-year exercise period, ~~16.6%~~all have exercise prices ~~higher~~lower than the market price of our common stock on such date. In recent years, our stock repurchase program has more than offset the dilutive effect of our stock-based compensation program. However, we may modify the levels of our stock repurchases in the future depending on a number of factors, including the amount of cash we have available for acquisitions, to pay dividends, to repay or repurchase indebtedness or for other purposes. At ~~February 28, 2018,~~August 31, 2021, the maximum potential dilution from all outstanding restricted stock-based awards and unexercised stock options, regardless of when granted and regardless of whether vested or unvested, ~~and including stock options where the strike price is higher than the market price as~~was 8.3%.

Table of ~~such date, was 9.8%.~~Contents

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements, if any, and the impact of these pronouncements on our consolidated financial statements, if any, see Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~

There were no significant changes to our quantitative and qualitative disclosures about market risk during the first ~~nine months~~quarter of fiscal ~~2018.~~2022. Please refer to Part II, Item ~~7A.~~7A Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form10-K for our fiscal year ended May 31, ~~2017~~2021 for a more complete discussion of the market risks we encounter.

Item 4.

Controls and Procedures

~~Item 4. Controls and Procedures~~

Evaluation of Disclosure Controls and Procedures: Based on our management’s evaluation (with the participation of our Principal Executive ~~Officers, one of whom is our Principal~~and Financial Officer), as of the end

of the period covered by this Quarterly Report, our Principal Executive ~~Officers have~~and Financial Officer has concluded that our “disclosure controls and procedures” (as defined in Rules13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) were effective to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management (including our Principal Executive ~~Officers)~~and Financial Officer) as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting: There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls: Our management, including our Principal Executive ~~Officers (one of whom is our Principal~~and Financial ~~Officer),~~Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Table of Contents

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

~~Item 1. Legal Proceedings~~

The material set forth in Note 118 (pertaining to information regarding contingencies related to our income taxes) and Note 1411 (pertaining to information regarding legal contingencies) of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form10-Q is incorporated herein by reference.

Item 1A.

Risk Factors

~~Item 1A. Risk Factors~~

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item ~~1A. “Risk Factors”~~1A Risk Factors in our Annual Report on Form10-K for our fiscal year ended May 31, ~~2017.~~2021. The risks discussed in our Annual Report on Form10-K could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form10-K are not the only risks facing us. 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.

Item 2.

Unregistered

Sales of Equity Securities and Use of Proceeds

Our Board of Directors has approved a program for us to repurchase shares of our common stock. ~~On December 14, 2017 and February 2, 2018, we announced that our Board of Directors approved expansions of our stock repurchase program totaling $24.0 billion.~~ As of ~~February 28, 2018,~~August 31, 2021, approximately ~~$22.8~~$7.6 billion remained available for stock repurchases pursuant to our stock repurchase program.

Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchases of our debt, our stock price, and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to aRule 10b5-1 plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

The following table summarizes the stock repurchase activity for the three months ended ~~February 28, 2018~~August 31, 2021 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program:

(in millions, except per share amounts)
Total Number
of Shares
Purchased Average
Price Paid
per Share Total Number of
Shares Purchased
as Part of Publicly
Announced
Program Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Program
December 1, 2017—December 31, 2017
16.5 $ 48.43 16.5 $ 14,047.2
January 1, 2018—January 31, 2018
44.0 $ 50.00 44.0 $ 11,848.4
February 1, 2018—February 28, 2018
20.1 $ 49.68 20.1 $ 22,848.4

Total
80.6 $ 49.60 80.6

(in millions, except per share amounts)	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
June 1, 2021—June 30, 2021		30.8	$	81.19		30.8	$	13,148.4
July 1, 2021—July 31, 2021		52.0	$	86.49		52.0	$	8,648.4
August 1, 2021—August 31, 2021		11.2	$	89.50		11.2	$	7,648.4
Total		94.0	$	85.11		94.0

Table of Contents

~~Item 6. Exhibits~~
Item 6.
Exhibits

Exhibit

No.

~~Exhibit Description~~

Incorporated by Reference

Exhibit Description

~~Form~~

Form

File No.

Exhibit

Filing Date

Filed By

~~31.01‡~~

10.15*

~~Rule13a-14(a)/15d-14(a)~~ ~~Certification of Principal Executive Officer~~

First Amendment to Performance-Based Stock Option Agreement with Lawrence J. Ellison and Safra A. Catz under the Amended and Restated 2000 Long-Term Equity Incentive Plan

8-K

001-35992

10.15

7/7/21

Oracle Corporation

~~31.02‡~~

31.01‡

Rule13a-14(a)/15d-14(a) Certification of Principal Executive and Financial Officer

32.01†

Section 1350 Certification of Principal Executive ~~Officers~~ and ~~Principal~~ Financial Officer

101‡

Interactive Data Files Pursuant to Rule 405 of Regulation~~S-T:~~ S-T, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets as of ~~February 28, 2018~~August 31, 2021 and May 31, ~~2017,~~2021, (ii) Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~February 28, 2018~~August 31, 2021 and ~~2017,~~2020, (iii) Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three ~~and nine~~ months ended ~~February 28, 2018~~August 31, 2021 and ~~2017,~~2020, (iv) Condensed Consolidated Statements of Stockholders’ (Deficit) Equity for the three months ended August 31, 2021 and 2020, (v) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~February 28, 2018~~August 31, 2021 and ~~2017~~2020 and ~~(v)~~(vi) Notes to Condensed Consolidated Financial Statements

‡

~~Filed herewith.~~

104‡

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2021, formatted in Inline XBRL

† *	~~Furnished herewith.~~Indicates management contract or compensatory plan or arrangement.

‡	Filed herewith.

†	Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Oracle Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			ORACLE CORPORATION
		~~ORACLE CORPORATION~~

Date: ~~March 21, 2018~~September 13, 2021	By:	/s/ S~~AFRA~~Safra A. C~~ATZ~~ Catz
		Safra A. Catz
		Chief Executive Officer and Director (Principal Executive and Financial Officer)

Date: ~~March 21, 2018~~September 13, 2021	By:	/s/ W~~ILLIAM~~ C~~OREY~~ W~~EST~~ William Corey West
		William Corey West
		Executive Vice President, ~~Corporate Controller~~ ~~and~~ Chief Accounting Officer (Principal Accounting Officer)

5043


Remainder of fiscal 2018	$	387
Fiscal 2019		1,411
Fiscal 2020		1,210
Fiscal 2021		1,023
Fiscal 2022		918
Fiscal 2023		567
Thereafter		884

Total intangible assets, net	$	6,400


			February 28, 2018
(Dollars in millions)	Date of Issuance		Amount			Effective Interest Rate
$1,250, 2.625%, due February 2023		November 2017	$	1,250			2.637%
$2,000, 2.95%, due November 2024		November 2017		2,000			2.975%
$2,750, 3.25%, due November 2027		November 2017		2,750			3.263%
$1,750, 3.80%, due November 2037		November 2017		1,750			3.827%
$2,250, 4.00%, due November 2047		November 2017		2,250			4.027%

Total fixed rate senior notes			$	10,000

Unamortized discount/issuance costs				(55	)

Total fixed rate senior notes, net			$	9,945


	Accrued May 31, 2017⁽²⁾		Nine Months Ended February 28, 2018											Accrued February 28, 2018⁽²⁾		Total Costs Accrued to Date		Total Expected Program Costs
(in millions)	Accrued May 31, 2017⁽²⁾		Initial Costs⁽³⁾		Adj. to Cost⁽⁴⁾			Cash Payments			Others⁽⁵⁾			Accrued February 28, 2018⁽²⁾		Total Costs Accrued to Date		Total Expected Program Costs
Fiscal 2017 Oracle Restructuring Plan⁽¹⁾
Cloud andon-premise software	$	85	$	111	$	(8	)	$	(129	)	$	6		$	65	$	281	$	300
Hardware		31		146		(7	)		(89	)		4			85		227		241
Services		25		40		(3	)		(45	)		2			19		95		130
Other		44		230		7			(159	)		(4	)		118		399		443

Total Fiscal 2017 Oracle Restructuring Plan	$	185	$	527	$	(11	)	$	(422	)	$	8		$	287	$	1,002	$	1,114

Total other restructuring plans⁽⁶⁾	$	79	$	1	$	(11	)	$	(30	)	$	5		$	44

Total restructuring plans	$	264	$	528	$	(22	)	$	(452	)	$	13		$	331


		Fair Value as of
(in millions)	Balance Sheet Location	February 28, 2018			May 31, 2017
Interest rate swap agreements designated as fair value hedges	Other current liabilities	$	(7	)	$	—

Interest rate swap agreements designated as fair value hedges	Other non-current (liabilities) assets	$	(47	)	$	40

Cross-currency swap agreements designated as cash flow hedges	Other non-current liabilities	$	(30	)	$	(191	)

Foreign currency borrowings designated as net investment hedge	Notes payable,non-current	$	(1,079	)	$	(980	)


	Amount of Gain (Loss) Recognized in Accumulated OCI or OCL (Effective Portion)												Location and Amount of Gain (Loss) Reclassified from Accumulated OCI or OCL into Income (Effective Portion)
	Three Months Ended February 28,						Nine Months Ended February 28,							Three Months Ended February 28,				Nine Months Ended February 28,
(in millions)	2018			2017			2018			2017				2018		2017		2018		2017
Cross-currency swap agreements designated as cash flow hedges	$	57		$	6		$	161		$	(44	)	Non-operating income (expense), net	$	51	$	2	$	142	$	(69	)

Foreign currency borrowings designated as net investment hedge	$	(31	)	$	(1	)	$	(85	)	$	42		Not applicable	$	—	$	—	$	—	$	—


	Location and Amount of Gain (Loss) Recognized in Income on Derivative													Location and Amount of Gain (Loss) on Hedged Item Recognized in Income Attributable to Risk Being Hedged
		Three Months Ended February 28,						Nine Months Ended February 28,							Three Months Ended February 28,				Nine Months Ended February 28,
(in millions)		2018			2017			2018			2017				2018		2017		2018		2017
Interest rate swap agreements designated as fair value hedges	Interest expense	$	(47	)	$	(31	)	$	(94	)	$	(99	)	Interest expense	$	47	$	31	$	94	$	99


(in millions, except per share amounts)	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
December 1, 2017—December 31, 2017		16.5	$	48.43		16.5	$	14,047.2
January 1, 2018—January 31, 2018		44.0	$	50.00		44.0	$	11,848.4
February 1, 2018—February 28, 2018		20.1	$	49.68		20.1	$	22,848.4

Total		80.6	$	49.60		80.6