Welcome to Oracle’s Second Quarter 2020 Earnings Conference Call. Now, I’d like to turn the call over to Ken Bond, Senior Vice President.

Ken?.

Thank you, Holly. Good afternoon, everyone, and welcome to Oracle’s second quarter fiscal year 2020 earnings conference call. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information can be viewed and downloaded from our Investor Relations website.

On the call today are Chairman and Chief Technology Officer, Larry Ellison; and CEO, Safra Catz. As a reminder, today’s discussion will include forward-looking statements, including predictions, expectations, estimates, or other information that might be considered forward-looking.

Throughout today’s discussion, we will present some important factors relating to our business, which may potentially affect these forward-looking statements. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today.

As a result, we caution you against placing undue reliance on these forward-looking statements and we encourage you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock.

And finally, we are not obligating ourselves to revise our results or publicly release any revision to these forward-looking statements in light of new information or future events. Before taking questions, we’ll begin with a few prepared remarks. And with that, I’d like to turn the call over to Safra..

feature-rich, simple, secure, performant and priced right. They see Oracle as being strategic to their ongoing operations, and they tell me repeatedly that Oracle is the right partner to run their mission-critical assets, both in the cloud and on-premise. Their comments reinforce our conviction that our product strategy is right.

At Oracle, we’ve upgraded our internal systems to the cloud, and we are sharing our experience with customers by describing the stunning benefits and efficiencies that can be realized from the move and know we have thousands of customers and references, our own experience, adopting Oracle Cloud applications and infrastructure allows us to serve as a unique and knowledgeable adviser to customers who want to know how to go about their own digital transformation.

To give you some context, let me share just a few of the many benefits we are seeing in our business. With Fusion ERP Cloud, we are now able to close our books and report earnings in 12 days or less. Many companies don’t report their results for weeks. And not only can we get our results out faster, but we’ve saved money, too.

By using the AI and processes in Fusion ERP Cloud, we have been able to eliminate more than 30% of our manual accounting activities. And enabled by Fusion HCM Cloud, we have seen employee satisfaction levels soar with all-time high rates for things like hiring and onboarding new employees.

We’ve also made it easier for our managers and employees, as Fusion HCM reduces the time needed to complete the talent review process by more than 70%. And separately, we’re saving more than 20,000 hours of manager time each year with our accelerated job offer process.

In sales, we’re using our front-office cloud platform, augmented with machine learning and our own Data Cloud to help our salespeople sell more and sell more quickly. With Marketing Cloud, campaign planning now takes days rather than weeks. And with built-in machine learning, we’ve seen a doubling in lead conversion.

We automatically capture millions of activities in Sales Cloud each year. And with CPQ Cloud, ordering is much faster and easier, with over 70% of our transactions fully automated. We needed that to handle the increased volumes of transactions as a result of our customers move to the cloud.

In addition, we’ve adopted the Gen2 Infrastructure, including Autonomous Database for our custom apps. Our internal IT costs to run these systems are down by millions, while at the same time, we are adopting more than 100 new features each quarter.

Here at Oracle, we are going to continue using our own cloud technology as an intelligent automation engine and continue to simplify our business model and processes. In turn, I expect that our revenue growth rates will increase and see even more expense efficiencies.

And as a result, I expect that you will see us expand our margins and grow EPS double digits for the foreseeable future. Now on to the numbers. I’ll review our non-GAAP results using constant dollar growth rates unless I state otherwise.

Currency Q – for Q2 was largely in line with my guidance at nearly 1%, and the fact that the growth rates look the same in a few categories is simply because of rounding. Total Cloud Services and License Support revenues for the quarter were $6.8 billion, up 3%, accounting for over 70% of total company revenues and most of this is recurring revenue.

Cloud and on-premise license revenues were $1.1 billion, down 7%, as more of our GBU customers order cloud instead of license. In terms of ecosystem, GAAP application ecosystem revenues were $2.9 billion, up 4%, with Fusion apps up in the low-30%s, including Fusion ERP up 38% and Fusion HCM up 23%. NetSuite ERP was up 28%.

Vertical SaaS was up low double digits, while Data Cloud stabilized. On a trailing 12 months basis, more than 90% of our application ecosystem revenue is recurring. GAAP infrastructure ecosystem revenues were $5 billion, up 1%, with total database revenue up 1%, highlighted by BYOL and Autonomous Database revenues, both up over 200%.

But off a small base for now, on a trailing 12-month basis, more than three quarters of our infrastructure ecosystem revenue is recurring. Just a few days ago, we were able to get our first Gen2 Exadata Cloud@Customer fully deployed and connected. It was done in just four days.

Previously, with our Gen1 architecture, this typically took significantly longer. As a result, we are very optimistic about the impact our Gen2 Cloud@Customer will have on our business. No other cloud provider has the right technology to actually do this.

In terms of geographies, we saw double-digit revenue growth in SaaS revenue in all regions except EMEA, with especially strong results in Latin America and Japan. Gross margin for Cloud Services and License Support was 85%, down slightly from last quarter due to accelerated investments in our Gen2 Cloud to address higher demand worldwide.

As we get to scale, I expect our cloud gross margins will grow higher, driving an acceleration in our gross profit growth.

By the way, our strategic hardware products delivered on-premise, which includes Exadata, grew double digits for the quarter, once again showing that our installed base of customers focused on our world-leading database platform continues to grow. Total revenue for the quarter were $9.6 billion, up 1% from last year.

Non-GAAP operating income was $4 billion, essentially unchanged from last year and operating margin was 42%, down from 43% last year. The non-GAAP tax rate for the quarter was 18.8%, slightly below our base tax rate of 20% and EPS was $0.90 in USD, up 13% in constant currency and 12% in USD.

The GAAP tax rate was 17.7% and GAAP EPS was $0.69 in USD, up 15% in constant currency, 14% in USD. Operating cash flow over the last four quarters was $13.8 billion. Over the last four quarters, capital expenditures were $1.6 billion and free cash flow was $12.2 billion.

We now have approximately $27 billion in cash and marketable securities and short-term net deferred revenue balance is $8.1 billion, down 1% in constant currency due to timing differences in customer payments. Also, the prior year deferred balance was affected by our transition to ASC 606.

Gross deferred revenue was up over 1% in constant currency and would have been up over 3%, if not for the ASC 606 transition changes. We remain committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases and prudent use of debt and the dividend.

This quarter, we repurchased 91 million shares for a total of $5 billion. Over the last 12 months, we’ve repurchased nearly 500 million shares for a total of $26 billion. And over the last five years, we have reduced the shares outstanding by more than 25%. The Board of Directors again declared a quarterly dividend of $0.24 per share.

My guidance today is on a non-GAAP basis and in constant currency, assuming current exchange rates remain the same as they are now. Currency should have a 1% negative effect on total revenue and $0.01 negative effect on EPS.

So for Q3, total revenues are expected to grow 1% to 3% in constant currency and assuming a 1% currency headwind, total revenues are expected to grow 1% to 3% in USD. Now I realize that my USD and constant currency revenue guidance sound like they’re the same number, but it’s just rounding similar to our revenue growth this quarter.

I do expect a currency impact of 1% – of nearly 1%. Non-GAAP EPS in constant currency is expected to grow between 10% to 12% and be between $0.96 and $0.98 in constant currency. And assuming a $0.01 headwind, non-GAAP EPS in USD is expected to grow between 9% and 11% and between – and be between $0.95 and $0.97 in USD.

Total CapEx for fiscal year 2020 is expected to be around $2.2 billion, but it could move higher based on demand for data center growth. My EPS guidance for Q2 and fiscal year 2020 assumes a base tax rate of 20%. However, one-time tax events could cause actual tax rates for any given quarter to vary from our base tax rate.

But I expect that in normalizing for those one-time tax benefits – the tax events, our tax rate will average around 20% in fiscal year 2020. And finally, for fiscal year 2020, I continue to expect that in constant currency, total revenue will grow faster than last year and that we will report double-digit EPS growth for the year.

And with that, I’ll turn it over to Larry for his comments..

Thank you, Safra. As I’ve said before, there are two key product areas that will determine Oracle’s future in the cloud, Cloud ERP Applications and the Autonomous Database.

Being the clear number one in both of these two giant applications and infrastructure market segments, we’ll enable the success of our other application and infrastructure products in adjacent market segments. This is already happening in applications.

We have a huge lead in Cloud ERP, with over 7,000 Fusion ERP customers and 20,000 NetSuite ERP customers. Our closest Cloud ERP competitors, Workday, and they claim to have a few 100 ERP customers. Workday’s lack of success in Cloud ERP is creating opportunities for Oracle in Cloud HCM.

More and more, we’re seeing HCM as being purchased as a part of an ERP cloud application suite. As a result, today, we have more HCM customers than Workday. And we’re beginning to see that same integrated suite strategy beginning to drive our sales of CX customer experience applications in sales and service and in marketing.

SAP never rewrote their ERP applications for the cloud. As a result, SAP’s installed base is very vulnerable. We’ve already replaced and successfully migrated many midsized SAP customers from SAP to Fusion ERP. Importantly, a few months from now, in Q1 calendar year 2020, one of SAP’s biggest customers will go live on Fusion ERP.

Many of SAP’s largest customers are already working with us to develop plans to migrate the Fusion ERP. SAP’s customer base is up for grabs. They didn’t rewrite their applications for the cloud. That has created an enormous opportunity for Oracle.

We’re already declared number one in the Cloud ERP market as measured in market share and our Cloud ERP business is already growing at a rate of over 30%. By offering a safe and compelling alternatives to SAP’s old technology, we can increase our applications growth rate far beyond that 30%.

We’re very, very comfortable that we will be the overwhelming winner in this generation Cloud ERP business. Now, let’s look at some application wins in the quarter. Advance Publications, a media company, bought ERP, Albertsons got ERP, EPM and supply chain. C.H. Robinson, Worldwide, a transportation company, bought ERP and EPM.

DHL Supply Chain, big German company, bought ERP, EPM and supply chain. Edwards Lifesciences, a medical equipment company, bought ERP. By the way, I’m not mentioning any HCM – associated HCM deals, because I have a separate list for HCM. So a lot of these guys, maybe next quarter, I will put the HCM deals right next to the ERP deal.

So you can see, because you’ll – I’ll be repeating a lot of these names when I get to my HCM list, and that’s the point I made earlier that people are now looking at HCM as just another module that we need in the back-office, very important. Edwards Lifesciences bought ERP. Ferguson, a manufacturing firm, bought ERP and supply chain.

Global Companies, big energy firm, bought ERP, EPM and supply chain. NCR, financial services, bought ERP, EPM and supply chain. NETSCOUT, telecommunications company, bought supply chain. Mutual Life Assurance bought ERP and supply chain. Southern Star Central Gas Pipeline, big energy company, bought ERP. Technip, another energy company, bought ERP.

By the way, SAP is supposed to be very strong in energy. Texas Children’s Healthcare, the hospital bought ERP, EPM and supply chain. Unilever bought ERP and supply chain. Baker Hughes, energy company, bought ERP, EPM and supply chain. Carlson Wagonlit Travel services, ERP, EPM and supply chain.

Kuwait Petroleum, energy company, bought ERP, EPM and supply chain. Liberty Global, communications company, ERP, EPM and supply chain. Manpower, the global services company bought ERP, EPM and supply chain. Sherwin-Williams, that’s what they bought ERP, EPM and supply chain.

The suite, a lot of people are buying multiple modules, it’s not just ERP, it’s ERP. It’s EPM, Enterprise Performance Management. It’s supply chain. It’s manufacturing. Bank of New York Mellon bought ERP, EPM and supply chain. Airport Terminal Services – I’m sorry, now I’m on my HCM Group. I’m in the HCM Group, they’re all grouped together.

Airport Terminal Services bought HCM. Apparel Bosco Retail, HCM. Banque Saudi Fransi bought HCM. CenterPoint Energy, other energy company, bought HCM. Cummins, manufacturing company, HCM. Graybar Electric bought HCM. Hologic, HCM. HUS at the hospital, both of the hospitals in Finland, run by the federal government in Finland bought HCM.

Mountaire Farms, HCM. North Atlantic Refining, again, this is my HCM list, big energy company, an SAP stronghold in the energy sector bought HCM from us. Southern Star Central Gas Pipeline, big gas company, Energy, HCM. Technip, energy company, HCM. Tenet Healthcare bought HCM. Texas Children’s Hospital bought HCM and [indiscernible] brought HCM.

Birmingham City Council bought HCM. Kuwait Petroleum Corporation, a big energy bought HCM. MEDNAX Health Care, HCM. Phoenix Life Holdings, HCM. In customer experience, Equinix bought service. Ferguson Enterprises bought service. Ferrari bought sales and marketing. IKYA bought service. Nordstrom bought service. PayPal bought marketing.

Rabobank bought service and Santander Bank bought service. Okay, let me move on to the other segment, which is Autonomous Database and Gen2 Infrastructure.

In the database market, we are the overwhelming number one, with a combination of a dominant share on-premise and very strong market share in the cloud, though, I have yet to see any good data on database market share in the cloud.

Our database business is growing very, very rapidly, because we have an enormous technology advantage in the cloud over all of our competitors with Autonomous Database. Autonomous Database is the world’s only Autonomous Database. What does that mean? That means, when you configure the system, you don’t do anything. The system configures itself.

Robots configure the system. The recent Capital One lost all that data at AWS is, because one of the Capital One people made a configuration here. You can’t make configuration errors with the Autonomous Database, because human beings don’t configure the system.

A lot of these above the fold headlines of people losing their data are caused by human errors. People forget the patch systems. Remember that one. They patched some, but not all of the systems. And Equifax, Equifax it was a patchy stocks [ph] database, didn’t get patched. They didn’t find them all.

Guess what? Autonomous Database automatically patches itself when a security flaw is detected And by the way, they detected that security flow at Equifax. They knew about it. They just didn’t get around to patching. Patching is hard. They have to find all the databases. You had to schedule downtime.

You don’t schedule downtime with the Autonomous Database. You can’t see Autonomous Database, while the database is still running. But you don’t capture database. The robots, our robots attach the database. That’s why it’s Autonomous. There’s no human labor. So there’s no human error.

So if you are willing to pay less and not have that human labor, you get rid of all those mistakes. This is a gigantic technology advantage, by the way, and we’re ten times faster than anything Amazon apps. That means, we’re much cheaper than anything Amazon has. Much safer, much easier to use, build applications faster.

So we already have thousands of Autonomous Database customers running in our Public Cloud. We added 2,000 more this quarter. And our Autonomous business, as Safra said, is growing in excess of 200%, Autonomous Database business off a small base.

Admittedly, it’s a relatively new product, but it’s on its way to being the most successful new product introduction in our company’s history. Now this triple-digit growth rate, I expect will spike up dramatically because of another thing Safra just mentioned. Our introduction of our Autonomous Database Cloud@Customer, Gen2 Cloud@Customer.

Now, when people can start putting Autonomous Database, they’re already – I mean, all our Autonomous Database customers, let me be clear, are in our Public Cloud. A lot of our customers, especially those in regulated markets, big banks, people – government agencies, defense ministries, people have that.

They need the Autonomous Database capabilities behind their firewall in their data center. And next – and over the next few months, we’re rolling out this Autonomous Database Gen2 Cloud@Customer. Now all of our cloud competitors are trying to create these outposts of their cloud on the floor – on the floors of their customers.

We actually have it working. And in fact, we’re in our second-generation of this. We did it early. We did a reasonable first-generation job, but the second time is a charm. And this new Gen2 stuff was – can be installed in a day. No, the first one we installed in four days. We expect to do that even faster.

There’ll be more time spent unpacking the hardware and plugging it in than readying the software, because it just syncs up with our Public Cloud and you’re up and running. This is going to be a huge opportunity for us to dramatically increase the adoption rate on Autonomous Database, very excited about that. The – okay.

The – when that happens, we think by any measure, we will be not only have the overwhelming market share lead on-prem, but the overwhelming market share lead in the cloud. We expect to hold onto our database franchise in a big way.

So it’s interesting that both of our Autonomous Database and our cloud applications are running in our new Gen2 highly secured infrastructure. And by the end of 2020, by the end of next calendar year, this time next year, I’ll be able to say that we have more Gen2 data centers in more countries than Amazon Web Services has data centers period.

We’re adding lots and lots of data centers in lots and lots of countries. And, again, we’ll have more data centers in more countries than Amazon by the end – a year from now, that’s very, very exciting. Now, let’s look at some of our Autonomous Database in Gen2 Infrastructure wins this quarter. Okay. [indiscernible] international big manufacturing firm.

Albertson’s, this another – this is more synergy that I’ve got to mention where people buy our applications. They buy our ERP applications. They also build data warehouses associated with those applications. They do a lot of work.

So a lot of our application customers are beginning to be infrastructure – Autonomous Database customers and infrastructure customers. So, yes, when you buy ERP, you might also by HCM. When you buy ERP, you’re also going to buy the Fusion Data Warehouse, which is an Autonomous Database product and Infrastructure product.

You’re going to buy analytics in our Gen2 data center. You’re going to be an infrastructure customer, as well as an application customer and we see a lot of overlap. We often see see people buying suites of applications, ERP, plus HCM, plus sales and things like that. But also applications plus infrastructure. Aon Financial Services.

Biogen bought Autonomous Data Warehouse. Cisco Systems, again, Gen2 Infrastructure and Autonomous Data Warehouse. Clearstream services, same thing, Gen2 Infrastructure Autonomous Data Warehouse. Embraer Aviation, the Brazilian airplane – the aircraft manufacturer, Autonomous Database and Gen2 Infrastructure.

Equity Bank of Kenya, Autonomous Database, Gen2 Infrastructure. Fastenal Company, a big distribution company in the United States, Gen2 Infrastructure. Healthcare Services Corp., Gen2 Infrastructure and Autonomous Database. Interact, Gen2 Infrastructure.

King Faisal Specialist Hospital & Research Centre, Autonomous Database, Autonomous Transaction Processing. The Core University, Autonomous Database, Gen2 Infrastructure. Manchester, Autonomous Database and Gen2 Infrastructure. MGM Entertainment, Autonomous Database, Autonomous Transaction Processing.

Provident Healthcare Services, Autonomous Database, Autonomous Transaction Processing. Schenker Logistics in Germany, Autonomous Data Warehouse. Soar [ph] Gen2 Infrastructure. Swiss Post, Gen2 Infrastructure, Autonomous Data Warehouse. Target, based in the United States, Autonomous Database, Autonomous Data Warehouse.

Technip, energy company, but I’ve mentioned that bought I believe, the HCM, ERP, bought the full suite and Gen2 Infrastructure and Autonomous Database. The Boston Globe, Gen2 Infrastructure, Autonomous Database. Thermos, Autonomous Database, Autonomous Transaction Processing. Cybersoft, Autonomous Database. Tideworks Netherlands, Gen2 Infrastructure.

Tokyo Gas and Electric, Autonomous Data Warehouse, Gen2 Infrastructure. TriMark USA, Gen2 Infrastructure. Walgreens, Autonomous Data Warehouse, Autonomous Transaction Processing, Gen2 Infrastructure. Wizink Bank, Autonomous Data Warehouse, Gen2 Infrastructure.

Zim, the big shipping company, you’ve seen a lot of Maersk, you see them in Zim on lots and lots of containers, Autonomous Database, Autonomous Transaction Processing and Gen2 Infrastructure. AXA Equitable Life Insurance, Autonomous Database, Gen2 Infrastructure. Banco de Chile, Autonomous Database, Autonomous Data Warehouse, Gen2 Infrastructure.

Baxter Healthcare, Autonomous Data Warehouse. Cigna Corporate Services, Autonomous Data Warehouse, Gen2 Infrastructure. Eventbrite, Gen2 Infrastructure. Ford Motor Company, Gen2 Infrastructure, Autonomous Database, Autonomous Warehouse. Mary Kay, Gen2 Infrastructure.

Samsung Electronics, Gen2 Infrastructure, Autonomous Database, Autonomous Transaction Processing. VeriFone, Gen2 Infrastructure, Autonomous Database and Autonomous Transaction Processing. With that, I will turn it over to the audience for questions..

Thank you, Holly. Thank you, Larry. Holly, if you could please prepare the audience for questions..

[Operator Instructions] And our first question is going to come from the line of Michael Turits, Raymond James..

Hey, good evening, everybody. Safra, it was great to see that you reaffirmed your guidance for the full-year per revenue acceleration and double-digit EPS growth. But with the 3Q guide, it does suggest a very strong fourth-quarter on top of what was the fourth – strong fourth quarter than last year.

So can you give us a little bit of visibility into what’s driving that confidence.? And also I know it’s early, but given what that means for fourth quarter, what does it mean in terms of what it implies about fiscal 2021?.

So we’ve got everything finally out and available. And as Larry and I both mentioned, we’ve got Cloud@Customer. We have a lot of orders for that, that we have not deployed yet. So we’ve got a lot of demand there. We’ve got Autonomous Database. We’ve got new versions of Autonomous Database on track.

We’ve got the entire Fusion suite rolling even – including all of the additional modules have all been continuously upgraded. So we’ve got an immense amount of demand. And we have enormous pipelines and our conversion rates are increasing.

And so the pipe has just expanded so dramatically than I know we’re going to have more bookings, but also previous bookings as those deals are ramping up and more users are using the products were very, very upbeat about the second-half.

But even more so next year, we believe that the momentum we will have in the second-half of this year will more than carry through to 2021..

Great. Thanks very much..

Sure..

And our next question is going to come from the line of Heather Bellini, Goldman Sachs..

Great. Thank you so much for the time and I’m going to try and get away with two questions. But I guess, the first one, Safra, as you mentioned about license this quarter, it was a little lighter than what, I think, people were expecting. I know we’re talking about a big base.

But if there’s anything you could call out in terms of whether it’s the sales force reorg or just macro or whatever in terms of the results in the quarter on that line.

And then I know just covering the company for a while, given the lumpiness historically between Q2 and Q3, I know sometimes deals push from one quarter to the next and typically, it’s better to just average those two quarters. But how do you feel about the outlook for the Q3 license number? And then I just have one follow-up, if you don’t mind..

I generally feel very good about the Q3 license number, as you said, it is lumpy. The one thing we do have is that the GBUs, which, of course, not a giant part of our license business, but are significant. They have moved and their cloud products have become available.

And I do expect that most of the orders for new services in the GBUs will come through as Cloud Services instead of just plain License. But I don’t think that will be as significant. I do expect that licenses, in fact, will be just fine in Q3 other than the GBU piece..

Okay. And then just my follow-up. I mean, these calls just still don’t feel the same without Mark being on them.

And with all due respect to him to his passing just knowing how hard it is going to be to replace him, I mean, is there anything to share with us regarding you getting some – getting someone to kind of help take his place in some of the responsibilities that you’ve taken over?.

Okay. This is Larry. I know how to answer that question, because I get the question is, so how’s our search for a second CEO guy? Remember, when we announced two CEOs, the first time was people thought that was a bit odd. And so now people are finding that we have one CEO is a bit odd, two CEOs – so it’s so simple. So let me make it very simple.

How’s our search going for the new – for a second CEO, we don’t have plans. We have no plans for having a second CEO, it was an unusual situation, where Mark and Safra were an absolutely fantastic team. But we have complete confidence in our existing management team.

We’re doing a lot of recruiting and you’ll see a lot of announcements at the next layer down that we’re hiring a bunch of people at the next layer down who are potential CEOs, when both Safra and I retire and which is not anytime soon.

And so we’re going to strengthen the management team, but one of the strategies for strengthening that team is not to hire a second CEO..

Thank you very much..

Next question, please. Thank you, Heather..

Our next question is going to come from the line of Brad Zelnick, Credit Suisse..

Great. Thanks so much. Larry, the momentum in Autonomous Database is fantastic, growing over a 100% in your Public Cloud. But having been in market now for over a year, I know investors are wondering when we might see an inflection in your financial results from Autonomous.

And I appreciate many customers are including some of the required database option in their deals. But now that you’re making it available on Gen2 Cloud@Customer.

How should we think about the appetite from your installed base? How material can it be to your financials? And is there anything you might compare it to in Oracle’s history?.

Well, no. I mean, there – either in terms of a technological breakthrough. Well, I guess, we’re the first commercial relational database..

Wow..

The very beginning, that’s kind of created Oracle Corporation, right? So that we had the very first commercial relational database. We had one before IBM did or anyone else did. So that traded – that turned this company from an idea into the company that manages most of the world’s information.

So I would say, Autonomous Database is that same kind of thing. It’s – it is so much different, so much favored to use, so much more reliable than anything else that’s in the market. I think everyone is going to use it. Virtually, everyone is going to use it. Now that said, it is – it takes a while when you introduce an all new products.

The good news is, we have a huge installed base here. It takes a while for that – for us to shift a, if you will, a next-gen technology and get people comfortable with it and using it. And that first year, we’ve seen a lot of early adopters. But the early adopters are now in the thousands.

And we think eventually the only database will offer, it’s Autonomous Database. It will replace everything else. And by the way, at Autonomous Database, it’s only available in Q4.

If we put a cloud in – if we put our cloud in your data center, that’s our Exadata machine and our Middleware machines and all of that is in our storage in your data center and our Public Cloud. So it – we think it will be consumed in one of those two ways and that will replace our entire base.

So it means that our existing database business from a financial standpoint will more than double or triple or triple probably is a reasonable estimate to look out. Now, of course, when you are in your business, it’s all about timing. And I wish I could tell you exactly how much will sell over the next 18 months. That’s kind of tricky.

Now we don’t have that many data points. We have four quarters of data points. And then the first couple of quarters, it was so new. So we really only have a couple of quarters of data points. All I’ve been saying is none of us ever seen an adoption rate like this before..

Fantastic. Thank you, Larry..

Our next question is going to come from the line of Phil Winslow, Wells Fargo..

Hi, great. Thanks for taking my questions. Just wanted to focus in on the applications business. Obviously, you saw a nice tick back up here quarter-to-quarter in terms of the year-over-year growth rate. I guess, the question to Safra and I guess, Larry, too.

What do you think about the sort of the different curves that buildup that business? Obviously, you’ve talked about in the past some of the headwinds from things like Data Cloud and then also some of the wins that we saw on your Fusion, Fusion ERP and NetSuite this quarter? Where are we when we stack all those curves together? Are we past for those headwinds and we’re now looking at sort of acceleration from here? In other words, Q1 was a trough or just help us kind of, Larry, take that up, if you could?.

So let me get started and then Larry can add when he needs to add. So first of all, the Data Cloud has stabilized. I don’t know if it will stay that way, but that was a very significant headwind for us. In that whole business, it has completely stabilized. It grew ever so slightly.

Additionally, the adoption in our ERP Cloud is now such that it’s in the thousands. We’ve many, many references. And what happens in our business is that, once you are sort of obviously referenceable, it becomes much, much easier for other potential customers to move ahead.

One of the things that had been to some extent leading to a wait-and-see attitude by some historically business suite customers was the adoption of first availability and now adoption of supply chain. Our supply chain now has many, many customers, and so more of our customers are willing and interested in moving.

Remember, every single quarter, a 100-plus new features become available. And some of those have been must-have features for extremely happy customers in the business suite. Simultaneously, as Larry mentioned, SAP customers have realized that SAPs’ offerings are not cloud offerings.

If you use SAP’s technology, you don’t get a 100 new features every quarter. There’s a simply a hosted offering, which means that we are the obvious choice for customers who are – who want to go through and really adopt a digital approach in their business. And so for us, this is going to be success leads more success.

It’s an incredibly virtuous cycle. And as Larry mentioned, what it also means is that additional modules are going with and that’s clearly showing up in our other segments and, of course, HCM, which is obviously a match and then ultimately, the front-office, where we’ve got a lot of new technology rolling out that is being adopted..

Yes. I think a lot of SAP’s – again, in the mid-market, where we are replacing a lot of SAP customers and we’ve got them live and we have references. But right at the very impacts of SAP’s customer base, they’re top 50 customers around the world.

They’re – looking at this one particular implementation that where we expect to go live in March of next year. And I would describe them as rooting for us. They want to have an alternative to a billion-dollar SAP upgrade. SAP end-of-life, their current stuff in 2025.

So if you’re a big SAP customer, you’ve got to make it – that some people have bought – actually bought ahead, actually bought as we’re having in the cloud with no plan – with no really good plan to implement it. It’s a five-year implementation. They’re getting price quotes of a billion-dollars for the upgrade.

Imagine going from your existing SAP system, taking out Oracle and replacing HANA and that’s the only change. Basically, that’s the only change and it’s hosted. It’s not cloud. There is no cloud. Anyway, I want to say, well, it’s easy for Oracle and say, go to SAP’s website and try to find the SAP Cloud for ERP.

I mean, you can find it for the stuff they bought. You can find it for Callidus, which is on one cloud. You can find it for Ariba, which is on another cloud. You can find it for little SurveyMonkey, and all the stuff that they bought. But they forgot. They forgot to write ERP, that’s your business and they forgot to rewrite ERP there.

There are projects that they had to do that whole business by design fails, they canceled it. So there is no cloud option for SAP customers. They can’t go to Workday. Workday can’t even handle mid-market ERP. So we’re at – so believe me, they want an alternatives to SAP, makes sense, right, that they should want an alternative.

But we’ve just got to demonstrate that we can safely take these enormous companies to the cloud in a way that they’re not putting their business than any risks. And that’s why this one particular giant implementation they’re watching closely. But by the way, they’re not just watching and waiting.

A number of their biggest customers in the heart of German, lots of them are working with – these are German customers the core of SAP are working with us. And taking some of their – moving some of their divisions already on some of their divisions to Oracle’s Fusion to persuade themselves that we can do this safely. They’ve gone that far.

They don’t want to continue with its obsolete code. This is – this opportunity is gigantic, because we have one European customer on – competitor on-premise. They don’t have a cloud offering. That’s SAP. And we’ve got one ERP Cloud competitor that just as not doing very well, having a hard time getting their business off the ground.

It doesn’t scale there a lot. There are a lot of problems. So we have a chance here to be – to get what used to be in the old world called gates share for ERP and getting – like Microsoft Office to be – the Microsoft Office of ERP, where – and it’s sitting there. And we just have to get this last proof point out to SAP’s largest customers.

Yes, we can do this. We can do it safely. And we will be overwhelmingly the largest application company in the cloud..

Thank you, Larry..

Next question, please..

Our next question is going to come from the line of Mark Moerdler, Sanford Bernstein..

Thank you very much for taking my questions. Autonomous Database sounds like, it’s really starting to gain traction.

Given the shift of sales personnel to selling Autonomous, can you give us some more color specifically? Specifically, are you seeing the customers buying the required modules as license or they including it with the cloud? Are you seeing changes in the size of the customer, size of the pipeline, the time it takes from customer interest to adoption.

Any of that would be really appreciated?.

Okay, I’m happy to do that. I think the most interesting thing that’s going on is, we’ve decided to take, if you will, in AWS approach to selling Autonomous Database in the cloud. So we almost prefer selling our $30,000 deal to a $100,000 deal, because in a $30,000 deal, we can close in four weeks.

So we think the way to sell Autonomous Database is to get it installed on a project in one of our customers, get it going, help them become successful.

And then once they under – once they actually get their hands on Autonomous Database and they have working app, they have working projects, working data warehouses, working transaction processing systems, you start some new land and expand. So we’re selling thousands and thousands of small deals.

And some of those deals are already coming back as larger deals. But our approach, again, is to – and most of it is not BYOL, because they’re small. I mean some of it is. Not – yes, some of it is BYOL, but the majority is not BYOL. It was interesting in the early days in ERP. When we had ERP, people moving our e-business suite customers.

No, they were new logos. In the early days in Cloud ERP for us, they were new logos. Believe it or not, we’re actually seeing new logos and database. But again, most of them are our customers, but they’re not using their existing licenses. They’re going ahead and using a standard cloud and license, what we call [indiscernible]. They pay us as we get.

You pay for what you use. I mean, it’s the promise of the cloud. And we’re getting in thousands of these, because we think the best selling techniques for Autonomous Database is try it, get it running, watch it backs itself up. It upgrades itself. It tunes itself. It configures itself. There’s nothing like it. We just got to win those hearts and minds.

And the way to do that is go wide across our entire customer base. That’s what’s going on. And again, it’s working very, very well. I think it’s working very, very well, because we’re seeing just beginning to see the first people coming back and going from $30,000 a month to $600,000 a month..

Great.

Next question, please?.

Our final question for today will come from the line of Kirk Materne, Evercore..

Yes. Thanks very much and thanks for taking the question. Safra, I was just wondering if you could comment on just sort of the geographic landscape for you all. It looked like Europe was perhaps a little bit softer in your other geographies this quarter. Maybe that’s just macro.

I was wondering if you could just add a little bit color on sort of what you’re seeing across the different theaters? Thanks..

Yes. This quarter, EMEA only grew in the single digits. Some of the other regions did grow in the high double digits, some very high double digits. And I think there’s nothing really special going on one way or the other. Some of it’s just the way the quarter falls out for them. But overall, our business remains very strong.

And I think that next quarter could be completely different. So it was – it’s really nothing. We’re not seeing a massive change even month-over-month or quarter-over-quarter from what it looked like. Obviously, there are some regions doing very, very well for a number of different reasons as they get to roll out new capabilities.

We’ve got a lot of – we’ve got data centers opening and have opened very, very successfully in Latin America and in Asia and in Japan. And so we’ve got a lot of usage and increase in some of those areas, which helped explain some of the big growth in some of those areas. But EMEA, I think, we will see – there’s nothing special, in particular.

I have no real color to add and we’ll see what happens after today’s selection in the UK..

Sounds good. Thank you..

Thank you, Safra. A telephonic replay of this conference call will be available for 24 hours. Dial-in information can be found in the press release issued earlier today. Please call the Investor Relations department with any follow-up questions from this call and we look forward to speaking to you.

With that, I’ll turn the call back to Holly for closing. Thank you..

Thank you for joining us for today’s Oracle’s second quarter 2020 earnings conference call. We appreciate your participation. You may now disconnect..