Item 1A. Risk
Factors

We operate in rapidly changing economic and technological environments that present numerous risks, many of which are driven by
factors that we cannot control or predict. The following discussion, as well as our "Critical Accounting Policies and Estimates" discussion in Management's Discussion and Analysis of Financial Condition and Results of Operations (Item
7), highlights some of these risks. The risks described below are not exhaustive and you should carefully consider these risks and uncertainties before investing in our securities.

Our Oracle Cloud strategy, including our Oracle Software as a Service (SaaS), Platform as a Service (PaaS), Infrastructure as a Service (IaaS)
and Data as a Service (DaaS) offerings, may adversely affect our revenues and profitability. We provide our cloud and other offerings to customers worldwide via deployment models that best suit their needs, including
via our cloud-based SaaS, PaaS, IaaS and DaaS offerings. As these business

Index to Financial Statements

models continue to evolve, we may not be able to compete effectively, generate significant revenues or maintain the profitability of our cloud offerings. Additionally, the increasing prevalence
of cloud and SaaS delivery models offered by us and our competitors may unfavorably impact the pricing of our cloud and license offerings. If we do not successfully execute our cloud computing strategy or anticipate the cloud computing needs of our
customers, our reputation as a cloud services provider could be harmed and our revenues and profitability could decline.

As customer demand for
our cloud offerings increases, we experience volatility in our reported revenues and operating results due to the differences in timing of revenue recognition between our cloud license and on-premise license,
and hardware arrangements relative to our cloud offering arrangements. Customers generally purchase our cloud offerings on a subscription basis and revenues from these offerings are generally recognized ratably over the terms of the subscriptions.
Consequently, any deterioration in sales activity associated with our cloud offerings may not be immediately observable in our consolidated statement of operations. This is in contrast to revenues associated with our cloud license and on-premise license arrangements which are generally recognized in full at the time of delivery of the related licenses. In addition, we incur certain expenses associated with the infrastructure and marketing of our
cloud offerings in advance of our ability to recognize the revenues associated with these offerings.

We have also acquired a number of cloud
computing companies, and the integration of these companies into our Oracle Cloud strategy may not be as efficient or scalable as anticipated, which could adversely affect our ability to fully realize the benefits anticipated from these
acquisitions.

Our success depends upon our ability to develop new products and services, integrate acquired products and services and
enhance our existing products and services. Rapid technological advances, changing delivery models and evolving standards in computer hardware and software development and communications infrastructure,
changing and increasingly sophisticated customer needs and frequent new product introductions and enhancements characterize the industries in which we compete. If we are unable to develop new or sufficiently differentiated products and services,
enhance and improve our product offerings and support services in a timely manner or position and price our products and services to meet demand, customers may not purchase or subscribe to our software, hardware or cloud offerings or renew software
support, hardware support or cloud subscriptions contracts. Renewals of these contracts are important to the growth of our business. In addition, we cannot provide any assurance that the standards on which we choose to develop new products will
allow us to compete effectively for business opportunities in emerging areas.

We have continued to refresh and release new offerings of our cloud
products and services, including the launch of the Oracle Autonomous Data Warehouse Cloud Service in fiscal 2018. The Oracle Autonomous Data Warehouse Cloud Service offers automation based on machine learning and we have guaranteed, among other
matters, that it will reduce customer downtime to less than 30 minutes a year and that Amazon Data Warehouse customers will see a significant cost reduction if they migrate their workloads to our offering. Machine learning and artificial
intelligence are increasingly driving innovations in technology but if they fail to operate as anticipated or the Oracle Autonomous Warehouse Cloud Service or our other products do not perform as promised, our business and reputation may be harmed.

In addition, our business may be adversely affected if:

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we do not continue to develop and release new or enhanced products and services within the anticipated time frames;

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there is a delay in market acceptance of new, enhanced or acquired product lines or services;

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there are changes in information technology (IT) trends that we do not adequately anticipate or address with our
product development efforts;

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we do not timely optimize complementary product lines and services; or

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we fail to adequately integrate, support or enhance acquired product lines or services.

We might experience significant coding, manufacturing or configuration errors in our cloud, license and hardware
offerings. Despite testing prior to the release and throughout the lifecycle of a product or service,

Index to Financial Statements

our cloud, license and hardware offerings sometimes contain coding or manufacturing errors that can impact their function, performance and security, and result in other negative consequences. The
detection and correction of any errors in released cloud, license or hardware offerings can be time consuming and costly. Errors in our cloud, license or hardware offerings could affect their ability to properly function or operate with other cloud,
license or hardware offerings, could delay the development or release of new products or services or new versions of products or services, could create security vulnerabilities in our products or services, and could adversely affect market
acceptance of our products or services. This includes third-party software products or services incorporated into our own. If we experience errors or delays in releasing our cloud, license or hardware offerings or new versions thereof, our sales
could be affected and revenues could decline. In addition, we run Oracle's business operations as well as cloud and other services that we offer to our customers on our products and networks. Therefore, any flaws could affect our ability to
conduct our business operations and the operations of our customers. Enterprise customers rely on our cloud, license and hardware offerings and related services to run their businesses and errors in our cloud, license and hardware offerings and
related services could expose us to product liability, performance and warranty claims as well as significant harm to our brand and reputation, which could impact our future sales.

If our security measures for our products and services are compromised and as a result, our data, our customers' data or our IT systems are
accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable, our brand and reputation could be damaged, the IT services we provide to our customers could be disrupted, and customers may
stop using our products and services, all of which could reduce our revenue and earnings, increase our expenses and expose us to legal claims and regulatory actions. We are in the IT business, and our products and
services, including our Oracle Cloud Services, store, retrieve, manipulate and manage our customers' information and data, external data, as well as our own data. We have a reputation for secure and reliable product offerings and related
services and we have invested a great deal of time and resources in protecting the integrity and security of our products, services and the internal and external data that we manage. At times, we encounter attempts by third parties (which may
include individuals or groups of hackers and sophisticated organizations, such as state-sponsored organizations, nation states and individuals sponsored by them) to identify and exploit product and service vulnerabilities, penetrate or bypass our
security measures, and gain unauthorized access to our or our customers', partners' and suppliers' software, hardware and cloud offerings, networks and systems, any of which could lead to the compromise of personal information or the
confidential information or data of Oracle or our customers. Computer hackers and others may be able to develop and deploy IT related viruses, worms, and other malicious software programs that could attack our networks, systems, products and
services, exploit potential security vulnerabilities of our networks, systems, products and services, create system disruptions and cause shutdowns or denials of service. This is also true for third-party data, products or services incorporated into
our own. Data may also be accessed or modified improperly as a result of customer, partner, employee or supplier error or malfeasance and third parties may attempt to fraudulently induce customers, partners, employees or suppliers into disclosing
sensitive information such as user names, passwords or other information in order to gain access to our data, our customers', suppliers' or partners' data or the IT systems of Oracle, our customers, suppliers or partners.

Security industry experts and government officials have warned about the risks of hackers and cyber-attacks targeting IT products and businesses.
Although this is an industry-wide problem that affects software and hardware companies generally, it affects Oracle in particular because computer hackers tend to focus their efforts on the most prominent IT companies, and they may focus on Oracle
because of our reputation for, and marketing efforts associated with, having secure products and services. These risks will increase as we continue to grow our cloud offerings and store and process increasingly large amounts of data, including
personal information and our customers' confidential information and data and other external data, and host or manage parts of our customers' businesses in cloud-based IT environments, especially in customer sectors involving particularly
sensitive data such as health sciences, financial services, retail, hospitality and the government. We also have an active acquisition program and have acquired a number of companies, products, services and technologies over the years. While we make
significant efforts to address any IT security issues with respect to our acquired companies, we may still inherit such risks when we integrate these companies within Oracle.

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Because the techniques used to obtain unauthorized access to, or sabotage IT systems change frequently,
grow more complex over time, and often are not recognized until launched against a target, we may be unable to anticipate or implement adequate measures to prevent against such techniques. Our
internal IT systems continue to evolve and we are often early adapters of new technologies. However, our business policies and internal security controls may not keep pace with these changes as
new threats emerge. In addition, we may not discover any security breach and loss of information for a significant period of time after the security breach.

We could suffer significant damage to our brand and reputation if a cyber-attack or other security incident were to allow unauthorized access to or
modification of our customers' or suppliers' data, other external data, or our own data or our IT systems or if the services we provide to our customers were disrupted, or if our products or services are perceived as having security
vulnerabilities. Customers could lose confidence in the security and reliability of our products and services, including our cloud offerings, and perceive them to be not secure. This could lead to fewer customers using our products and services and
result in reduced revenue and earnings. The costs we would incur to address and fix these security incidents would increase our expenses. These types of security incidents could also lead to loss or destruction of information, inappropriate use of
proprietary and sensitive data, lawsuits, indemnity obligations, regulatory investigations and financial penalties, and claims and increased legal liability, including in some cases contractual costs related to customer notification and fraud
monitoring.

As illustrated by the Spectre and Meltdown threats, our products operate in conjunction with and are dependent on products and
components across a broad ecosystem. If there is a security vulnerability in one of these components, and if there is a security exploit targeting it, we could face increased costs, liability claims, customer dissatisfaction, reduced revenue, or
harm to our reputation or competitive position.

Our business practices with respect to data could give rise to operational interruption,
liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection. As regulatory focus on privacy issues continues to
increase and worldwide laws and regulations concerning the handling of personal information expand and become more complex, potential risks related to data collection and use within our business will intensify. For example, the European Union (EU)
and the United States (U.S.) formally entered into a new framework in July 2016 that provides a mechanism for companies to transfer data from EU member states to the U.S. This new framework, called the Privacy Shield, is intended to address
shortcomings identified by the Court of Justice of the EU in the previous EU-U.S. Safe Harbor Framework, which the Court of Justice invalidated in October 2015. The Privacy Shield and other data transfer
mechanisms are currently subject to challenges in European courts, which may lead to uncertainty about the legal basis for data transfers to the U.S. or interruption of such transfers. In the event any court blocks transfers to or from a particular
jurisdiction on the basis that no transfer mechanisms are legally adequate, this could give rise to operational interruption in the performance of services for customers and internal processing of employee information, regulatory liabilities or
reputational harm.

In addition, U.S. and foreign governments have enacted or are considering enacting legislation or regulations, or may in the
near future interpret existing legislation or regulations, in a manner that could significantly impact our ability, as well as the ability of our customers, partners and data providers, to collect, augment, analyze, use, transfer and share personal
and other information that is integral to certain services we provide. This could be true particularly in those jurisdictions where privacy laws or regulators take a broader view of how personal information is defined, therefore subjecting the
handling of such data to heightened restrictions that may be obstructive to our operations and the operations of our customers, partners and data providers. This impact may be acute in countries that have passed or are considering passing
legislation that requires data to remain localized "in country," as this imposes financial costs on any service provider that is required to store data in jurisdictions not of its choosing and nonstandard operational processes that are
difficult and costly to integrate with global processes.

Regulators globally are also imposing greater monetary fines for privacy violations. For
example, in 2016, the EU adopted the General Data Protection Regulation (GDPR), which became effective in May 2018. The law establishes new requirements regarding the handling of personal data. Non-compliance
with the GDPR may result in monetary penalties of up to 4% of worldwide revenue. The GDPR and other changes in laws or regulations associated with the enhanced protection of personal and other types of data could greatly increase

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the size of potential fines related to data protection and our cost of providing our products and services could result in changes to our business practices or even prevent us from offering
certain services in jurisdictions in which we operate. Although we have implemented contracts, policies and procedures designed to ensure compliance with applicable laws and regulations, there can be no assurance that our employees, contractors,
partners, data providers or agents will not violate such laws and regulations or our contracts, policies and procedures. Additionally, public perception and standards related to the privacy of personal information can shift rapidly, in ways that may
affect our reputation or influence regulators to enact regulations and laws that may limit our ability to provide certain products.

We make
statements about our use and disclosure of personal information through our privacy policy, information provided on our website and press statements. Any failure, or perceived failure, by us to comply with these public statements or with U.S.
federal, state, or foreign laws and regulations, including laws and regulations regulating privacy, data security, or consumer protection, public perception, standards, self-regulatory requirements or legal obligations, could result in lost or
restricted business, proceedings, actions or fines brought against us or levied by governmental entities or others, or could adversely affect our business and harm our reputation.

Economic, political and market conditions can adversely affect our business, results of operations and financial condition, including our revenue
growth and profitability, which in turn could adversely affect our stock price. Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting.
These include:

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general economic and business conditions;

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overall demand for enterprise cloud, license and hardware products and services;

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governmental budgetary constraints or shifts in government spending priorities; and

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general legal, regulatory and political developments.

Macroeconomic developments like the developments associated with the United Kingdom's vote to exit the EU or the occurrence of similar events in
other countries that lead to uncertainty or instability in economic, political or market conditions could negatively affect our business, operating results, financial condition and outlook, which, in turn, could adversely affect our stock price. Any
general weakening of, and related declining corporate confidence in, the global economy or the curtailment of government or corporate spending could cause current or potential customers to reduce or eliminate their IT budgets and spending, which
could cause customers to delay, decrease or cancel purchases of our products and services or cause customers not to pay us or to delay paying us for previously purchased products and services.

In addition, international, regional or domestic political unrest and the related potential impact on global stability, terrorist attacks and the
potential for other hostilities in various parts of the world, potential public health crises and natural disasters continue to contribute to a climate of economic and political uncertainty that could adversely affect our results of operations and
financial condition, including our revenue growth and profitability. These factors generally have the strongest effect on our sales of cloud license and on-premise license, hardware and related services and,
to a lesser extent, also may affect our renewal rates for license support and our subscription-based cloud offerings.

If we are unable to
compete effectively, the results of operations and prospects for our business could be harmed. 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 delivery models change. Many vendors spend amounts in excess of what Oracle spends to develop and market applications, platform and infrastructure
technologies including databases, middleware products, application development tools, business applications, collaboration products and business intelligence products, among others, which compete with Oracle applications, platform and infrastructure
offerings. Use of our competitors' technologies may influence a customer's purchasing decision or create an environment that makes it less efficient to utilize Oracle products and services. Our competition may also adopt business practices
that provide customers access to competing products and services at a risk profile that we may not generally find acceptable, which may convince customers to purchase competitor products and services. We could lose

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customers if our competitors introduce new competitive products, add new functionality, acquire competitive products, reduce prices, better execute on their sales and marketing strategies, offer
more flexible business practices or form strategic alliances with other companies. We may also face increasing competition from open source software initiatives in which competitors may provide software and intellectual property for free. Existing
or new competitors could gain sales opportunities or customers at our expense.

Our hardware business competes with, among others, (1) systems
manufacturers and resellers of systems based on our own microprocessors and operating systems and those of our competitors, (2) microprocessor/chip manufacturers, (3) providers of storage products, (4) certain industry-specific
hardware manufacturers including those serving communications, hospitality and retail industries and (5) certain cloud providers that build their own IT infrastructures. Our hardware business causes us to compete with certain companies that
historically have been partners. Some of these competitors may have more experience than we do in managing a hardware business. Certain of these competitors also compete very aggressively on price. A loss in our competitive position could result in
lower revenues or profitability, which could adversely impact our ability to realize the revenue and profitability forecasts for our hardware business.

We may need to change our pricing models to compete successfully. The intense competition we face in the sales of
our products and services and general economic and business conditions can put pressure on us to change our prices. If our competitors offer deep discounts on certain products or services or develop products that the marketplace considers more
valuable, we may need to lower prices or offer other favorable terms in order to compete successfully. Any such changes may reduce margins and could adversely affect operating results. Additionally, the increasing prevalence of cloud delivery models
offered by us and our competitors may unfavorably impact the pricing of our other cloud and license, hardware and services offerings, in particular our IaaS offerings, which could reduce our revenues and profitability. Our license support fees and
hardware support fees are generally priced as a percentage of our net cloud license and on-premise license fees and net new hardware products fees, respectively. Our competitors may offer lower pricing on
their support offerings, which could put pressure on us to further discount our offerings or support pricing.

We introduced Oracle Bring Your Own
License (BYOL) to PaaS and Universal Credit Pricing in fiscal 2018 to simplify the way customers purchase and consume our cloud services. Oracle BYOL enables customers to maintain their existing software licenses for Oracle PaaS while expanding
their platform technology footprint at a discounted price. Oracle Universal Credit Pricing provides a flexible model for customers to access Oracle PaaS and IaaS services on demand via a single contract. These changes and any future changes to our
prices and pricing policies could cause our revenues to decline or be delayed as our sales force implements and our customers adjust to the new pricing policies. Some of our competitors may bundle products for promotional purposes or as a long-term
pricing strategy, commit to large customer deployments at prices that are unprofitable, or provide guarantees of prices and product implementations. These practices could, over time, significantly constrain the prices that we can charge for certain
of our products. If we do not adapt our pricing models to reflect changes in customer use of our products or changes in customer demand, our revenues could decrease. The increase in open source software distribution may also cause us to change our
pricing models.

Our international sales and operations subject us to additional risks that can adversely affect our operating
results. We derive a substantial portion of our revenues from, and have significant operations, outside of the U.S. Our international operations include cloud operations, cloud, software and hardware development,
manufacturing, assembly, sales, customer support, consulting and other services and shared administrative service centers.

Compliance with
international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in foreign jurisdictions. These laws and regulations include U.S. laws and local laws which include data privacy
requirements, labor relations laws, tax laws, foreign currency-related regulations, anti-competition regulations, prohibitions on payments to governmental officials, market access, import, export and general trade regulations, including but not
limited to economic sanctions and embargos. Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business, including the
loss of trade privileges. Any such violations could result in prohibitions on our ability to offer our products and services in one or more countries, could delay or prevent potential acquisitions and could also materially damage our

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reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results. Compliance with these laws requires a significant
amount of management attention and effort, which may divert management's attention from running our business operations and could harm our ability to grow our business, or may increase our expenses as we engage specialized or other additional
resources to assist us with our compliance efforts. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties. We monitor our operations and investigate allegations of improprieties relating to transactions
and the way in which such transactions are recorded. Where circumstances warrant, we provide information and report our findings to government authorities, but no assurance can be given that action will not be taken by such authorities.

We are also subject to a variety of other risks and challenges in managing an organization operating globally, including those related to:

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general economic conditions in each country or region;

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fluctuations in currency exchange rates and related impacts to customer demand and our operating results;

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difficulties in transferring funds from or converting currencies in certain countries that could lead to a devaluation
of our net assets, in particular our cash assets, in that country's currency;

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regulatory changes, including government austerity measures in certain countries that we may not be able to
sufficiently plan for or avoid that may unexpectedly impair bank deposits or other cash assets that we hold in these countries or that impose additional taxes that we may be required to pay in these countries;

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political unrest, terrorism and the potential for other hostilities;

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common local business behaviors that are in direct conflict with our business ethics, practices and conduct policies;

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natural disasters;

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the effects of climate change (such as sea level rise, drought, flooding, wildfires and increased storm sensitivity);

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longer payment cycles and difficulties in collecting accounts receivable;

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overlapping tax regimes;

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public health risks, social risks and supporting infrastructure stability risks, particularly in areas in which we
have significant operations; and

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reduced protection for intellectual property rights in some countries.

The variety of risks and challenges listed above could also disrupt or otherwise negatively impact the supply chain operations for our hardware
business and the sales of our products and services in affected countries or regions.

As the majority shareholder of Oracle Financial Services
Software Limited, a publicly traded company in India, and Oracle Corporation Japan, a publicly traded company in Japan, we are faced with several additional risks, including being subject to local securities regulations and being unable to exert
full control that we would otherwise have if these entities were wholly-owned subsidiaries.

Acquisitions present many risks and we may not
realize the financial and strategic goals that were contemplated at the time of a transaction. We continue to invest billions of dollars to acquire companies, products, services and technologies. We have a selective
and active acquisition program and we expect to continue to make acquisitions in the future because acquisitions are an important element of our overall corporate strategy. Risks we may face in connection with our acquisition program include:

•

our ongoing business may be disrupted and our management's attention may be diverted by acquisition, transition
or integration activities;

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•

we may have difficulties (1) managing an acquired company's technologies or lines of business;
(2) entering new markets where we have no or limited direct prior experience or where competitors may have stronger market positions; or (3) retaining key personnel from the acquired companies;

•

an acquisition may not further our business strategy as we expected, we may not integrate an acquired company or
technology as successfully as we expected, we may impose our business practices or alter go-to-market strategies that adversely impact the acquired business or we may
overpay for, or otherwise not realize the expected return on, our investments, which could adversely affect our business or operating results and potentially cause impairment to assets that we recorded as a part of an acquisition including
intangible assets and goodwill;

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our operating results or financial condition may be adversely impacted by (1) claims or liabilities that we
assume from an acquired company or technology or that are otherwise related to an acquisition, including, among others, claims from government agencies, terminated employees, current or former customers, former stockholders or other third parties; (2) pre-existing contractual relationships of an acquired company that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business;
(3) unfavorable revenue recognition or other accounting treatment as a result of an acquired company's practices; and (4) intellectual property claims or disputes;

•

we may fail to identify or assess the magnitude of certain liabilities, shortcomings or other circumstances prior to
acquiring a company or technology, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business,
operating results or financial condition;

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we may not realize the anticipated increase in our revenues from an acquisition for a number of reasons, including if
a larger than predicted number of customers decline to renew cloud-based subscription contracts or software or hardware support contracts, if we are unable to sell the acquired products or service offerings to our customer base, if acquired
customers do not elect to purchase our technologies due to differing business practices or if contract models of an acquired company do not allow us to recognize revenues on a timely basis;

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we may have difficulty incorporating acquired technologies, products, services and their related supply chain
operations with our existing lines of business and supply chain infrastructure and maintaining uniform standards, architecture, controls, procedures and policies;

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we may have multiple product lines or services offerings as a result of our acquisitions that are offered, priced and
supported differently, which could cause customer confusion and delays;

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we may have higher than anticipated costs in continuing support and development of acquired products or services, in
general and administrative functions that support new business models, or in compliance with associated regulations that are more complicated than we had anticipated;

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we may be unable to obtain timely approvals from, or may otherwise have certain limitations, restrictions, penalties
or other sanctions imposed on us by worker councils or similar bodies under applicable employment laws as a result of an acquisition, which could adversely affect our integration plans in certain jurisdictions and potentially increase our
integration and restructuring expenses;

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we may be unable to obtain required approvals from governmental authorities under competition and antitrust laws on a
timely basis, if at all, which could, among other things, delay or prevent us from completing a transaction, adversely affect our integration plans in certain jurisdictions, restrict our ability to realize the expected financial or strategic goals
of an acquisition, or have other adverse effects on our current business and operations;

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our use of cash to pay for acquisitions may limit other potential uses of our cash, including stock repurchases,
dividend payments and retirement of outstanding indebtedness;

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•

we may significantly increase our interest expense, leverage and debt service requirements if we incur additional debt
to pay for an acquisition and we may have to delay or not proceed with a substantial acquisition if we cannot obtain the necessary funding to complete the acquisition in a timely manner or on favorable terms;

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to the extent that we issue a significant amount of equity securities in connection with future acquisitions, existing
stockholders may be diluted and earnings per share may decrease; and

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we may experience additional or unexpected changes in how we are required to account for our acquisitions pursuant to
U.S. generally accepted accounting principles, including arrangements that we assume from an acquisition.

The occurrence of any
of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition or several concurrent acquisitions.

Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and our financial
results. Our customers depend on our support organization to resolve technical issues relating to our applications, platform and infrastructure offerings. We may be unable to respond quickly enough to accommodate
short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. Any failure to maintain high-quality
technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our applications to existing and prospective customers, and our business, operating results, and
financial position.

We may fail to achieve our financial forecasts due to inaccurate sales forecasts or other
factors. Our revenues, particularly certain of our cloud license and on-premise license revenues and hardware revenues, are difficult to forecast. As a result, our quarterly
operating results can fluctuate substantially.

For our Oracle Cloud Services, we may use conversion or renewal rates in our forecasts that differ
materially from our actual conversion or renewal rates because this business is continuing to evolve and such rates may be unpredictable. For our license business, we use a "pipeline" system, a common industry practice, to forecast sales
and trends in that business. Our sales personnel monitor the status of all proposals and estimate when a customer will make a purchase decision and the dollar amount of the sale. These estimates are aggregated periodically to generate a sales
pipeline. Our pipeline estimates can prove to be unreliable both in a particular quarter and over a longer period of time, in part because the conversion rate or closure rate of the pipeline into contracts can be very difficult to estimate.

A reduction in the conversion rates, renewal rates, or in the pipeline itself, could cause us to plan or budget incorrectly and adversely affect our
business or results of operations. In particular, a slowdown in IT spending or economic conditions generally can unexpectedly reduce the conversion rates and renewal rates in particular periods as purchasing decisions are delayed, reduced in amount
or cancelled. The conversion rates can also be affected by the tendency of some of our customers to wait until the end of a fiscal period in the hope of obtaining more favorable terms, which can also impede our ability to negotiate, execute and
deliver upon these contracts in a timely manner. In addition, for newly acquired companies, we have limited ability to predict how their pipelines will convert into sales or revenues for a number of quarters following the acquisition. Conversion
rates and renewal rates post-acquisition may be quite different from the acquired companies' historical conversion rates. Differences in conversion rates and renewal rates can also be affected by changes in business practices that we implement
in our newly acquired companies. These changes may negatively affect customer behavior.

A substantial portion of our cloud license and on-premise license, and hardware contracts is completed in the latter part of a quarter and a significant percentage of these are larger orders. Because a significant portion of our cost structure is largely fixed
in the short term, sales and revenue shortfalls tend to have a disproportionately negative impact on our profitability. The number of large cloud license and on-premise license transactions and, to a lesser
extent, hardware products transactions increases the risk of fluctuations in our quarterly results because a delay in even a small number of these transactions could cause our quarterly sales, revenues and profitability to fall significantly short
of our predictions.

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We may experience foreign currency gains and losses. Changes in currency exchange rates can
adversely affect customer demand and our revenue and profitability. We conduct a significant number of transactions and hold cash in currencies other than the U.S. Dollar. Changes in the values of major foreign
currencies, particularly the Euro, Japanese Yen and British Pound, relative to the U.S. Dollar can significantly affect our total assets, revenues, operating results and cash flows, which are reported in U.S. Dollars. In particular, the
economic uncertainties relating to European sovereign and other debt obligations may cause the value of the Euro to fluctuate relative to the U.S. Dollar. Fluctuations in foreign currency rates, including the strengthening of the
U.S. Dollar against the Euro and most other major international currencies, adversely affects our revenue growth in terms of the amounts that we report in U.S. Dollars after converting our foreign currency results into U.S. Dollars and in terms
of actual demand for our products and services as certain of these products may become relatively more expensive for foreign currency-based enterprises to purchase. In addition, currency variations can adversely affect margins on sales of our
products in countries outside of the U.S. Generally, our revenues and operating results are adversely affected when the dollar strengthens relative to other currencies and are positively affected when the dollar weakens. In addition, our reported
assets generally are adversely affected when the dollar strengthens relative to other currencies as a portion of our consolidated cash and bank deposits, among other assets, are held in foreign currencies.

In addition, we incur foreign currency transaction gains and losses, primarily related to sublicense fees and other intercompany agreements among us
and our subsidiaries that we expect to cash settle in the near term, which are charged against earnings in the period incurred. We have a program which primarily utilizes foreign currency forward contracts designed to offset the risks associated
with certain foreign currency exposures. We may suspend the program from time to time. As a part of this program, we enter into foreign currency forward contracts so that increases or decreases in our foreign currency exposures are offset at least
in part by gains or losses on the foreign currency forward contracts in an effort to mitigate the risks and volatility associated with our foreign currency transaction gains or losses. A large portion of our consolidated operations are
international, and we expect that we will continue to realize gains or losses with respect to our foreign currency exposures, net of gains or losses from our foreign currency forward contracts. For example, we will experience foreign currency gains
and losses in certain instances if it is not possible or cost-effective to hedge our foreign currency exposures, if our hedging efforts are ineffective, or should we suspend our foreign currency forward contract program. Our ultimate realized loss
or gain with respect to currency fluctuations will generally depend on the size and type of cross-currency exposures that we enter into, the currency exchange rates associated with these exposures and changes in those rates, whether we have entered
into foreign currency forward contracts to offset these exposures and other factors. All of these factors could materially impact our results of operations, financial position and cash flows.

We have incurred foreign currency losses associated with the devaluation of currencies in certain highly inflationary economies relative to the
U.S. Dollar. We could incur future losses in emerging market countries where we do business should their currencies become designated as highly inflationary.

Our hardware revenues and profitability have declined and could continue to decline. Our hardware business may
adversely affect our overall profitability. We may not achieve our estimated revenue, profit or other financial projections with respect to our hardware business in a timely manner or at all due to a number of factors, including:

•

our changes in hardware strategies, offerings and technologies including the development marketing and sale of our own
Oracle Cloud Services, which could adversely affect demand for our hardware products;

•

our hardware business has higher expenses as a percentage of revenues, and thus has been less profitable, than our
cloud and license business;

•

our focus on our more profitable Oracle Engineered Systems, such as our Oracle Exadata Database Machine, and the de-emphasis of our lower profit margin commodity hardware products, which could adversely affect our hardware revenues because the lower profit products have historically constituted a larger portion of our hardware
revenues;

23

•

changes in strategies for the development and introduction of new versions or next generations of our hardware
products, including the pace at which we offer new versions or next generations of our hardware products, and the related impacts from customers that may defer or delay purchases of existing hardware products and wait for these new releases, all of
which could adversely affect our hardware revenues;

•

a greater risk of material charges that could adversely affect our operating results, such as potential write-downs
and impairments of our inventories; higher warranty expenses than what we experience in our cloud and license and services businesses; and amortization and potential impairment of intangible assets associated with our hardware business;

•

the close connection between hardware products (which have a finite life) and customer demand for related hardware
support in which hardware products that approach the end of their useful lives are less likely to have hardware support contracts renewed by customers; and

•

we may acquire hardware companies that are strategically important to us but (1) operate in hardware businesses
with historically lower operating margins than our own; (2) have different legacy business practices and go-to-market strategies than our own that we may alter as a
part of our integration efforts, which may significantly impact our estimated revenues and profits from the acquired company; (3) leverage different platforms or competing technologies that we may encounter difficulties in integrating; or
(4) utilize unique manufacturing processes that affect our ability to scale these acquired products within our own manufacturing operations.

Our hardware offerings are complex products, and if we cannot successfully manage this complexity, the results of our hardware business will
suffer. Designing, developing, manufacturing and introducing new hardware products are complicated processes. The development process for our hardware products is uncertain and requires a high level of innovation.
After the development phase, we must be able to forecast customer demand and manufacture new hardware products in sufficient volumes to meet this demand and do so in a cost-effective manner. Our "build-to-order" manufacturing model, in which our hardware products generally are not built until after customers place orders, may from time to time experience delays in delivering our hardware
products to customers in a timely manner. These delays could cause our customers to purchase hardware products and services from our competitors. We must also manage new hardware product introductions and transitions to minimize the impact of
customer delayed purchases of existing hardware products in anticipation of new hardware product releases. It is also possible that we could experience design or manufacturing flaws, which could delay or prevent the production of the components for
which we have previously committed to pay or need to fulfill orders from customers and could also prevent the production of our hardware products or cause our hardware products to be returned, recalled or rejected resulting in lost revenues,
increases in warranty costs or costs related to remediation efforts, damage to our reputation, penalties and litigation.

We depend on suppliers to
design, develop, manufacture and deliver on a timely basis the necessary technologies and components for our hardware products, and there are some technologies and components that can only be purchased from a single vendor due to price, quality,
technology, availability or other business constraints. As a result, our supply chain operations could be disrupted or negatively impacted by industry consolidation and component constraints or shortages, natural disasters, political unrest, port
stoppages or other transportation disruptions or slowdowns, or other factors affecting the countries or regions where these single source component vendors are located or where the products are being shipped. We may be unable to purchase these items
from the respective single vendors on acceptable terms or may experience significant shortages, delays or quality issues in the delivery of necessary technologies, parts or components from a particular vendor. If we had to find a new supplier for
these technologies, parts and components, hardware product shipments could be delayed, which would adversely affect our hardware revenues. We could also experience fluctuations in component prices, which, if unanticipated, could negatively affect
our hardware business cost structure. Additionally, we could experience changes in shipping and logistics of our hardware products, which could result in fluctuations in prices and negatively impact our hardware margins. These factors may make it
difficult for us to plan and procure appropriate component inventory levels in a timely fashion to meet customer demand for our hardware products. Therefore, we may experience component inventory

24

shortages, which may result in production delays or customers choosing to purchase fewer hardware products from us or hardware products from our competitors. We negotiate supply commitments with
vendors early in the manufacturing process to ensure we have sufficient technologies and components for our hardware products to meet anticipated customer demand. We must also manage our levels of older component inventories used in our hardware
products to minimize inventory write-offs or write-downs. If we have excess inventory, it may be necessary to write-down the inventory, which would adversely affect our operating results. If one or more of the risks described above occurs, our
hardware business and related operating results could be materially and adversely affected.

We are susceptible to third-party manufacturing
and logistics delays, which could result in the loss of sales and customers. We outsource the design, manufacturing, assembly and delivery of certain of our hardware products to a variety of companies, many of which
are located outside the U.S. Our reliance on these third parties reduces our control over the manufacturing and delivery process, exposing us to risks, including reduced control over quality assurance, product costs, product supply and delivery
delays as well as the political and economic uncertainties and natural disasters of the international locations where certain of these third-party manufacturers have facilities and operations. Some countries may raise national security concerns or
impose market access restrictions based on location of manufacturing or sourcing. Any manufacturing disruption or logistics delays by these third parties could impair our ability to fulfill orders for these hardware products for extended periods of
time. If we are unable to manage our relationships with these third parties effectively, or if these third parties experience delays, disruptions, capacity constraints, regulatory issues or quality control problems in their operations, or fail to
meet our future requirements for timely delivery, our ability to ship and deliver certain of our hardware products to our customers could be impaired and our hardware business could be harmed.

We endeavor to continue simplifying our supply chain processes by reducing the number of third-party manufacturing partners and the number of locations
where these third-party manufacturers build our hardware products. We therefore have become more dependent on a fewer number of these manufacturing partners and locations. If these partners experience production problems or delays or cannot meet our
demand for products, we may not be able to find alternate manufacturing sources in a timely or cost-effective manner, if at all. If we are required to change third-party manufacturers, our ability to meet our scheduled hardware products deliveries
to our customers could be adversely affected, which could cause the loss of sales and existing or potential customers, delayed revenue recognition or an increase in our hardware products expenses, all of which could adversely affect the margins of
our hardware business.

These challenges and risks also exist when we acquire companies with hardware products and related supply chain operations.
In some cases, we may be dependent, at least initially, on these acquired companies' supply chain operations that we are less familiar with and thus we may be slower to adjust or react to these challenges and risks.

Our cloud and license, and hardware indirect sales channel could affect our future operating results. Our cloud
and license, and hardware indirect channel network is comprised primarily of resellers, system integrators/implementers, consultants, education providers, internet service providers, network integrators and independent software vendors. Our
relationships with these channel participants are important elements of our cloud, software and hardware marketing and sales efforts. Our financial results could be adversely affected if our contracts with channel participants were terminated, if
our relationships with channel participants were to deteriorate, if any of our competitors enter into strategic relationships with or acquire a significant channel participant, if the financial condition or operations of our channel participants
were to weaken or if the level of demand for our channel participants' products and services were to decrease. There can be no assurance that we will be successful in maintaining, expanding or developing our relationships with channel
participants. If we are not successful, we may lose sales opportunities, customers and revenues.

We may not be able to protect our
intellectual property rights. We rely on copyright, trademark, patent and trade secret laws, confidentiality procedures, controls and contractual commitments to protect our intellectual property rights. Despite our
efforts, these protections may be limited. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise obtain and use our intellectual property. Any

25

patents owned by us may be invalidated, circumvented or challenged. Any of our pending or future patent applications, whether or not being currently challenged, may not be issued with the scope
of the claims we seek, if at all. In addition, the laws of some countries do not provide the same level of protection of our intellectual property rights as do the laws and courts of the U.S. If we cannot protect our intellectual property rights
against unauthorized copying or use, or other misappropriation, we may not remain competitive.

Third parties have claimed, and in the future
may claim, infringement or misuse of intellectual property rights and/or breach of license agreement provisions. We periodically receive notices from, or have lawsuits filed against us by, others claiming infringement
or other misuse of their intellectual property rights and/or breach of our agreements with them. These third parties include entities that do not have the capabilities to design, manufacture, or distribute products or services or that acquire
intellectual property like patents for the sole purpose of monetizing their acquired intellectual property through asserting claims of infringement and misuse. We expect to continue to receive such claims as:

•

we continue to acquire companies and expand into new businesses;

•

the number of products and competitors in our industry segments grows;

•

the use and support of third-party code (including open source code) becomes more prevalent in the industry;

•

the volume of issued patents continues to increase; and

•

non-practicing entities continue to assert intellectual property infringement
in our industry segments.

Responding to any such claim, regardless of its validity, could:

•

be time consuming, costly and result in litigation;

•

divert management's time and attention from developing our business;

•

require us to pay monetary damages or enter into royalty and licensing agreements that we would not normally find
acceptable;

•

require us to stop selling or to redesign certain of our products;

•

require us to release source code to third parties, possibly under open source license terms;

•

require us to satisfy indemnification obligations to our customers; or

•

otherwise adversely affect our business, results of operations, financial condition or cash flows.

Our periodic workforce restructurings and reorganizations can be disruptive. We have in the
past restructured or made other adjustments to our workforce, including our hardware employees and direct sales force, in response to management changes, product changes, performance issues, change in strategies, acquisitions and other internal and
external considerations. In the past, these types of restructurings have resulted in increased restructuring costs, increased sales and marketing costs and temporary reduced productivity while the employees adjusted to their new roles and
responsibilities. In addition, we may not achieve or sustain the expected growth or cost savings benefits of these restructurings, or may not do so within the expected timeframe. These effects could recur in connection with future acquisitions and
other restructurings and our revenues and other results of operations could be negatively affected.

We may lose key employees or may be
unable to hire enough qualified employees. We rely on hiring qualified employees and the continued service of our senior management, including our Chairman of the Board of Directors, Chief Technology Officer and
founder, our Chief Executive Officers, other members of our executive team and other key employees. In the technology industry, there is substantial and continuous competition for highly skilled business, product development, technical and other
personnel. We may also experience increased compensation costs that are not offset by either improved productivity or higher sales. We may not be successful in recruiting new personnel and in retaining and motivating existing personnel. With rare
exceptions, we do not have long-term employment or non-competition agreements with our employees. Members of our senior management team have left Oracle over the years for a variety of reasons, and we cannot
guarantee that there will not be additional departures, which may be disruptive to our operations.

26

We continually focus on improving our cost structure by hiring personnel in countries where advanced
technical expertise and other expertise are available at lower costs. When we make adjustments to our workforce, we may incur expenses associated with workforce reductions that delay the benefit of a more efficient workforce structure. We may also
experience increased competition for employees in these countries as the trend toward globalization continues, which may affect our employee retention efforts and increase our expenses in an effort to offer a competitive compensation program. In
addition, changes to immigration and labor law policies may adversely impact our access to technical and professional talent.

Our general
compensation program includes restricted stock units, performance equity and stock options, which are important tools in attracting and retaining employees in our industry. If our stock price performs poorly, it may adversely affect our ability to
retain or attract employees. We continually evaluate our compensation practices and consider changes from time to time, such as reducing the number of employees granted equity awards or the number of equity awards granted per employee and granting
alternative forms of stock-based compensation, which may have an impact on our ability to retain employees and the amount of stock-based compensation expense that we record. Any changes in our compensation practices or those of our competitors could
affect our ability to retain and motivate existing personnel and recruit new personnel.

Our sales to government clients expose us to
business volatility and risks, including government budgeting cycles and appropriations, procurement regulations, governmental policy shifts, early termination of contracts, audits, investigations, sanctions and
penalties. We derive revenues from contracts with the U.S. government, state and local governments, and foreign governments and are subject to procurement laws and regulations relating to the award, administration and
performance of those contracts.

Governmental entities are variously pursuing policies that affect our ability to sell our products and services.
Changes in government procurement policy, priorities, technology initiatives, and/or contract award criteria may negatively impact our potential for growth in the government sector.

We are also subject to early termination of our contracts. Many governmental entities have the right to terminate contracts at any time, without cause.
For example, the U.S. federal government may terminate any of our government contracts and subcontracts at its convenience, or for default based on our performance.

U.S. federal contracts are subject to the congressional approval of appropriations to fund the expenditures under these contracts. Similarly, our
contracts with U.S. state and local governments, foreign governments and their agencies are generally subject to government funding authorizations. Contracts may be terminated based upon a lack of appropriated funds.

There is increased pressure on governments and their agencies, both domestically and internationally, to reduce spending as governments continue to
face significant deficit reduction pressures. This may adversely impact spending on government programs.

Government contracts laws and regulations
impose certain risks, and contracts are generally subject to audits and investigations. If violations of law are found, they could result in civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a
portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.

We may not receive significant revenues from our current research and development efforts for several years, if at
all. Developing our cloud and license, and hardware offerings is expensive and the investment in the development of these offerings often involves a long return on investment cycle. An important element of our
corporate strategy is to continue to dedicate a significant amount of resources to research and development and related product and service opportunities both through internal investments and the acquisition of intellectual property from companies
that we have acquired. Accelerated product and service introductions and short life cycles require high levels of expenditures for research and development that could adversely affect our operating results if not offset by revenue increases. We
believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we do not expect to receive significant revenues from these investments for several
years, if at all.

27

Business disruptions could adversely affect our operating results. A
significant portion of our critical business operations are concentrated in a few geographic areas, some of which include emerging market international locations that may be less stable relative to running such business operations solely within the
U.S. We are a highly automated business and a disruption or failure of our systems and processes could cause delays in completing sales, providing services, including some of our cloud offerings, and enabling a seamless customer experience with
respect to our customer facing back office processes. A major earthquake or fire, political, social or other disruption to infrastructure that supports or operations or other catastrophic event or the effects of climate change (such as increased
storm severity, drought and pandemics) that results in the destruction or disruption of any of our critical business or IT systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results
could be materially and adversely affected.

Adverse litigation results could affect our business. We are
subject to various legal proceedings. Litigation can be lengthy, expensive and disruptive to our operations, and can divert our management's attention away from running our core business. The results of our litigation also cannot be predicted
with certainty. An adverse decision could result in monetary damages or injunctive relief that could affect our business, operating results or financial condition. Additional information regarding certain of the lawsuits we are involved in is
discussed under Note 17 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

We may have exposure to
additional tax liabilities. As a multinational corporation, we are subject to income taxes as well as non-income based taxes, in both the U.S. and various foreign jurisdictions.
Significant uncertainties exist with respect to the amount of our tax liabilities, including those arising from potential changes in laws in the countries in which we do business and the possibility of adverse determinations with respect to the
application of existing laws. Many judgments are required in determining our worldwide provision for income taxes and other tax liabilities, and we are regularly under audit by tax authorities, which often do not agree with positions taken by us on
our tax returns. Any unfavorable resolution of these uncertainties may have a significant adverse impact on our tax rate.

Increasingly, countries
around the world are actively considering or have enacted changes in relevant tax, accounting and other laws, regulations and interpretations. In particular, the recently enacted U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act) significantly changed
how corporations are taxed in the United States, which has had and we expect will continue to have a meaningful impact on our provision for income taxes. Due to the complexity involved in applying the provisions of the Tax Act, we made reasonable
estimates of the effects and recorded provisional amounts in our financial statements for the year ended May 31, 2018. The U.S. Treasury Department and the Internal Revenue Service (IRS), and other standards-setting bodies may issue guidance on
how the provisions of the Tax Act will be applied that is different from our interpretation. The Tax Act requires complex computations not previously required or produced, and significant judgments and assumptions in the interpretation of the law
were made in producing our provisional estimates. As we complete our analyses, and interpret any additional guidance, we may adjust the provisional amounts we have recorded, and those adjustments may materially impact our provision for income taxes
in the period in which the adjustments are made. We also anticipate that uncertainty in the application of the Tax Act to our ongoing operations as well as possible adverse future law changes attributable to changes in the U.S. political environment
could have an adverse impact on our future tax rate. Other countries also continue to consider enacting new laws, including changes in withholding tax regimes and the imposition of taxes targeted at certain technology businesses (some of which may
be made in response to the Tax Act), that could adversely affect us.

As a part of our income tax structure, there are many intercompany
transactions and calculations made in the ordinary course of business where the ultimate tax determination is uncertain. Our intercompany transfer pricing has been and is currently being reviewed by the IRS and by foreign tax jurisdictions and will
likely be subject to additional audits in the future. Although we have negotiated a number of agreements with certain taxing jurisdictions, these agreements do not cover substantial elements of our transfer pricing. In recent periods, transfer
pricing audits in many foreign jurisdictions have become increasingly contentious. Similarly, certain jurisdictions are increasingly raising concerns about certain withholding tax matters under current law. In addition, our provision for income
taxes could be adversely affected by shifts of earnings from jurisdictions or regimes that have relatively lower statutory tax rates to those in which the rates are relatively higher.

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We are also subject to non-income based taxes, such as payroll,
sales, use, value-added, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions that have uncertain applicability to the businesses in which we are engaged. Although we believe that our income
and non-income based tax estimates are reasonable, there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax
provisions and accruals.

Charges to earnings resulting from acquisitions may adversely affect our operating
results. Under business combination accounting standards pursuant to Accounting Standards Codification (ASC) 805, Business Combinations, we recognize the identifiable assets acquired, the liabilities assumed and
any non-controlling interests in acquired companies generally at their acquisition date fair values and, in each case, separately from goodwill. Goodwill as of the acquisition date is measured as the excess
amount of consideration transferred, which is also generally measured at fair value, and the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. Our estimates of fair value are based upon assumptions
believed to be reasonable but which are inherently uncertain. After we complete an acquisition, the following factors could result in material charges and adversely affect our operating results and may adversely affect our cash flows:

•

costs incurred to combine the operations of companies we acquire, such as transitional employee expenses and employee
retention, redeployment or relocation expenses;

•

impairment of goodwill or impairment of intangible assets;

•

amortization of intangible assets acquired;

•

a reduction in the useful lives of intangible assets acquired;

•

identification of, or changes to, assumed contingent liabilities, both income tax and
non-income tax related, after our final determination of the amounts for these contingencies or the conclusion of the measurement period (generally up to one year from the acquisition date), whichever comes
first;

•

charges to our operating results to maintain certain duplicative pre-merger
activities for an extended period of time or to maintain these activities for a period of time that is longer than we had anticipated, charges to eliminate certain duplicative pre-merger activities, and
charges to restructure our operations or to reduce our cost structure;

•

charges to our operating results due to expenses incurred to effect the acquisition; and

•

charges to our operating results due to the expensing of certain stock awards assumed in an acquisition.

Substantially all of these costs will be accounted for as expenses that will adversely impact our operating results for the
periods in which those costs are incurred. Charges to our operating results in any given period could differ substantially from other periods based on the timing and size of our future acquisitions and the extent of integration activities. A more
detailed discussion of our accounting for business combinations and other items is presented in the "Critical Accounting Policies and Estimates" section of Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7) included elsewhere in this Annual Report.

There are risks associated with our outstanding and future
indebtedness. As of May 31, 2018, we had an aggregate of $60.9 billion of outstanding indebtedness that will mature between calendar year 2018 and calendar year 2055 and we may incur additional indebtedness
in the future. Our ability to pay interest and repay the principal for our indebtedness is dependent upon our ability to manage our business operations, generate sufficient cash flows to service such debt and the other factors discussed in this
section. There can be no assurance that we will be able to manage any of these risks successfully.

We may also need to refinance a portion of our
outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other
factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase. Should we incur future increases in interest expense, our ability to utilize
certain of our foreign tax credits to reduce our U.S. federal income tax could be limited, which could unfavorably affect our provision for income taxes and effective tax rate. In addition, changes by any rating agency to our outlook or credit
rating

29

could negatively affect the value of both our debt and equity securities and increase the interest amounts we pay on certain outstanding or future debt. These risks could adversely affect our
financial condition and results of operations.

Environmental and other related laws and regulations subject us to a number of risks and
could result in significant liabilities and costs. Some of our cloud and hardware operations are subject to state, federal and international laws governing protection of the environment, proper handling and disposal of
materials used for these products, human health and safety, the use of certain chemical substances and the labor practices of suppliers, as well as local testing and labelling requirements. Compliance with these environmental and other laws could
increase our product design, development, procurement, manufacturing, delivery, cloud operations and administration costs, limit our ability to manage excess and obsolete non-compliant inventory, change our
sales activities, or otherwise impact future financial results of our cloud and hardware businesses. Any violation of these laws can subject us to significant liability, including fines, penalties and possible prohibition of sales of our products
and services into one or more states or countries and result in a material adverse effect on the financial condition or results of operations of our cloud and hardware businesses. Regulatory, market, and competitive pressures regarding the energy
intensity and energy mix for our data center operations may also grow.

The U.S. Securities and Exchange Commission has adopted disclosure
requirements for companies that use certain "conflict minerals" (tantalum, tin, tungsten and gold) in their products. Our supply chain is multi-tiered, global and highly complex. As a provider of hardware end products, we are several steps
removed from the mining and smelting or refining of any conflict minerals in our supply chain. Accordingly, our ability to determine with certainty the origin and chain of custody of conflict minerals is limited. Our relationships with customers and
suppliers could suffer if we are unable to describe our products as "conflict-free." We may also face increased costs in complying with conflict minerals disclosure requirements.

A significant portion of our hardware revenues come from international sales. Environmental legislation, such as the EU Directive on Restriction of
Hazardous Substances (RoHS), the EU Waste Electrical and Electronic Equipment Directive (WEEE Directive) and China's regulation on Management Methods for Controlling Pollution Caused by Electronic Information Products, may increase our cost of
doing business internationally and impact our hardware revenues from the EU, China and other countries with similar environmental legislation as we endeavor to comply with and implement these requirements. The cumulative impact of international
environmental legislation could be significant.

Our stock price could become more volatile and your investment could lose
value. All of the factors discussed in this section could affect our stock price. The timing of announcements in the public market regarding new products, product enhancements or technological advances by our
competitors or us and any announcements by us of acquisitions, major transactions, or management changes could also affect our stock price. Changes in the amounts and frequency of share repurchases or dividends could adversely affect our stock
price. Our stock price could also be affected by factors, some of which are beyond our control, including, among others: speculation in the press and the analyst community, changes in recommendations or earnings estimates by financial analysts,
changes in investors' or analysts' valuation measures for our stock, earnings announcements where our financial results differ from our guidance or investors' expectations, our credit ratings and market trends unrelated to our
performance. A significant drop in our stock price could also expose us to the risk of securities class action lawsuits, which could result in substantial costs and divert management's attention and resources, which could adversely affect our
business.

We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder
value. In fiscal 2018, our Board of Directors approved expansions of our stock repurchase program totaling $24.0 billion. The repurchase program does not have an expiration date and we are not obligated to
repurchase a specified number or dollar value of shares. Our repurchase program may be suspended or terminated at any time and, even if fully implemented, may not enhance long-term stockholder value.