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Oracle Corp (ORCL 2.02%)
Q2 2020 Earnings Call
Dec 12, 2019, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Welcome to Oracle's Second Quarter 2020 Earnings Conference Call.
Now I would like to turn the call over to Ken Bond, Senior Vice President. Ken?
Ken Bond -- Senior Vice President, Investor Relations
Thank you, Holly. And 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 our 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.
Safra Ada Catz -- Chief Executive Officer
Thanks, Ken. But before I start, I'd like to acknowledge and thank you all for the many, many sincere condolences we received upon Mark's passing. Thank you. They mean a lot to us.
As you can see, we had another solid quarter. This quarter, we finished with total revenue growth within my guidance range and EPS at the high-end. Cloud Services and License Support continue to see material growth and given that it represents more than 70% of our total revenue, it more than offsets declines in some smaller non-strategic businesses.
We continue to be encouraged that our overall revenue growth will further accelerate, as we reach the final stages of this ongoing shift in business mix. Of late, I've been spending much more time with customers. The overriding theme I hear is the compelling nature of our technology and how it is critical to the success of their businesses, feature-rich, simple, secure, performance 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 though 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 advisor 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 saved money too. By using the AI and processes in Fusion ERP Cloud, we've been able to eliminate more than 30% of our manual accounting activities.
And enabled by Fusion HCM Cloud, we have seen employee satisfaction level soar with all-time high rates for things like hiring and on-boarding 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 are 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 ourselves -- our sales people 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 customer’s move to the cloud.
In addition, we have adopted the Gen 2 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 will review our non-GAAP results using constant dollar growth rates unless I state otherwise. Currency 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 30s, including Fusion ERP, up 38% and Fusion HCM, up 23%, NetSuite ERP was up 28%, vertical Fast was up low-double-digits, while Data Cloud stabilized.
On a trailing 12-month 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 of 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 Gen 2 Exadata Cloud at customer fully deployed and connected. It was done in just four days. Previously, with our Gen 1 architecture, this typically took significantly longer. As a result, we are very optimistic about the impact our Gen 2 clouded 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 the 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 Gen 2 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 sounds like they are 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 be between $0.95 and $0.97 in USD. Total capex for fiscal year '20 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 '20 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 -- 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 -- 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.
Lawrence J. Ellison -- Chairman of the Board and Chief Technology Officer
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, will 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 European competitor is Workday and they claim to have a few hundred ERP customers. Workday's lack of success in cloud ERP is creating opportunities for Oracle and Cloud HCM. More and more we are seeing HCM is 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 mid-size SAP customers from SAP to Fusion ERP. Importantly, a few months from now, in Q1, in the 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 to 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 the clear 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 application’s growth rate far beyond that 30%. We are very, very comfortable that we will be the overwhelming winner in this generation of Cloud ERP business.
Now let's look at some application wins in the quarter. Advanced Publications, a media company bought ERP. Albertsons bought ERP, EPM and Supply Chain. CH 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. So I have a separate list for HCM. So a lot of these guys, maybe next quarter, I'll put the HCM deals right next to the ERP deals. So you could see -- because I'll be repeating a lot of these names when I get to my HCM list. And that's a point I made earlier that people are now looking at HCM, it's just another module that we need at 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 -- 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, big 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 were 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 -- oh I'm sorry, now I'm in 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, another energy company, bough HCM. Cummins, manufacturing company, HCM. Graybar Electric bought HCM. Hologic, HCM. HUS that's the hospital -- both are 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 and SAP's stronghold in the energy sector, bought HCM from us. Southern Star Central Pipeline, big gas company, energy, HCM. Technip, energy company, HCM. Tenet Healthcare bought HCM. Texas Children's Hospital bought HCM. And WHATABRANDS bought HCM. Birmingham City Council bought HCM. Kuwait Petroleum Company, a big energy company bought HCM. MEDNAX, healthcare, HCM. Phoenix Life Holdings, HCM.
In Customer Experience, Equinix bought Service. Ferguson Enterprises bought Service. Ferrari bought Sales and Marketing. IKEA 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 Gen 2 Infrastructure. In the database market, we are the overwhelming number-one, with the 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. So 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 reason Capital One lost all that data at AWS is because one of the Capital One people made a configuration error. 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 to patch systems. Remember that one, they patch some but not all, all of the systems, and Equifax, it was a patchy struts 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's a security flaw over at Equifax. They knew what that is, they just didn't get around the patching. Patching is hard. Didn't find all the databases you had to schedule downtime. You don't schedule downtime with the Autonomous Database. You patch the Autonomous Database while the database is still running. You don't patch the database, it's the robots, our robots patch the database that's why it's autonomous. There's no human labor, so there is no human error. So if you're wanting 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 10 times faster than anything Amazon have. That means we're much cheaper than anything Amazon have.
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 businesses, 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 at Customer, Gen 2 Cloud at Customer. Now when people can start putting Autonomous Database, they are 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 at that -- they need the Autonomous Database capabilities behind their firewall in their data center. And over the next few months, we are rolling out this Autonomous Database Gen 2 Cloud at 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 Gen 2 stuff was -- can be installed in a day. Now, 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.
Okay. 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 our -- it's interesting that both of our Autonomous Database and our Cloud Applications are running in our new Gen 2 highly secure infrastructure. And by the end 2020, by the end of next calendar year, this time next year, I'll be able to say that we have more Gen 2 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 and Gen 2 Infrastructure wins this quarter. Okay. AFIA [Phonetic] International, a big manufacturing firm. Albertsons, this is another -- this is more synergies that I've got to mention when 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 buy HCM, but 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 Gen 2 Data Center. You become an infrastructure customer as well as an application customer and we see a lot of overlap. We often 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 Gen 2 Infrastructure and the Autonomous Data Warehouse. Clearstream services, same thing Gen 2 Infrastructure, Autonomous Data Warehouse. Embraer Aviation, the Brazilian aircraft manufacturer, Autonomous Database and Gen 2 Infrastructure. Equity Bank of Kenya, Autonomous Database, Gen 2 Infrastructure. Fastenal Company, a big distribution company in the United States, Gen 2 Infrastructure. Health Care Services Corp, Gen 2 Infrastructure and Autonomous Database. Interac, Gen 2 Infrastructure. King Faisal Specialist Hospitals and Research Center, Autonomous Database, Autonomous Transaction Processing.
Encore [Phonetic] University, Autonomous Database, Gen 2 Infrastructure. Manchester, Autonomous Database and Gen 2 Infrastructure. MGM Entertainment, Autonomous Database, Autonomous Transaction Processing. Provident Health Care Services, Autonomous Database, Autonomous Transaction Processing. Schenker Logistics in Germany, Autonomous Data Warehouse. Sauer [Phonetic], Gen 2 Infrastructure. Swiss Post Gen 2 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 HCM, ERP, bought the full suite and Gen 2 Infrastructure and Autonomous Database. The Boston Globe, Gen 2 Infrastructure, Autonomous Database. Thermos, Autonomous Database, Autonomous Transaction Processing. Tibersoft, Autonomous Database. Tideworks Netherlands, Gen 2 Infrastructure. Tokyo Gas and Electric, Autonomous Data Warehouse, Gen 2 Infrastructure. TriMark USA, Gen w2 Infrastructure. Walgreens, Autonomous Data Warehouse, Autonomous Transaction Processing, Gen 2 Infrastructure.
WiZink Bank, Autonomous Data Warehouse, Gen 2 Infrastructure. ZIM, the big shipping company, you see a lot of Maersk, you see that in ZIM on lots of lots of containers, Autonomous Database, Autonomous Transaction Processing and Gen 2 Infrastructure. AXA Equitable Life Insurance, Autonomous Database, Gen 2 Infrastructure. Banco de Chile, Autonomous Database, Autonomous Data Warehouse, Gen 2 Infrastructure. Baxter Healthcare, Autonomous Data Warehouse. Cigna Corporate Services, Autonomous Data Warehouse, Gen 2 Infrastructure. Eventbrite, Gen 2 Infrastructure. Ford Motor Company, Gen 2 Infrastructure, Autonomous Database, Autonomous Warehouse. Mary Kay, Gen 2 Infrastructure. Samsung Electronics, Gen 2 Infrastructure, Autonomous Database, Autonomous Transaction Processing. Verifone, Gen 2 Infrastructure, Autonomous Database and Autonomous Transaction Processing.
With that, I will turn it over to the audience for questions.
Ken Bond -- Senior Vice President, Investor Relations
Thank you, Holly. Thank you, Larry. Holly, if you could please prepare the audience for questions.
Questions and Answers:
Operator
[Operator Instructions] And our first question is going to come from the line of Michael Turits, Raymond James.
Michael Turits -- Raymond James -- Analyst
Hey, good evening everybody. Safra it's great to see that you reaffirmed your guidance for the full-year for 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 that mean in terms of what it implies about fiscal '21?
Safra Ada Catz -- Chief Executive Officer
So, we've got everything finally out and available, and as Larry and I both mentioned, we've got Cloud at 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 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. We are 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.
Michael Turits -- Raymond James -- Analyst
Great. Thanks very much.
Safra Ada Catz -- Chief Executive Officer
Sure.
Operator
And our next question is going to come from the line of Heather Bellini, Goldman Sachs.
Heather Bellini -- Goldman Sachs -- Analyst
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 is 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 throughout, 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?
Safra Ada Catz -- Chief Executive Officer
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 are 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 GBU piece.
Heather Bellini -- Goldman Sachs -- Analyst
Okay and then – and 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 -- you getting someone to kind of help take his place and some of the responsibilities that you've taken over?
Lawrence J. Ellison -- Chairman of the Board and Chief Technology Officer
Okay. This is Larry. I'm going to answer that question because I get the questions. So how is our search for a second CEO going? I 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. So, let me make it very simple. How is our search going for the news -- for a second CEO? We don't have one. 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, 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.
Heather Bellini -- Goldman Sachs -- Analyst
Thank you very much.
Ken Bond -- Senior Vice President, Investor Relations
Next question please. Thank you, Heather.
Operator
Next question is going to come from the line of Brad Zelnick, Credit Suisse.
Brad Zelnick -- Credit Suisse -- Analyst
Great. Thanks so much. Larry, the momentum in Autonomous Database is fantastic, growing over 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 at 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?
Lawrence J. Ellison -- Chairman of the Board and Chief Technology Officer
No. I mean there -- either in terms of the technological breakthrough. Well, yeah, I guess we had the first commercial relational database at the very beginning. I mean that's kind of created Oracle Corporation, right? So we had the very first commercial relational database. We had one before IBM did or anyone else did. So that created -- 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 things. It is so much different, so much safer 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 product. The good news is we’re having a huge installed base here, it takes a while for that -- for us to ship in, 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 we'll offer is Autonomous Database. It will replace everything else.
And by the way, our Autonomous Database is only available in two forms. 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's in our storage in your data center and in our public cloud. So we think it'll 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, triple probably is a reasonable estimate to look at. Now, of course, when you're in your business, it's all about timing. And I wish I could tell you exactly how much we'll 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 the first couple of quarters, it was still 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.
Ken Bond -- Senior Vice President, Investor Relations
Fantastic. Thank you, Larry.
Operator
Our next question is going to come from the line of Phil Winslow, Wells Fargo.
Philip Winslow -- Wells Fargo -- Analyst
Okay. Great. Thanks for taking my question. Just wanted to focus in on the Applications business. Obviously, we saw a nice pick back up here quarter-to-quarter in terms of the year-over-year growth rate. I guess the question is Safra, and I guess Larry too, would you think about the sort of different curves that build up 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 sort of those headwinds that 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?
Safra Ada Catz -- Chief Executive Officer
So let me get it 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 have 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 has been, to some extent, leading to a wait and see attitude by some historical E-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 E-Business Suite. Simultaneously, as Larry mentioned, SAP customers have realized that SAP's offerings are not cloud offerings. If you use SAP's technology, you don't get a 100 new features, every quarter. Theirs is simply a hosted offering, which means that we are the obvious choice for customers 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.
Lawrence J. Ellison -- Chairman of the Board and Chief Technology Officer
Yeah. I think a lot of SAP is -- again in the mid-market, we are replacing a lot of SAP customers and we've got them live and we have references. But right at the very apex that SAP's customer base is their top 50 customers around the world. They are 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 $1 billion SAP upgrade. SAP end-of-life, their current stuff in 2025. So if you're a big SAP customer, you got to make it -- that some people have bought, as you bought ahead, as you bought S/4HANA in the cloud with no plan to -- with no really good plan to implement it. It's a five-year implementation. They're getting price quotes of $1 billion 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. I think everyone said, oh, it's easy for Oracle to 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. I mean, you can find it for little Survey Monkey and all the stuff that they bought. But they forgot to write ERP -- and that's their business, they forgot to rewrite ERP, the projects that they had to do, they’re called Business By Design failed. They canceled it. So there is no cloud option for SAP's customers. They can't go to Workday. Workday can't even handle mid-market ERP. So believe me, they want an alternative SAP. Makes sense, right? That they should want alternative. But we've just got to demonstrate that we can safely take these enormous companies to the cloud in a way that they are not putting their business in any risk. And that's why this one particular joint 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 Germany, lots of them are working with us. These are German customers. The core of SAP are working with us and taking some of their -- moving some of their divisions already, some of their divisions to Oracle Fusion to persuade themselves that we can do this safely. They've gone that far. They don't want to continue with this obsolete code.
This is -- this opportunity is gigantic because we have one ERP customer -- competitor on-premise. They don't have a cloud offering that's SAP. And we've got one ERP cloud competitor that just is not doing very well, having hard time getting their business off the ground, it doesn't scale. 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 Gate's Share for ERP, like Microsoft Office to be -- Microsoft Office of ERP 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.
Ken Bond -- Senior Vice President, Investor Relations
Thank you, Larry. Next question please.
Operator
And our next question is going to come from the line of Mark Moerdler, Sanford Bernstein.
Mark Moerdler -- Sanford Bernstein -- Analyst
Thank you very much for taking my question. Autonomous Database, sounds like it's really starting to gain traction. Given the shift to 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, are they including it with the cloud, are you seeing changes in the size of the customer, size of the pipeline, time it takes from customer interest to adoption, any of that would be really appreciated?
Lawrence J. Ellison -- Chairman of the Board and Chief Technology Officer
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, an AWS approach to selling Autonomous Database in the cloud. So we almost prefer selling a $30,000 deal to $100,000 deal because the $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 apps, and they've working projects, working data warehouses, working transaction processing systems, you start and you land and expand. So we are 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 BYOL but the majority is not BYOL. It was interesting, in the early days in ERP, when we are ERP people used to say, well, you’re used – moving your 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 in database. But again, most of them are our customers, but they are not using their existing licenses. They're going ahead and using a standard cloud license what we call paid up. They pay us big up, you pay for what you use. I mean it's the promise of the cloud and we're getting thousands of these because we think the best-selling technique for Autonomous Database is try it, get it running, watch, it backs itself up, it upgrades itself, it tunes itself, it configures itself. There is 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.
Ken Bond -- Senior Vice President, Investor Relations
Great. Next question please.
Operator
Our final question for today will come from the line of Kirk Materne, Evercore.
Kirk Materne -- Evercore -- Analyst
Yes. Thanks very much and thanks for taking the question. Safra, I just wonder if you could comment on just sort of the geographic landscape for you all. Looked like Europe was perhaps a little bit softer than 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.
Safra Ada Catz -- Chief Executive Officer
Yeah. 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 is nothing really special going on one way or the other. Sometimes 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's 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 help to explain some of the big growth in some of those areas. But EMEA, I think we'll see there is nothing special in particular. I have no real color to add and we'll see what happens after today's election in the UK.
Kirk Materne -- Evercore -- Analyst
Sounds good. Thank you.
Ken Bond -- Senior Vice President, Investor Relations
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, we look forward to speaking to you.
With that, I'll turn the call back to, Holly, for closing. Thank you.
Operator
[Operator Closing Remarks]
Duration: 55 minutes
Call participants:
Ken Bond -- Senior Vice President, Investor Relations
Safra Ada Catz -- Chief Executive Officer
Lawrence J. Ellison -- Chairman of the Board and Chief Technology Officer
Michael Turits -- Raymond James -- Analyst
Heather Bellini -- Goldman Sachs -- Analyst
Brad Zelnick -- Credit Suisse -- Analyst
Philip Winslow -- Wells Fargo -- Analyst
Mark Moerdler -- Sanford Bernstein -- Analyst
Kirk Materne -- Evercore -- Analyst
