甲骨文 (ORCL) 2016 Q2 法說會逐字稿

Welcome to Oracle's second-quarter 2016 earnings release.

As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Ken Bond, Senior Vice President of Investor Relations.

Thank you, Holly, and good afternoon, everyone.

Welcome to Oracle's second quarter FY16 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 CEOs Safra Catz and Mark Hurd.

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 on our 10-Q and 10-K, 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.

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 begin with a few prepared remarks.

With that, I'd like to turn the call over to Safra.

Thanks, Ken.

I'm going to focus on our non-GAAP results for Q2.

I'll then review guidance for Q3 and Q4, and turn the call over to Larry and Mark for their comments.

As you can imagine, we are very pleased with the quarter.

Total revenue exceeded my guidance, driven by the combined strength of our cloud business, as well as better than expected results from the on-premise software business.

Earnings per share were also above my guidance, coming in $0.04 better than the mid-point of the constant currency range I provided last quarter.

Q2 currency headwinds were mostly as expected, around 6% in most categories, including total revenues.

However, the currency effect to earnings per share was $0.06, $0.01 more than my guidance.

We will continue to use constant dollar growth rates on our quarterly calls so we can have some measure of consistency across the quarters, as well as to reflect how we measure the business.

Considering the progress we've made in our transition to the cloud and the subscription business, from now on I'm going to start with our SaaS and PaaS business.

We continue to see excellent momentum there, with bookings growth of 75% for this quarter, on top of the 147% we reported last year.

SaaS and PaaS revenue was $487 million, up 38% from last year, 39% in GAAP.

Sequentially, SaaS and PaaS revenue grew 8%, and we expect the sequential growth next quarter will be even higher.

The bookings growth that we have been experiencing will now translate into a significant acceleration in SaaS and PaaS revenue growth in Q3, where we could hit 50% revenue growth, and in Q4, where it should be even higher.

You can also see the coming revenue acceleration of our cloud business in the SaaS and PaaS billings in deferred revenue.

SaaS and PaaS billings grew 68% in US dollars this quarter, on top of the 70% growth last quarter.

Also, the gross deferred revenue balance is now nearly $1.1 billion, and was up 135% in US dollars.

We've put the billings numbers up on our website for you to see the details.

The balance of our cloud revenues come from cloud infrastructure-as-a-service, which was up 11% to $165 million.

While SaaS and PaaS revenue will see much higher growth rates, we expect infrastructure-as-a-service revenue growth, which is currently dominated by our hosting business, will be more moderate for now.

Total cloud revenues which is SaaS, PaaS, and IaaS were $652 million, up 30%.

As our cloud revenue business continues to scale from the growth we are experiencing, it is beginning to benefit our margins, as I previously predicted.

The Q2 growth margin for SaaS and PaaS was 43%, up from 40% last quarter, and will see further improvement in Q3.

I also expect the Q4 exit rate gross margin for SaaS and PaaS will be around 55% to 60%.

From there, we'll be targeting 80% in FY18.

The gross margin in the IaaS business was up slightly to 45%.

Capital expenditures for the quarter were $195 million, or $251 million lower than Q1.

I expect the cloud-based, cloud-related CapEx for the full year will be lower than last year, as we utilize the investments we have made.

On-premise software revenues, including new software license and software license updates and product support, was unchanged, at $6.4 billion.

Software license updates and product support revenue was $4.7 billion, up 5% from last year and up 1% sequentially.

Attach and renewal rates are running at their usual high levels.

New software license revenue was $1.7 billion, down from last year, but a bit better than I expected for the quarter.

Over the full year, I expect we will see modest growth in our on-premise software revenue, comprised of continued growth in software support that more than offset the declines in new software license.

Finally, total hardware revenue was down 10%, which included hardware products revenue of $573 million and hardware support revenue of $550 million.

Total revenue for the quarter was unchanged at $9 billion.

Non-GAAP operating income was $3.7 billion, and operating margin was 41%.

I believe that for the fiscal year we are currently in, we are more than halfway through what will turn out to have been the trough year for operating income.

The non-GAAP tax rate for the quarter was 20.4%, and the GAAP tax rate was 17.6%, as we saw some one-time, non-cash benefit.

Non-GAAP EPS was $0.63 in USD, and GAAP EPS was $0.51 in USD.

As I said earlier, non-GAAP EPS was $0.06 lower due to currency.

Free cash flow over the last four quarters was $11.3 billion.

We now have more than $52 billion in cash and marketable securities.

Net of debt, our cash position is over $10.4 billion.

Short-term deferred revenue balance is $7 billion, up 9% in constant currency.

This quarter we repurchased more than 86 million shares for a total of $3.25 billion, and over the last four years we have reduced the shares outstanding by more than 16%.

The Board of Directors also declared a quarterly dividend of $0.15 per share.

Over the last 12 months we have repurchased more than 250 million shares for a total of $10.3 billion, and paid out dividends of $2.5 billion, for a total that is more than 110% of our free cash flow.

I'd also like to formally welcome Renee James to Oracle's Board.

She's a great addition.

Now to the guidance.

I'm going to give you guidance for Q3, and then some preliminary guidance for Q4.

We feel very good about the progress of our cloud transition, and clearly customers are rapidly adopting Oracle.

As you know, we are expecting to see a material second-half acceleration in our SaaS/PaaS revenue, based on our bookings growth and the expiration of customer promotion.

My guidance will reflect this, making it easier to see that we are taking share in the industry.

Since we have a clear trend and visibility through the end of our fiscal year, I'm going to give not only Q3 guidance, but also some guidance for Q4.

My intention is to share with you what we are seeing in our business now that we have line of sight to it.

All my guidance today is on a non-GAAP basis, and in constant currency.

We expect to see continued volatility in exchange rates.

I'm going to give you constant-currency guidance, but if current exchange rates remain the same as they are right now, we expect to see currency headwind of 4% on revenue and $0.03 to EPS, which is significantly less than Q2.

On to guidance.

SaaS and PaaS revenue is expected to grow between 49% and 53%.

Cloud IaaS revenue is expected to grow between 3% to 7%.

Total cloud and on-premise software is expected to grow 3% to 4%.

Total revenue growth is expected to range from 0% to positive 3%.

Non-GAAP EPS in constant currency is expected to be somewhere between $0.63 and $0.66.

This assumes a non-GAAP tax rate of 25.5%.

Of course if this quarter is any example, it may be -- it may end up being different -- probably better.

Looking further out to Q4, we expect to see continued acceleration in SaaS and PaaS, as well as a return to EPS growth year over year.

My guidance for Q4 is also in constant currency.

SaaS and PaaS revenue is expected to grow between 55% and 59%.

Cloud IaaS revenue is expected to grow 1% to 5%.

Total cloud and on-premise software is expected to grow between 2% and 4%.

Total revenue growth is expected to range from 1% to 3%.

Non-GAAP EPS in constant currency is expected to be somewhere between $0.83 and $0.86, which is a significant increase compared to last year's $0.78.

As I've said before, I believe FY16 is a trough year for profitability as we move to the cloud.

As such, I expect to see strong EPS growth in Q1 and beyond.

My Q4 EPS guidance assumes the same non-GAAP tax rate as Q3 at 25.5% but that's probably too early to get a real bead on.

Finally, SaaS and PaaS gross margins are expected to improve in both Q3 and Q4, exiting the year between 55% and 60%.

I will of course revisit Q4 guidance with you as part of the Q3 earnings call.

With that, I will turn it over to Mark for his comments.

Thanks much, Safra.

In the spirit of giving you just a blizzard of numbers, I am going to extend that, because our strong cloud bookings and deferred revenue growth will lead to revenue acceleration in the second half and next year.

We talked about a 38% year on year double-digit growth.

Our billings grew 68%.

Again, just to give you a number, Salesforce grew 21%, and Workday 41%.

We grew 68%.

Bookings [$284] in USD.

In cloud, 75% growth.

Let me give you some customer numbers.

We added 857 new SaaS customers in the quarter, 720 customer expansions.

Our install base is now over 10,000 customers.

Over 3,000 of these are fusion, and almost 50% of our bookings in dollars are now fusion.

In ACM we added 211 customers, growing faster than Workday; CX, 409 customers.

In ERP, we added 311 customers.

We're now over 1,500 customers in our install base -- 450 are now live.

5X Workdays, 90.

ERP and EPM, more than half of our Q2 wins did not have Oracle on-premise apps, meaning in one quarter we sold more net new customers than Workday did in it is lifetime.

In PaaS we added 1,343 new PaaS customers, 4,100 now over the last 12 months.

Bookings $100 million in USD, and 75% of what we've sold is now subscription, non-metered.

25% metered, our PaaS business is scaling nicely.

Now I am going to read you a bunch of names.

I just want you to get a context for the brands we closed in the quarter.

In ERP, Blue Shield of California, DHL, FDIC, McKesson, Toshiba Mitsubishi Electric, [QuidPro], a very large phone company in France, a very large industrial manufacturing company -- perhaps the largest in the world, with over $130 billion of revenue.

In HCM, AAA, Allergan, City of Aspen, Crocs.

Think of many of these now that I'm naming again beats against Workday -- Exelon, Kaiser, McGraw-Hill, Genesis -- actually, a replacement of Workday, Brocade.

More HCM, the United Nations, Stanford University.

In CX, AmBev -- CXP and customer experience -- AmBev, Expedia, Halliburton, Lufthansa, Maersk, Motorola Solutions, Sears, Toshiba Mitsubishi, and United Airlines.

In PaaS, Anthem, IKEA, Kaiser, KIA Motors, Maersk, Qantas, Symantec, and Windstream.

I could have named a lot more.

I just wanted to give you a flavor for what we did in the quarter.

Just to wrap up and connect a few dots for you on the Oracle SaaS PaaS cloud.

We are currently at a $2.6-billion run rate in total cloud revenue.

It's likely our quarterly run rate will exit the year around $3.2 billion, and will grow further after Q1 bookings.

We will book roughly more than $1.5 million in ARO this fiscal year.

Billion, sorry.

Thank you, billion.

If we continue to book the way we expect, we should see our first $1-billion quarter for SaaS/PaaS revenue next year.

Gross deferred revenue is now nearly $1.1 billion.

That is up 135% year on year, and 9% quarter on quarter.

Gross margin improved sequentially, as Safra described, 40% to 43%.

We're headed to 60% and then, as Safra described, on to 80%.

With that, I will turn it over to Larry.

Thanks, Mark.

I don't have nearly as many numbers.

I'm moving right up to 25,000 feet and talk a little bit about strategy.

Oracle's strategy is to differentiate our cloud products from our competitors.

In SaaS, we differentiate by delivering the industry's most complete suite of cloud applications.

In customer experience, we offer a CX suite made up of sales, service, marketing, eCommerce, and a lot more.

In human capital management we have an HCM suite made up of human resources, recruiting, training, and so on.

In enterprise resource planning, we are delivering an ERP suite made up of financials, supply chain, manufacturing, and all the rest.

Oracle is the first Company to market a complete cloud ERP suite for mid-size and large enterprises.

By pioneering this market, we have become the ERP market leader, with over 1,500 cloud ERP customers.

Cloud ERP is now our fastest-growing SaaS application suite.

In past, we have differentiated by making it effortless for our hundreds of thousands of customers to move their millions of existing Oracle databases and Java programs to our cloud with the push of a button, thereby obtaining the low cost and ease of use of the cloud without having to sacrifice any performance loss or any security degradation.

We now have highly differentiated, rapidly growing SaaS and PaaS businesses.

This coming year we will deliver a number of innovations in infrastructure-as-a-service, as well.

We expect that our rapidly growing cloud business will drive Oracle's overall revenue and overall profit growth for years and years to come.

Thank you, Larry.

Holly, could we please move to the Q&A portion of the call?

(Operator Instructions)

Heather Bellini, Goldman Sachs.

Thank you so much.

Safra, I had a question for you.

Just based on yours and Mark's comments about the $1.5-billion-plus in SaaS/PaaS bookings this fiscal year, is it reasonable then to assume that in FY17 that we should see SaaS/PaaS revenue growth accelerate versus what you are guiding to for FY16?

Thank you.

Yes, Heather.

In fact, it will accelerate very strongly.

It can't help itself.

Our bookings are so strong.

We've had so many contracts already.

We will be recognizing those basically regardless of how bookings go.

Of course, as you can see our bookings are also accelerating.

Yes, we are going to have a phenomenal FY17 in the cloud business.

Yes, and you know, Heather, right from the star it's going to be strong, because you're going to wind up with a Q4 at the revenue rate that we just gave you some guidance on.

You add the bookings on top of it.

When you start Q1 and into Q2, you can already do the math on what the comparisons are going to look like.

It's going to be a strong year and particularly strong start.

Thank you.

John DiFucci, Jefferies.

Hi, thank you.

Safra, it's nice to see some modest progress in your gross margin goals for the cloud business, 43% versus 40% last quarter.

But non-GAAP operating margin at 41% was a little bit below what we were looking for, anyway.

I guess, can you expand a little bit on the gross margin progress into the end of year?

This is going to be a steep ramp.

I'm just trying to figure out how much of this is based simply on this top-line growth you're going to see as the sales promotions end, and you start to see the top-line growth that's going to happen.

How much of it, if there's any just due to increased efficiencies as you move along?

Then on the operating margin side, I realize you don't hedge the income statement, but was this due -- what would have been the impact on excluding foreign exchange effects?

Let's back up.

It is all -- the bulk of the SaaS and PaaS margin improvement is because we are now recognizing revenues for which -- and much larger revenues -- for which we have already paid for many of the costs.

We built up an infrastructure that can handle massive amount of usage, significantly more usage.

We have not been able to recognize the revenue because we are recognizing it ratably.

As we scale, this is absolutely an area where it is inevitable that we -- that this improves.

In addition, we also have efficiency gains at all times; but that is again because of our larger scale, and those are simply economies of scale.

But the bulk of it is we are starting to be able to recognize revenue for which we have already invested.

As to how many points, I actually -- the impact on operating income for us was quite significant from a currency point of view, but -- hold on, I'm doing the math.

I don't know, I've got to actually do it on our margin.

I will have to do it while you are talking -- while other people are talking, and then I'll give you the exact answer at that point, how much of it was --

John, we'll circle back to you later in the call.

Why don't we go to the next question, please?

Great, thank you.

Ross McMillan, RBC Capital Markets.

Thanks for taking my question.

Mark, I think by my math the cloud bookings are about $475 million year to date, so to hit the $1.5 billion for the year, you need to deliver $1 billion-ish or so in the second half.

How confident are you in that goal?

Related to that, I'm curious on the platform or database as a service.

You commented that non-metered was a higher percentage.

I was just curious to get a sense of how you see customer usage trending on the database as a service product?

Thanks.

Okay.

Let me tell you confident.

That would be my answer to your question.

Our pipeline -- I think I mentioned this at Financial Analyst Day, as I'm going to mention it again.

Our pipeline -- I can't come up with a better analytical statement then just huge.

Our pipeline now is multiple billions of dollars.

Let me give you more color.

If I looked at the next six months, our pipeline of things that are in the next six-month funnel, you have a multi-billion dollar funnel, and our conversion rate is increasing.

That would tell you -- and our business has become scaled enough, Ross, just to be clear, that it now is behaving like a large business begins to, in terms of the scale of the funnel, the pipeline, the discipline we have, the conversion rates we have, et cetera.

That would be my view on that.

On PaaS, we have had a change to your point of going away from metered to subscription bookings.

The bookings are now the bulk.

As I mentioned it's at 75% now subscription, as opposed to metered.

I would say the usage of our PaaS has increased not significantly, but sort of geometrically -- meaning that it's gone from when we originally started the usage to jumped up over the last four or six months, I would say, to where the usage is extremely high -- extremely high in terms of the increase of our usage.

It's very exciting both in the bookings, the type of bookings, and of usage that we're seeing of what's booked.

Thank you.

Philip Winslow, Credit Suisse.

Hi, thanks guys, and congrats on a great quarter, particularly in the cloud.

Mark, you gave some pretty impressive metrics just on the customer count side, obviously in addition to the numbers Safra talked about in terms of cloud billings.

If I focus on the SaaS side in particular here, really just a competitive question here.

Obviously you put up some numbers that are multiple times the size of your competitors.

When you look application by application, because not obviously every segment's the same, where do you think you're pulling away from the competition?

Where have you seen the biggest change, do you think, in that position over the past -- call it one, two years?

That would be great, thanks.

Well, I'd start -- again, I'm going to make -- this is going to be like the fifth time I've said this, but I'm going to try to again.

In SaaS overall, we are just better overall.

We have more people.

We are well trained.

Our products all have matured, and we have a lot of references.

Our position in ERP is just unique.

We don't have a competitor, per se.

I use these metrics against Workday just to describe to you how exponentially far ahead of our only person I can think of that's built a product.

Just to be clear in ERP SaaS, I don't ever -- I'm not trying -- Safra might have somebody she knows or Larry might know somebody -- I don't see SAP.

I'm out in the market a lot.

I don't see them.

I don't know what they're working on, but it's not ERP/SaaS.

In HCM, I think we are continue to just get better and better and better.

I mentioned, because I had a blizzard of names and I may have been myself a disservice by mentioning so many names.

But in a couple of these we actually replaced Workday.

Imagine, in a period of time Workday -- sorry, in HCM, we replaced Workday.

We continue to get better and better and better at HCM, and now we are beginning to see a lot of deals that are where you sell ERP, and HCM is attached to the ERP sale.

Because of ERP being in many ways a very strategic, very sticky sale, we now see our attach rates moving up and up and up where somebody buys ERP, and they buy HCM at the same time.

The scale of our fusion products -- and the reason I gave you that metric for the first time -- is it is now a very high -- it's now beginning to become a reasonable percent of our total portfolio, versus everything that we've got, including marketing, which is having a great run, as you know.

But I add to it the fact that now fusion products, which are extremely sticky, are almost 50% of our total bookings.

Phil, I could keep going down these metrics for you, but I think we're unique in ERP, and getting further ahead.

We're at the point now we're over 1,500 customers.

We'll give you a prognostication where we end the year, but it's going to be well over 2,000 -- I guess I just did.

It's going to be well over 2,000.

We're getting better and better at HCM.

We're in a leadership position in marketing.

I feel good about where we sit.

Got it, perfect.

Thanks, congrats guys.

[Lionel Lenshow], Barclays Capital.

Hi, thanks for taking my question.

We talked a lot about cloud, but can I talk -- ask about the database business?

Throughout season, and better since open world, can you talk a little bit about what you're seeing -- we're coming closer to release two now, hopefully.

What are you seeing out in the market?

Thank you.

Thank you.

Well, we see our customers with a much higher up-take of 12-2, simply because they have two key features that are very important to our customers.

One is the in-memory aspect of the database, where we now have the fastest in-memory database.

The way you take advantage of that, you take any existing Oracle application, and you run it without change on 12-2, and it runs much -- it runs in memory without changing.

Other people say well, use my memory database.

We have to re-write the application.

In this case, you don't have to re-write the odd case, you press a button.

We run much faster.

By the way, we run faster than the competition.

We have a lot of our customers who wanted to take advantage of the in-memory acceleration.

That's one of the reasons they buy the new version of the database.

The other thing is multi-tenancy.

They like to do a lot of consolidation.

They have a lot of small databases.

They'd like to run on one machine.

You can do that much more efficiently by running the Oracle database with multiple tenants.

You consume less hardware resources.

It's easier to manage.

You can back up a whole suite of databases, a group of databases as one.

It's thoroughly automated.

That's the other major reason you would see a very rapid up-take.

Finally, we are seeing our customers, as our past big business begins to increase in adoption, that the customer wants to run the latest version of the database in the cloud, and they want to match that up with the latest version of the database in their data center.

They want to run basically the same technology both in our cloud and their data center.

That's one of the unique value propositions that we offer our cloud customers -- the same exact technology on-premise and in the cloud.

Those things will then coexist for years and years to come.

Then the customers are syncing up their versions.

We have the latest version in the Cloud, they want the latest version on-premise.

That's also accelerating the adoption of the database on-premise.

Brad Reback, Stifel Nicolaus.

Great, thanks very much.

If I look at the results geographically, Asia and Europe look to be pretty solid, especially given what's going on in Asia.

North America seemed to lag a bit.

Were there any specific items that led to that under-performance?

No.

No, you're also looking at the Americas.

For example, hardware revenues are particularly problematic for us in Latin America, things like that.

You look at the Americas, you're actually seeing Latin America, which has issues of course.

Brazil and, as you know, North America, Canada -- all together.

Yes, US was fine.

I think to your point, Asia was strong.

We've been doing -- our team has -- we talked about this before.

We've been doing a lot of rebuilding in Asia, and that has really show promise for us.

The results reflect that in the quarter.

Europe had a solid quarter overall.

We had excellent results in the cloud.

US was fine.

In the Americas, to Safra's point, you have the inclusion of Latin America, which is great organization.

It's done a great job.

They're gaining share.

In fact, I look at every metric we have in Latin America.

We've gained share in virtually every category we compete in, in Latin America.

But within the context of the quarter, the situation in Brazil is tough, which is reflected in these overall Americas results you are describing.

Great, thanks very much.

Kirk Materne, Evercore ISI.

Thanks very much.

Mark, I just wanted to double-click on the strength and fusion ERP again, if we could.

Given how far in front you seem to be in that area, are there any specific verticals or geographies that are out-sized in terms of how you guys are doing?

I was also curious about how much of the strength is you guys going into the mid-market in a big way, or the mid to upper mid-market in a bigger way, or are you actually starting to see some broader G2000 deals, as well, in terms of the ERP product?

Thanks very much.

My inclination, to answer your question, is yes; but let me try to describe what's happening.

We talked about this a little bit at Financial Analyst Day.

The good news about ERP, our ERP suite, is it's still not available.

It's just going into other geographies.

With the last release we had, we've now brought on manufacturing and supply chain.

We're now releasing the product for sale in some -- for example, in Brazil and some European countries.

We actually get some geographic expansion with the last release we had.

This is actually good news -- the strong, in this case, actually get stronger.

We actually now have material number of references.

I think I mentioned, but I'm going to try again, we have over now 450 customers wide.

This is a big metric.

Our market also expands in a couple ways with ERP, which makes it so important.

We get two increases on our total available market.

One is what you mentioned, the fact that we actually get to go down-market now.

Now we do have broad market expansion.

We get to compete for companies that otherwise would never have had an IT staff, couldn't have assembled an ERP system.

We now get to compete.

We also now -- remember, when we win an ERP system, we win the hardware, we win everything.

We win the whole stack.

Our TAM really goes up -- our total available market -- on two dimensions, the total stack, in addition to our ability to compete down market.

Now, that broad-based, that's why I specifically used the names I did.

Our success is not unique to mid-market or up-market.

It's really both.

I mentioned the name of the biggest -- I didn't mention the name, a very big telephone company in France, a very big industrial company.

These are huge companies at the same time as we have $50-million companies that are moving to our cloud ERP.

It is broad-based success across geographies.

But the good news I have for you, I think we are just really getting started.

Great, thanks.

Happy holidays.

Thank you.

Same to you.

We do have time for one final question.

Final question will come from the line of Joel Fishbein, with BTIG.

Hi.

Larry, at Analyst Day you talked about building second-generation data center architecture that should improve Oracle's overall competitive positioning.

Can you give us a little more color on what changes you are making, and when this will be rolled out?

Well, again, I said in my short remarks before we started the Q&A, I said we will be delivering innovation in infrastructure as a service.

We have a next-generation data center that we've been architecting and building.

In fact, we've actually put -- the data center's actually up and running.

There are actually three data centers, what we call an availability zone.

They're all connected by a fiber-optic ring.

The thing we've really -- we focused on a number of things.

Obviously availability, performance, security are all things you'd expect us to focus on.

The big surprise is we think we will be by far the lowest cost provider of infrastructure as a service.

We think -- we've been in this business a very long time.

We're very focused.

This is data center version two.

We've been doing this for a while now.

We think our cost of delivering infrastructure as a service in the cloud much lower than anyone else's cost with this new architecture.

With these new data centers, we'll be passing that on to our customers.

Great, thank you.

Okay.

You know what, I just needed to answer -- I think DiFucci's question, which I think it's about from here, 3.5 to 4 points, something like that.

Okay?

Thank you, Safra.

The 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 the operator for closing.

Thank you.

This concludes today's conference call.

You may now disconnect, and we thank you for your participation.