Safra A. Catz
Chief Executive Officer at Oracle
Thanks, Ken and good afternoon, everyone. Q2 was another excellent quarter with total revenue at the high-end of my constant-currency guidance and EPS was actually $0.01 above the high-end. These results are being driven by the fact that our largest revenue component, Cloud services and license support now represents 77% of total revenue and is also our fastest-growing line item, which in turn is driving the acceleration of overall revenue growth. We expect Cloud revenue to reach $25 billion this fiscal year. This is happening for several reasons.
First, our Cloud is faster and thus less expensive than other Clouds. We remain the preferred Cloud for AI workloads as well as for non-GPU Cloud infrastructure services. In addition, our ability to deploy our Cloud in many sizes gives our customers flexibility and our multi-Cloud agreements with Microsoft, Google and AWS provide customers more choice in how they can migrate their Oracle databases to the Cloud. And our strategic SaaS applications continue to grow rapidly and we are also seeing more of our industry-based Cloud applications come online, which immediately contribute to revenue growth. You can see all of this in the momentum in the acceleration of our Cloud growth and the 50% growth of our $97 billion RPO number, Remaining Performance Obligation. And today we're telling you again that revenue growth will accelerate further in the coming quarters.
Turning to Q2, and I want to remind you that our quarter ended on Saturday a week ago and here we are announcing our results and that's only possible because we use Oracle Fusion. Now as for the numbers, we saw all segments exceeding our internal forecast. Now as the dollar strengthened in the quarter, the 1% currency benefit for total revenue and the $0.02 to $0.03 benefit for EPS that were present in my August guidance retreated with total revenue and EPS in Q2 essentially unaffected by currency movements. As usual, as I go over things today, I'll be discussing our financials using constant-currency growth rate as this is how we manage the business. So, here it goes.
Total Cloud revenue that's SaaS and IaaS was up 24% at $5.9 billion with SaaS revenue of $3.5 billion, up 10% and IaaS revenue of $2.4 billion, up 52% on top of the 50% growth reported last year. As a reminder, we exited the advertising business last quarter, which had the effect of lowering the total cloud revenue growth by 2% this quarter. Total Cloud services and license support for the quarter was $10.8 billion, up 12% driven again by OCI, our strategic Cloud applications and autonomous database.
Infrastructure subscription revenues, which includes license support, were $6 billion, up 17%. Record level AI demand drove Oracle Cloud infrastructure revenue up 52%. But excluding legacy hosting infrastructure, Cloud services, revenue was up 55%. Our infrastructure Cloud services now have an annualized revenue of $9.7 billion. OCI consumption revenue was up 58% as demand continues to outstrip supply. Growth in the AI segment of our infrastructure business was extraordinary. GPU consumption was up 336% in the quarter and we delivered the world's largest and fastest AI supercomputer scaling up to 65,000 NVIDIA H200 GPUs.
Cloud database services, which were up 28% and now have an annualized revenue of $2.2 billion. As on-premise databases migrate to the Cloud on OCI either directly or through our database at Cloud services with Azure, Google and AWS, we expect the Cloud database revenues collectively will be the third leg of revenue growth alongside OCI and strategic success. We are currently live in 17 Cloud regions with database at Cloud services and have another 35 planned with Azure, Google and AWS.
Database subscription services, which includes database license support, were up 5%. Application subscription revenues, which includes product support were $4.8 billion and up 7%. Our strategic back-office SaaS applications now have annualized revenue of $8.4 billion and were up 18%. Software license revenues were up 3% to $1.2 billion, including Java, which saw excellent growth. So all-in, total revenues for the quarter were $14.1 billion, up 9% from last year.
Now shifting to gross profit and operating income, the gross profit dollars of Cloud services and license support grew 9% in Q2. As our Cloud businesses continue to scale, the gross margins of both Cloud applications and Cloud infrastructure have each been trending higher. We continue to display expense discipline, which of course, we're known for, especially with R&D, sales and marketing and G&A expenses, which collectively continue to grow slower than revenue, a trend that I expect to continue.
The Q2 operating income grew 10% and the operating margin was 43%, up 60 basis points from last year. The non-GAAP tax rate for the quarter was actually 20.1%, which is higher than my 19% guidance. Even as higher tax rate lowered EPS by $0.02, we still hit the high-end of my constant-currency guidance. Actually, we did better. The non-GAAP EPS was $1.47 in US dollars, up 10% in USD and 10% in constant-currency. The GAAP EPS was $1.10 in USD and that's up 24% in USD and 23% in constant-currency. At quarter-end, we had $11.3 billion in cash and marketable securities. The short-term deferred revenue balance was $9.4 billion, up 8%.
With capex at $4 billion for the quarter, free cash flow was negative $2.7 billion and operating cash flow was positive $1.3 billion. Given the demand that you see in our RPO numbers and the additional demand we see in our pipeline, I expect fiscal year 2025 capex will be double what it was in fiscal year FY '24. As always, we remain careful to pace and align our capex investments appropriately and in line with booking trends. On a trailing 12-month basis, operating cash flow was up 19% at $20.3 billion and free cash flow was $9.5 billion. Our Remaining Performance Obligation or RPO, is now at $97.3 billion, up 50% in constant-currency and reflects the growing trend of customers wanting larger and longer contracts as they see firsthand how Oracle Cloud services are benefiting their businesses.
Further, our Cloud RPO grew near our Cloud RPO, grew nearly 80% and now represents nearly three-fourths of total RPO. Approximately 39% of the total RPO is expected to be recognized as revenue over the next 12 months and we continue to see the growth of current RPO accelerate. We have now about 98 Cloud regions live and many, many more to follow. That we have more Cloud regions than any of the other hyperscalers reflects the strategic advantage of our Gen 2 architecture. We can start a new Cloud region with a handful of racks and then scale-up with customer demands. Additionally, our data centers are highly automated and identical in features and function varying only in scale. This sizing flexibility and deployment optionality of our Cloud regions continue to be a significant advantage for us.
As we've said before, we're committed to returning value to our shareholders through technical innovation, acquisitions, stock repurchases, prudent use of debt and a dividend. This quarter, we repurchased nearly 1 million shares for a total of $150 million. In addition, we paid out dividends of $4.4 billion over the last 12 months and the Board of Directors again declared a quarterly dividend of $0.40 per share. Before I dive into specific Q3 guidance, I'd like to share some overarching thoughts about the financial benefits I expect we will see over the coming quarters and years.
To start, we continue to see excellent demand for our Cloud services, which you see in our RPO growth. And while this growth is stellar, our pipeline is actually growing even faster and our win rates are growing higher with the recent win at Meta being a prime example of why we expect that our RPO balance will climb again in Q3. Meta was not booked in the Q2 quarter only in Q3. In fiscal year 2024, we signed some big deals and many have begun to generate revenue. We expect that those will continue to ramp higher in the second-half and be a key contributor to revenue growth acceleration this year and next. For fiscal year 2025, we remain very confident and committed to full-year total revenue growing double-digit and full-year total Cloud Infrastructure growing faster than the 50% reported last year.
Okay. Let me now turn to guidance, which I'll review on a non-GAAP basis. In terms of currency, we've seen a dramatic shift due to significant strengthening of the US dollar. To put this in perspective, in Q2, we expected currency to have a $0.03 positive effect on EPS for Q3. Assuming exchange rates remain the same as they are now, currency should have a $0.03 negative effect on EPS and a 2% negative effect on revenue. However, as the dollar strengthened, it may not hold out the whole quarter and may be different.
All right. Total revenue are expected to grow from 9% to 11% in constant-currency and are expected to grow from 7% to 9% in USD at today's exchange rate. Total Cloud revenue is expected to grow from 25% to 27% in constant-currency and is expected to grow from 23% to 25% in USD. Non-GAAP EPS is expected to grow between 7% to 9% and be between $1.50 and $1.54 in constant-currency. Non-GAAP EPS is expected to grow between 4% to 6% and be between $1.47 and $1.41 in USD. I should mention that my Q3 EPS guidance is negatively impacted by by $0.05 due to an investment loss in another company that we are partial owner of. Lastly, my EPS guidance for Q3 assumes a base tax rate of 19%. However, like in Q2, one-time tax events and other things can cause actual tax rates to vary.
And with that, I'll turn it over to Larry for his comments.
