Item 1. Business

Oracle Corporation provides products and services that address all aspects of corporate information technology (IT) environments-applications,
platform and infrastructure. Our applications, platform and infrastructure offerings are delivered to customers worldwide through a variety of flexible and interoperable IT deployment models, including cloud-based,
on-premise, or hybrid, which enable customer choice and flexibility. We market and sell our offerings globally to businesses of many sizes, government agencies, educational institutions and resellers with a
worldwide sales force positioned to offer the combinations that best meet customer needs.

Our Oracle Cloud offerings provide a comprehensive and
fully integrated stack of applications, platform, compute, storage and networking services in all three primary layers of the cloud: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Our Oracle Cloud
SaaS, PaaS and IaaS offerings (collectively, "Oracle Cloud Services") integrate the software, hardware and services on customers' behalf in IT environments that we deploy, support and manage for the customer. Our integrated Oracle
Cloud Services are designed to be rapidly deployable to enable customers shorter time to innovation; easily maintainable to reduce integration and testing work; connectable among differing deployment models to enable interchangeability and
extendibility between IT environments; compatible to easily move workloads between the Oracle Cloud and other IT environments; cost-effective by requiring lower upfront customer investment; and secure, standards-based and reliable. We are a leader
in the core technologies of cloud IT environments, including database and middleware software as well as enterprise applications, virtualization, clustering, large-scale systems management and related infrastructure. Our products and services are
the building blocks of our Oracle Cloud Services, our partners' cloud services and our customers' cloud IT environments.

Our cloud
license and on-premise license deployment model includes Oracle Applications, Oracle Database and Oracle Fusion Middleware software offerings, among others, which customers deploy utilizing IT infrastructure
from the Oracle Cloud or their own cloud-based or on-premise IT environments. Substantially all customers, at their option, purchase license support contracts when they purchase a license. Our hardware
products include Oracle Engineered Systems, servers, storage and industry-specific products, among others, and customers generally opt to purchase hardware support contracts when they make a hardware purchase. We also offer services to assist our
customers and partners to maximize the performance of their Oracle purchases.

Providing choice and flexibility to our customers as to when and how
they deploy our applications, platform and infrastructure technologies is an important element of our corporate strategy. We believe that offering customers broad, comprehensive, flexible and interoperable deployment models for our applications,
platform and infrastructure technologies is important to our growth strategy and better addresses customer needs relative to our competitors, many of whom provide fewer offerings and more restrictive deployment models.

Our investments in, and innovation with respect to, our products and services that we offer through our cloud and license, hardware and services
businesses are another important element of our corporate strategy. In fiscal 2018, 2017 and 2016, we invested $6.1 billion, $6.2 billion and $5.8 billion, respectively, in research and development to enhance our existing portfolio of
offerings and products and to develop new technologies and services. We have a deep understanding as to how applications, platform and infrastructure technologies interact and function with one another. We focus our development efforts on improving
the performance, security, operation and integration of our technologies to make them more cost-effective and easier to deploy, manage and maintain for our customers and to improve their computing performance relative to our competitors'
products. For example, we believe that Oracle applications and platform technologies, such as the Oracle Database, when combined with Oracle infrastructure technologies deliver improved performance at a lower cost relative to competing
infrastructure technologies. After the initial purchase of Oracle products and services, our customers can continue to benefit from our research and development efforts and deep IT expertise by electing to purchase and renew Oracle support offerings
for their license and hardware deployments, which may include product enhancements that we periodically deliver to our products, and by renewing their Oracle Cloud Services contracts with us.

Index to Financial Statements

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

We have three businesses:

•

our cloud and license business, which is comprised of a single operating segment and includes our Oracle Cloud
Services offerings, cloud license and on-premise license offerings, and license support offerings, represented 82%, 80% and 78% of our total revenues in fiscal 2018, 2017 and 2016, respectively;

•

our hardware business, which is comprised of a single operating segment and includes our hardware products and related
hardware support services offerings, represented 10%, 11% and 13% of our total revenues in fiscal 2018, 2017, and 2016, respectively; and

•

our services business, which is comprised of a single operating segment, represented 8% of our total revenues in
fiscal 2018 and 9% of our total revenues in each of fiscal 2017 and 2016.

Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 15 of Notes to Consolidated Financial Statements, both included elsewhere in this Annual Report, provide additional information related to our businesses and operating segments.

Oracle Corporation was incorporated in 2005 as a Delaware corporation and is the successor to operations originally begun in June 1977.

Applications, Platform and Infrastructure Technologies

Oracle's comprehensive portfolio of applications, platform and infrastructure technologies is designed to address an organization's IT
environment needs including business process, infrastructure and applications development requirements, among others. Oracle applications, platform and infrastructure technologies are based upon industry standards and are designed to be
enterprise-grade, reliable, scalable and secure. We offer our applications, platform and infrastructure offerings through our cloud and license, hardware and services businesses and deliver them through the Oracle Cloud, or through customer use of
other IT environments including cloud-based, hybrid and on-premise. We believe our applications, platform and infrastructure offerings enable flexibility, interoperability, and choice to best meet customer IT
needs.

Oracle License Support

Oracle license
support offerings represent our largest revenue stream and are a part of our cloud and license business. Substantially all of our customers opt to purchase license support contracts when they purchase Oracle applications, platform and/or
infrastructure licenses to run within the Oracle Cloud or other cloud-based and on-premise IT environments. Substantially all customers renew their license support contracts annually. Our license support
contracts are generally priced as a percentage of the net fees paid by the customer to access the license and are typically one year in duration. We believe our license support offerings protect and enhance our customers' current investments in
Oracle applications, platform and infrastructure technologies because they provide proactive and personalized support services, including Oracle Lifetime Support and unspecified license enhancements and upgrades during the term of the support
period.

Providing choice and flexibility to our customers as to when and how they deploy our applications, platform and infrastructure
technologies is an important element of our corporate strategy. In recent periods, customer demand has increased for our Oracle Cloud Services. To address customer demand and enable customer choice, we have introduced certain programs for customers
to pivot their applications, platform and infrastructure licenses and license support contracts to the Oracle Cloud for new deployments and to migrate to and expand with the Oracle Cloud for their existing workloads. We expect these trends to
continue.

Index to Financial Statements

Applications Technologies

Oracle applications technologies are marketed, sold and delivered through our cloud and license business. Our applications technologies consist of
comprehensive cloud-based and license offerings including our Oracle Cloud SaaS offerings, which are available for customers as a subscription, and Oracle Applications offerings, which are available for customers to purchase as a license for use in
cloud-based and on-premise IT environments with the option to purchase related license support. Regardless of the deployment model selected, our applications technologies are designed to reduce the risk, cost
and complexity of our customers' IT infrastructures, while supporting customer choice with flexible deployment models that readily enable performance, agility, compatibility and extendibility.

Our applications technologies are generally designed using industry standards-based architectures to manage and automate core business functions across
the enterprise, as well as to help customers differentiate and innovate in those processes unique to their industries or organizations. We offer applications that are deployable to meet a number of business automation requirements across a broad
range of industries. We also offer industry-specific applications through a focused strategy of investments in internal development and strategic acquisitions, which provide solutions to customers in communications, construction and engineering,
financial services, health sciences, hospitality, manufacturing, public sectors, retail and utilities, among others.

Oracle Cloud Software
as a Service (SaaS)

Our broad spectrum of SaaS offerings provides customers a choice of software applications that are delivered via a
cloud-based IT environment that we host, manage and support. Our SaaS offerings are built upon open industry standards such as SQL, Java and HTML5 for easier application accessibility, integration and development. Our SaaS offerings include a broad
suite of modular, next-generation cloud software applications that span core business functions including human capital management (HCM), enterprise resource planning (ERP), customer experience (CX), and supply chain management (SCM), among others.
We also offer a number of cloud-based industry solutions to address specific customer needs within certain industries.

We believe that the
comprehensiveness and breadth of our SaaS offerings provide greater benefit to our customers and differentiate us from many of our competitors that offer more limited or specialized applications. Our SaaS offerings are designed to support connected
business processes in the cloud and are centered on a responsive and flexible business core. Our SaaS offerings are designed to deliver a secure data isolation architecture and flexible upgrades; self-service access controls for users; a
Service-Oriented Architecture (SOA); built-in social, mobile and business insight capabilities; and a high performance, high availability infrastructure based on our infrastructure technologies, including
Oracle Engineered Systems. These SaaS capabilities are designed to simplify IT environments, reduce time to implementation and risk, improve the user experience and enable customers to focus resources on business growth opportunities. Our SaaS
offerings are designed to incorporate emerging technologies such as Internet-of-Things (IoT), Artificial Intelligence (AI) and Machine Learning (ML), blockchain and
advances in the "human interface" and how users interact with our applications.

Our Oracle Cloud SaaS offerings include, among others:

•

Oracle HCM Cloud, which is designed to help organizations find, grow and retain their talent, enable collaboration,
provide complete workforce insights, increase operational efficiency, and enable users to connect to an integrated suite of HCM applications from any device;

•

Oracle ERP, which is designed to be a complete, global and integrated ERP solution to help organizations improve
decision making and workforce productivity, and to optimize back office operations by utilizing a single data and security model with a common user interface. We also offer NetSuite ERP, which is a cloud-based ERP offering targeted at small and medium-sized organizations and is designed to run back-office operations and financial processes and includes financial management, revenue management and billing, inventory, supply chain and warehouse management
capabilities, among others;

•

Oracle CX Cloud, which is designed to be a complete and integrated solution to help organizations deliver consistent
and personalized customer experiences across their customer channels, touch points and interactions;

5

•

Oracle SCM Cloud, which is designed to help organizations create, optimize and digitize their supply chains and
innovate products quickly; and

•

Oracle Data Cloud, which is designed to enable organizations to leverage consumer data to inform and measure marketing
strategies and programs.

Oracle Applications

Customers have the ability to license Oracle Applications for use within the Oracle Cloud, or within their own cloud-based or on-premise IT environments. Oracle Applications are designed to manage and automate core business functions across the enterprise, including HCM; ERP; financial management and governance, risk and compliance;
procurement; project portfolio management; SCM; business analytics and enterprise performance management; CX and customer relationship management; and industry-specific applications, among others.

As described above, we provide the option for customers to purchase license support contracts in connection with the purchase of Oracle Applications
licenses.

Platform and Infrastructure Technologies

Oracle platform technologies are marketed, sold and delivered through our cloud and license business. Our comprehensive platform technologies including
database, middleware and development tools are available through subscription to our Oracle Cloud PaaS offerings or by the purchase of a license. Our platform offerings include Oracle Database, the world's most popular enterprise database, and
Java, the computer industry's most widely-used software development language, among others, and related license support at the customer's option. Our platform technologies are designed to provide a cost-effective, standards-based,
high-performance platform for developing, running, integrating, managing and extending business applications. Our customers are increasingly focused on developing innovations and reducing the total cost of their IT infrastructure and we believe that
our platform technologies help them achieve this goal.

Our platform technologies are designed to accommodate demanding, mission-critical business
environments using elastic clusters of middleware, database servers and storage. These elastic clusters are designed to scale incrementally as required to address our customers' IT capacity requirements, satisfy their planning and procurement
needs, support their business applications with a standardized platform architecture, reduce their risk of data loss and IT infrastructure downtime and efficiently utilize available IT resources to meet quality of service expectations. In addition
to utilizing these tools for modernizing their businesses, our customers are looking to build new and innovative applications leveraging emerging technologies such as IoT chatbots and AI/ML. Today, Oracle delivers applied AI functionality as a part
of its Autonomous Data Warehouse Cloud Service, which is designed to deliver simplified, fast and highly elastic support for data warehousing in the Oracle Cloud, eliminating manual configuration, tuning, and scaling tasks and allowing for
streamlined operations, more efficient consumption of resources, and higher security and reliability. Our Cloud Platform technologies are designed with built-in automation at all levels to perform maintenance
tasks so our customers can utilize their IT resources to focus on extracting more value from the data they currently manage.

Oracle infrastructure
technologies provide cloud-based compute, storage and networking capabilities through our Oracle Cloud IaaS offerings. Oracle infrastructure technologies also include hardware and certain hardware-related software offerings such as Oracle Engineered
Systems, servers, storage, industry-specific hardware, virtualization software, operating systems, management software and related hardware services including support at the customer's option. We design our infrastructure technologies to work
in customer environments that may include other Oracle or non-Oracle hardware or software components. Our flexible and open approach provides Oracle customers choice on how they utilize and deploy our
infrastructure technologies: through the use of Oracle Cloud Platform's IaaS offerings; in our customer's data centers; or a hybrid combination of these two deployment models. We focus on the operation and integration of our infrastructure
technologies to make them easier to deploy, extend, interconnect, manage and maintain for our customers and to improve computing performance relative to our competitors' offerings. For example, we believe that Oracle applications and platform
technologies when combined with Oracle infrastructure technologies deliver improved performance at a lower cost relative to competing infrastructure technologies. As another example,

6

we design Oracle Engineered Systems to integrate multiple Oracle technology components to work together to deliver improved performance, availability, security and operational efficiency relative
to our competitors' products. These same Oracle technology components are tested together and supported together to streamline the Oracle Engineered System deployment and maintenance cycles. We also engineer our hardware products with
virtualization and management capabilities to enable the rapid deployment and efficient management of cloud and other IT infrastructures.

Oracle Cloud-Based Platform and Infrastructure Offerings

We believe that our Oracle Cloud Platform and Infrastructure offerings are large opportunities for us to expand our cloud and license business. We
believe that our customers increasingly recognize the value of access to cloud-based IaaS capabilities on both a standalone basis and including PaaS with Oracle Database, Oracle Fusion Middleware (Java, Container Platform, API Management,
Integration, Developer Tools, Mobile, Analytics, Content and Experience, Security and Management), and open source including MySQL via a low cost, rapidly deployable, flexible and interoperable services model that Oracle manages and maintains on the
customer's behalf. We believe that we can market and sell our PaaS and IaaS offerings together to help customers migrate their extensive installed base of on-premise platform and infrastructure
technologies to the Oracle Cloud while at the same time reaching a broader ecosystem of developers and partners. We also believe we can market our PaaS and IaaS services to small and medium-sized businesses
and non-IT lines of business purchasers due to the highly available, low touch and low cost characteristics of the Oracle Cloud.

Oracle Cloud Platform as a Service (PaaS)

Oracle Cloud PaaS is designed to provide a broad suite of services to rapidly build, deploy, integrate, analyze, secure and manage all enterprise
applications (customer facilities-based and cloud deployed) using a cloud-based IT model that we run, manage, and support on the behalf of the customer for a fee for a stated time period. Customers and partners utilize our open, standards-based PaaS
offerings that are based upon Oracle Fusion Middleware including Java, open source, and the Oracle Database, together with tools for a variety of use cases across data management, applications development, integration, content and experience,
business analytics, IT operations management and security. Our Oracle Cloud PaaS offerings include, among others, Data Management, Application Development, Integration, Business Analytics, Management and Security Cloud solutions.

Oracle Cloud Infrastructure as a Service (IaaS)

Oracle Cloud IaaS offerings are substantially marketed, sold and delivered through our cloud and license business and include our Oracle Cloud
Infrastructure and Oracle Managed Cloud Services offerings. Oracle Cloud Infrastructure offerings are designed to deliver enterprise-grade compute, storage and networking services within the Oracle Cloud for a fee for a stated period of time, or on
a pay-as-you-go basis for service at a specified rate. Customers use Oracle Cloud Infrastructure offerings to build and operate
new cloud-native applications, and to move their existing workloads to the Oracle Cloud from their data centers or from other cloud-based IT environments, among other uses. By utilizing Oracle Cloud IaaS, customers leverage the Oracle Cloud for
enterprise-grade, scalable, cost-effective, and secure infrastructure technologies that are designed to be rapidly deployable while reducing the amount of time and resources normally consumed by IT processes in their
on-premise environments. We continue to invest in Oracle Cloud IaaS to expand the catalog of tools and services we provide to simplify the process of migrating workloads to the Oracle Cloud, as well as to
provide customers with the ability to run workloads across on-premise IT environments and the Oracle Cloud in a hybrid deployment model. Our Oracle Cloud IaaS offerings include compute offerings such as bare
metal servers and virtual machines, among others; storage offerings including block, object and archive storage, among others; and networking cloud offerings.

We also offer Oracle Managed Cloud Services which are designed to provide comprehensive software and hardware management, maintenance and security
services for customer cloud-based, hybrid IT or other infrastructure for a fee for a stated term. Oracle Managed Cloud Services may be hosted at our Oracle data center facilities, select partner data centers or physically at our customer's
facilities.

7

Oracle Cloud at Customer

Oracle Cloud at Customer is a direct response to barriers to public cloud adoption for businesses within certain regulated industries or jurisdictions.
Customers are able to access certain SaaS, PaaS and IaaS capabilities of the Oracle Cloud in their own data centers, fully managed by Oracle. This allows customers to take advantage of the agility, innovation and subscription based pricing of Oracle
Cloud Services while meeting data sovereignty, data residency, data protection and regulatory business policy requirements.

Other Oracle
Platform and Infrastructure Offerings

Oracle Database

The Oracle Database is the world's most popular enterprise database and is designed to enable reliable and secure storage, retrieval and
manipulation of all forms of data. The Oracle Database is licensed throughout the world by businesses and organizations of different sizes for a multitude of purposes, including, among others: for use within the Oracle Cloud to deliver our Cloud
SaaS and PaaS offerings; for use by a number of cloud-based vendors in offering their cloud services; for packaged and custom applications for transactions processing; and for data warehousing and business intelligence. The Oracle Database may be
deployed within different IT environments including the Oracle Cloud, other cloud-based environments, on-premise data centers and related IT environments. Customers may elect to purchase license support for
the Oracle Database at their option.

Oracle Database Enterprise Edition is available with a number of optional
add-on products to address specific customer requirements. In addition to the Oracle Database, we also offer a portfolio of specialized database products to address particular customer requirements including
MySQL, Oracle TimesTen In-Memory Database, Oracle Berkeley DB, and Oracle NoSQL Database.

Oracle Big Data

Big data generally refers to a massive amount of unstructured, streaming and structured data that is so large that it is difficult to
process using traditional IT techniques. We offer big data solutions to complement and extend its applications, platform and infrastructure technologies. We believe that most businesses view big data as a potentially high-value source of
business intelligence that can be used to gain new insights into their customers' behaviors, to anticipate future demand more accurately, to align workforce deployment with business activity forecasts and to accelerate the pace
of operations, among other benefits. We offer a broad portfolio of platform and infrastructure offerings to address an organization's big data requirements including, among others, cloud-based services for data integration, data
management, analytics and ML.

Oracle Fusion Middleware

We license our Oracle Fusion Middleware, which is a broad family of integrated application infrastructure software, for use in the Oracle Cloud, other
cloud-based environments, on-premise data centers and related IT environments. These products are designed to form a reliable and scalable foundation on which customers can build, deploy, secure, access,
extend and integrate business applications and automate their business processes. Built with our Java technology platform, Oracle Fusion Middleware products are designed to be flexible across different deployment environments-cloud, on-premise or hybrid-as a foundation for custom, packaged and composite applications thereby simplifying and reducing time to deployment. Oracle Fusion Middleware is designed to protect customers' IT
investments and work with both Oracle and non-Oracle database, middleware and applications software through its open architecture and adherence to industry standards. Specifically, Oracle Fusion Middleware is
designed to enable customers to integrate Oracle and non-Oracle business applications, automate business processes, scale applications to meet customer demand, simplify security and compliance, manage
lifecycles of documents and get actionable, targeted business intelligence. In addition, Oracle Fusion Middleware supports multiple development languages and tools, which enables developers to flexibly build and deploy web services, websites,
portals and web-based applications across different IT environments.

8

Among our other middleware offerings, we license a wide range of development tools, identity management
and business analytics software for mobile computing development that are designed to address the needs of businesses that are increasingly focused on delivering mobile device applications to their customers. We also offer certain of these mobile
development capabilities as a cloud service, including Oracle Mobile Cloud Service, among others.

Customers may elect to purchase license support,
as described above, for Oracle Fusion Middleware licenses at their option.

Java

Java is the computer industry's most widely-used software development language and is viewed as a global standard. We believe the Java programming
language and platform together represent one of the most popular and powerful development environments in the world, one that is used by millions of developers globally to develop embedded applications, web content, enterprise software and games.
Oracle Fusion Middleware software products and certain of our Oracle Applications are built using our Java technology platform, which we believe is a key advantage for our business. Customers may license the use of Java or access Java through Oracle
Java Cloud Service.

Java is designed to enable developers to write software on a single platform and run it on many other different platforms,
independent of operating system and hardware architecture. Java has been adopted by both independent software vendors (ISVs) that have built their products on Java and by enterprise organizations building custom applications or consuming Java-based
ISV products.

Hardware Business

Our
hardware business provides a broad selection of hardware products and related hardware support services for cloud-based IT environments, data centers and related IT environments.

Oracle Engineered Systems

Oracle Engineered Systems are
core to our cloud-based and on-premise data center infrastructure offerings. Oracle Engineered Systems are pre-integrated products designed to integrate multiple Oracle
technology components including database, storage, operating system or middleware software with server, storage and networking hardware and other technologies to work together to deliver improved performance, availability, security and operational
efficiency relative to our competitors' products; to be upgraded effectively and efficiently; and to simplify maintenance cycles by providing a single solution for software patching. We offer certain of our Oracle Engineered Systems, including
Oracle Exadata Database Machine, among others, through flexible deployment options, including as a cloud service and as a cloud at customer service.

Servers

We offer a wide range of server products that are designed for mission-critical enterprise environments and are key components of our
engineered systems offerings and cloud offerings. We have two families of server products: those based on the SPARC microprocessor, which are designed to be differentiated by their reliability, security and scalability; and those using
microprocessors from Intel Corporation. By offering a range of server sizes and microprocessors, customers are offered the flexibility to choose the types of servers that they believe will be most appropriate and valuable for their particular IT
environments. We believe the combination of Oracle server systems with Oracle software enhances customer ability to shift data and workloads between data center and cloud deployments based on business requirements.

Storage

Oracle storage products are engineered for the
cloud and designed to securely store, manage, protect, and archive customers' mission-critical data assets generated by any database or application. Oracle storage products combine flash, disk, tape and server technologies with optimized
software and unique integrations with Oracle Database designed to offer greater performance and efficiency, and lower total cost relative to our

9

competitors' storage products. Certain of our storage products are offered as a cloud service and cloud at customer service. Our storage offerings include, among others, Oracle ZFS Storage
Appliance, a unified storage system that combines network attached storage (NAS), storage area network (SAN) and object storage capabilities; Oracle's Zero Data Loss Recovery Appliance that provides unique, recovery-focused data protection for
Oracle Database; and Oracle's StorageTek tape storage and automation product line which includes tape drives, tape libraries, mainframe virtualized tape libraries, media, and software packages that provide lifecycle data management and security
for enterprise backup and archive requirements.

Industry-Specific Hardware Offerings

We offer hardware products and services designed for certain specific industries including our point-of-sale terminals and related hardware that are designed for managing businesses within the food and beverage, hotel and retail industries; and hardware products and services for communications networks
including network signaling, policy control and subscriber data management solutions, and session border control technology, among others.

Operating Systems,
Virtualization, Management and Other Hardware-Related Software

We offer a portfolio of operating systems, including Oracle Linux and Oracle
Solaris, virtualization software including Oracle VM, and other hardware related software including development, management and file systems tools that are designed to optimize the performance, efficiency, and security of customers' hardware
products while providing customers with high levels of flexibility, reliability, and availability. We also offer a range of management technologies and products, including Oracle Enterprise Manager, that help customers build and efficiently operate
complex IT environments, including both end users' and service providers' cloud environments.

Hardware Support

Our hardware support offerings provide customers with unspecified software updates for software components that are essential to the functionality of
our hardware products and associated software products such as Oracle Solaris. These offerings can also include product repairs, maintenance services and technical support services. We continue to evolve hardware support processes that are intended
to proactively identify and solve quality issues and to increase the amount of new and renewed hardware support contracts sold in connection with the sales of our hardware products. Hardware support contracts are generally priced as a percentage of
the net hardware products fees.

Services

We
offer services solutions to help customers and partners maximize the performance of their investments in Oracle applications, platform and infrastructure technologies. We believe that our services are differentiated based on our focus on Oracle
technologies, extensive experience and broad sets of intellectual property and best practices. Our services business offers the following:

•

consulting services, which are designed to help our customers and global system integrator partners more successfully
architect and deploy our cloud and license offerings including IT strategy alignment, enterprise architecture planning and design, initial software implementation and integration, application development and integration services, security
assessments and ongoing software enhancements and upgrades. We utilize a global, blended delivery model to optimize value for our customers and partners, consisting of consultants from local geographies, industry specialists and consultants from our
global delivery and solution centers;

•

advanced customer support services, which are provided at customer facilities and remotely to enable increased
performance and higher availability of their Oracle products; and

•

education services for Oracle's cloud and license offerings, including training and certification programs that
are offered to customers, partners and employees through a variety of formats including instructor-led classes, live virtual training, video-based training on demand, online learning subscriptions, private
events and custom training.

10

Oracle Cloud Operations

Oracle Cloud Operations deliver our Oracle Cloud Services to customers through a secure, reliable, scalable, enterprise grade cloud infrastructure
platform managed by our employees within a global network of data centers, which we refer to as the Oracle Cloud. Oracle Cloud Operations leverage automated software tools to enable the rapid delivery of the latest cloud technology capabilities to
the Oracle Cloud as they become available. The Oracle Cloud enables secure and isolated cloud-based instances for each of our customers to access the functionality of our Oracle Cloud Services via a broad spectrum of devices.

Manufacturing

To produce our hardware products that we
market and sell to third-party customers and that we utilize internally to deliver as a part of our Oracle Cloud operations, we rely on both our internal manufacturing operations as well as third-party manufacturing partners. Our internal
manufacturing operations consist primarily of materials procurement, assembly, testing and quality control of our Oracle Engineered Systems and certain of our enterprise and data center servers and storage products. For all other manufacturing, we
generally rely on third-party manufacturing partners to produce our hardware-related components and hardware products and we may involve our internal manufacturing operations in the final assembly, testing and quality control processes for these
components and products. We distribute most of our hardware products either from our facilities or partner facilities. Our manufacturing processes are substantially based on standardization of components across product types, centralization of
assembly and distribution centers and a "build-to-order" methodology in which products generally are built only after customers have placed firm orders.
Production of our hardware products requires that we purchase materials, supplies, product subassemblies and full assemblies from a number of vendors. For most of our hardware products, we have existing alternate sources of supply or such sources
are readily available. However, we do rely on sole sources for certain of our hardware products. As a result, we continue to evaluate potential risks of disruption to our supply chain operations. Refer to "Risk Factors" included in Item 1A
within this Annual Report for additional discussion of the challenges we encounter with respect to the sources and availability of supplies for our products and the related risks to our business.

Sales and Marketing

We directly market and sell our
cloud, license, hardware and services offerings to businesses of many sizes and in many industries, government agencies and educational institutions. We also market and sell our offerings through indirect channels. No single customer accounted for
10% or more of our total revenues in fiscal 2018, 2017 or 2016.

In the United States, our sales and services employees are based in our
headquarters and in field offices throughout the country. Outside the United States, our international subsidiaries sell, support and service our offerings in their local countries as well as within other foreign countries where we do not operate
through a direct sales subsidiary. Our geographic coverage allows us to draw on business and technical expertise from a global workforce, provides stability to our operations and revenue streams to offset geography specific economic trends and
offers us an opportunity to take advantage of new markets for our offerings. Our international operations subject us to certain risks, which are more fully described in "Risk Factors" included in Item 1A of this Annual Report. A summary of
our domestic and international revenues and long-lived assets is set forth in Note 15 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

We also market our product offerings worldwide through indirect channels. The companies that comprise our indirect channel network are members of the
Oracle Partner Network. The Oracle Partner Network is a global program that manages our business relationships with a large, broad-based network of companies, including independent software and hardware vendors, system integrators and resellers that
deliver innovative solutions and services based upon our product offerings. By offering our partners access to our product offerings, educational information, technical services, marketing and sales support, the Oracle Partner Network program
extends our market reach by providing our partners with the resources they need to be successful in delivering solutions to customers globally. The majority of our hardware products are sold through indirect channels including independent
distributors and value-added resellers.

11

Research and Development

We develop the substantial majority of our product offerings internally. In addition, we have extended our product offerings and intellectual property
through acquisitions of businesses and technologies. We also purchase or license intellectual property rights in certain circumstances. Internal development allows us to maintain technical control over the design and development of our products. We
have a number of United States and foreign patents and pending applications that relate to various aspects of our products and technology. While we believe that our patents have value, no single patent is essential to us or to any of our principal
businesses. Research and development expenditures were $6.1 billion, $6.2 billion and $5.8 billion in fiscal 2018, 2017 and 2016, respectively, or 15% of total revenues in fiscal 2018 and 16% of total revenues in each of fiscal 2017
and 2016. Rapid technological advances in hardware and software development, evolving standards in computer hardware and software technology, changing customer needs and frequent new product introductions, offerings and enhancements characterize the
markets in which we compete. We plan to continue to dedicate a significant amount of resources to research and development efforts to maintain and improve our current product and services offerings.

Employees

As of May 31, 2018, we employed
approximately 137,000 full-time employees, including approximately 39,000 in sales and marketing, approximately 18,000 in our cloud services and license support operations, approximately 4,000 in hardware, approximately 24,000 in services,
approximately 39,000 in research and development and approximately 13,000 in general and administrative positions. Of these employees, approximately 49,000 were employed in the United States and approximately 88,000 were employed internationally.
None of our employees in the United States is represented by a labor union; however, in certain foreign subsidiaries, labor unions or workers' councils represent some of our employees.

Seasonality and Cyclicality

Our quarterly revenues have
historically been affected by a variety of seasonal factors, including the structure of our sales force incentive compensation plans, which are common in the technology industry. In each fiscal year, our total revenues and operating margins are
typically highest in our fourth fiscal quarter and lowest in our first fiscal quarter. The operating margins of our businesses (in particular, our cloud and license business and hardware business) are generally affected by seasonal factors in a
similar manner as our revenues as certain expenses within our cost structure are relatively fixed in the short term. See "Selected Quarterly Financial Data" in Item 7 of this Annual Report for a more complete description of the seasonality
and cyclicality of our revenues, expenses and margins.

Competition

We face intense competition in all aspects of our business. The nature of the IT industry creates a competitive landscape that is constantly evolving
as firms emerge, expand or are acquired, as technology evolves and as customer demands and competitive pressures otherwise change.

Our customers
are demanding less complexity and lower total cost in the implementation, sourcing, integration and ongoing maintenance of their enterprise software and hardware. Our enterprise cloud license and on-premise
license, and hardware offerings compete directly with certain offerings from some of the largest and most competitive companies in the world, including Amazon.com, Inc., Microsoft Corporation, International Business Machines Corporation (IBM), Intel
Corporation, Cisco Systems, Inc., Adobe Systems Incorporated, Alphabet Inc. and SAP SE, as well as other companies like Hewlett-Packard Enterprise, salesforce.com, inc. and Workday, Inc. In addition, due to the low barriers to entry in many of our
market segments, new technologies and new and growing competitors frequently emerge to challenge our offerings. Our competitors range from companies offering broad IT solutions across many of our lines of business to vendors providing point
solutions, or offerings focused on a specific functionality, product area or industry. In addition, as we expand into new market segments, we face increased competition as we compete with existing competitors, as well as firms that may be partners
in other areas of our business and other firms with whom we have not previously competed.

12

Moreover, we or our competitors may take certain strategic actions-including acquisitions, partnerships and joint ventures, or repositioning of product lines-which invite even greater
competition in one or more product offering categories.

Key competitive factors in each of the segments in which we currently compete and may
compete in the future include: total cost of ownership, performance, scalability, reliability, security, functionality, efficiency, speed to production and quality of technical support. Our product and service sales (and the relative strength of our
products and services versus those of our competitors) are also directly and indirectly affected by the following, among other things:

•

the adoption of cloud-based IT offerings including SaaS, PaaS and IaaS offerings;

•

ease of deployment, use and maintenance of our products and services offerings;

•

compatibility between Oracle products and services deployed within local IT environments and public cloud IT
environments, including our Oracle Cloud environments;

•

the adoption of commodity servers and microprocessors;

•

the broader "platform" competition between our industry standard Java technology platform and the .NET
programming environment of Microsoft;

•

operating system competition among our Oracle Solaris and Linux operating systems, with alternatives including
Microsoft's Windows Server, and other UNIX and Linux operating systems;

•

the adoption of open source alternatives to commercial software by enterprise software customers;

•

products, features and functionality developed internally by customers and their IT staff;

•

products, features and functionality customized and implemented for customers by consultants, systems integrators or
other third parties; and

•

attractiveness of offerings from business processing outsourcers.

For more information about the competitive risks we face, refer to Item 1A. "Risk Factors" included elsewhere in this Annual Report.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed pursuant to Sections 13(a) and
15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor Relations website at www.oracle.com/investor as soon as reasonably practicable after we electronically file such material with, or furnish it
to, the U.S. Securities and Exchange Commission. We use our Investor Relations website as a means of disclosing material non-public information. Accordingly, investors should monitor our Investor Relations website, in addition to following our press
releases, SEC filings and public conference calls and webcasts. In addition, information regarding our environmental policy and global sustainability initiatives and solutions are also available on our website www.oracle.com/corporate/citizenship.
The information posted on or accessible through our website is not incorporated into this Annual Report.

Executive Officers of the Registrant

Our executive officers are listed below.

Name

Office(s)

Lawrence J. Ellison

Chairman of the Board of Directors and Chief Technology Officer

Safra A. Catz

Chief Executive Officer and Director

Mark V. Hurd

Chief Executive Officer and Director

Jeffrey O. Henley

Vice Chairman of the Board of Directors

Thomas Kurian

President, Product Development

Edward Screven

Executive Vice President, Chief Corporate Architect

Dorian E. Daley

Executive Vice President and General Counsel

William Corey West

Executive Vice President, Corporate Controller and Chief Accounting Officer

13

Mr. Ellison, 73, has been our Chairman of the Board and Chief Technology Officer since September
2014. He served as our Chief Executive Officer from June 1977, when he founded Oracle, until September 2014. He has served as a Director since June 1977. He previously served as our Chairman of the Board from May 1995 to January 2004.

Ms. Catz, 56, has been our Chief Executive Officer since September 2014. She served as our President from January 2004 to September 2014, our
Chief Financial Officer most recently from April 2011 until September 2014 and a Director since October 2001. She was previously our Chief Financial Officer from November 2005 until September 2008 and our Interim Chief Financial Officer from April
2005 until July 2005. Prior to being named our President, she held various other positions with us since joining Oracle in 1999. She currently serves as a director of The Walt Disney Company and she previously served as a director of HSBC Holdings
plc.

Mr. Hurd, 61, has been our Chief Executive Officer since September 2014. He served as our President from September 2010 to September
2014 and a Director since September 2010. Prior to joining us, he served as Chairman of the Board of Directors of Hewlett-Packard Company from September 2006 to August 2010 and as Chief Executive Officer, President and a member of the Board of
Directors of Hewlett-Packard Company from April 2005 to August 2010.

Mr. Henley, 73, has served as our Vice Chairman of the Board since
September 2014. He previously served as our Chairman of the Board from January 2004 to September 2014 and has served as a Director since June 1995. He served as our Executive Vice President and Chief Financial Officer from March 1991 to July 2004.

Mr. Kurian, 51, has been our President, Product Development since January 2015. He served as our Executive Vice President, Product
Development from July 2009 until January 2015. He served as our Senior Vice President of Development from February 2001 until July 2009. Mr. Kurian worked in Oracle Server Technologies as Vice President of Development from March 1999 until
February 2001. He also held various other positions with us since joining Oracle in 1996.

Mr. Screven, 53, has been Executive Vice President,
Chief Corporate Architect since May 2015. He served as our Senior Vice President, Chief Corporate Architect from November 2006 to April 2015 and as Vice President, Chief Corporate Architect from January 2003 to November 2006. He held various other
positions with us since joining Oracle in 1986.

Ms. Daley, 59, has been our Executive Vice President and General Counsel since April 2015.
She served as our Secretary from October 2007 until October 2017 and she was our Senior Vice President, General Counsel from October 2007 to April 2015. She served as our Vice President, Legal, Associate General Counsel and Assistant Secretary from
June 2004 to October 2007, as Associate General Counsel and Assistant Secretary from October 2001 to June 2004 and as Associate General Counsel from February 2001 to October 2001. She held various other positions with us since joining Oracle's
Legal Department in 1992.

Mr. West, 56, has been our Executive Vice President, Corporate Controller and Chief Accounting Officer since April
2015. He served as our Senior Vice President, Corporate Controller and Chief Accounting Officer from February 2008 to April 2015 and served as our Vice President, Corporate Controller and Chief Accounting Officer from April 2007 to February 2008.
His previous experience includes 14 years with Arthur Andersen LLP, most recently as a partner.