Licences: The Feed Is ShrinkingNarrow moat

Oracle (ORCL) — moat facet

The licences that turn into support contracts are shrinking, so the annuity is being fed more slowly than it is paid.

Every support contract starts as a licence sale. That is why the licence line matters more than its size suggests. Software licence revenue was $5,081 million in fiscal 2024, $5,201 million in fiscal 2025 and $4,737 million in fiscal 20261, a fall of about 8.9% last year2.

Licence revenue ($M)6,523FY20175,855FY20195,399FY20215,779FY20235,201FY20254,737FY2026Oracle Forms 10-K FY2019, FY2022, FY2025, FY2026
Down about a quarter since fiscal 2017.

The decline is older than the cloud boom. Under the reporting that Oracle used until fiscal 2025, cloud licence and on-premise licence revenue was $6,523 million in fiscal 20173 and $5,081 million in fiscal 20244. Customers who once bought a perpetual licence now more often rent the same software as a cloud service, and that shows up in a different line.

The latest quarter was weak. Licence revenue was $655 million in the first quarter of fiscal 2027, against $766 million a year earlier5, about 14.5% lower6. Licence sales are lumpy and seasonal: Oracle says its revenues are "typically highest in our fourth fiscal quarter"7, and in fiscal 2026 the quarters ran $766 million, $939 million, $1,150 million and $1,881 million8.

For the moat this is a slow leak, not a break. A licence sold today adds a support stream that can last decades; a licence not sold is a customer that will pay Oracle through a cloud subscription instead, or pay someone else. The cloud applications and infrastructure lines, not the licence line, now decide whether the installed base keeps growing.

The older reporting shows how far the licence business has fallen. Under the definitions Oracle used before fiscal 2018, new software licences were $8,535 million in fiscal 20159. The licence line reported today, $4,737 million in fiscal 202610, is not strictly comparable, but on any basis Oracle sells far fewer perpetual licences than it did a decade ago.

The licence line is the leading indicator for support. If fiscal-year licence revenue falls below $4 billion while cloud database revenue does not replace it, the support annuity will begin a genuine decline within a few years.

Moat trajectory: Narrowing

Licences down 8.9% in FY2026 and 14.5% in Q1 FY2027.

The number that tests this moat
Reported
Software licence revenue, latest quarter
$655M, -14.5% (Q1 FY2027)

New licences feed future support; a sustained fall without cloud replacement would erode the annuity.

Source: Oracle Q1 FY2027 results release ↗
⚠ Threats to the moat
⚠ THREAT 01
The Fourth Quarter Carries the Year
Two-fifths of Oracle's licence sales arrive in one quarter, so a single slow May can turn a slow decline into a fast one.
References
  1. ReportedSoftware licence revenue was $5,081 million in fiscal 2024, $5,201 million in fiscal 2025 and $4,737 million in fiscal 2026, a fall of about 8.9% last year.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - Item 7 MD&A and segment note: revenue by line, segment margins, geography and remaining performance obligations. — FY2026 · publ. 22 June 2026 · source ↗
  2. Moat Explorer calcSoftware licence revenue was $5,081 million in fiscal 2024, $5,201 million in fiscal 2025 and $4,737 million in fiscal 2026, a fall of about 8.9% last year.
    Moat Explorer calculation from Oracle's reported figures ($ millions unless stated; fiscal years end 31 May). Revenue lines: software support 19,804 / 19,365 - 1 = 2.3% (FY2022-FY2026); support share 19,804 / 67,357 = 29.4%; support Q1 FY2027 4,895 / 4,955 - 1 = -1.2%; licences FY2026 4,737 / 5,201 - 1 = -8.9%; licences Q1 FY2027 655 / 766 - 1 = -14.5%; licences FY2017 to FY2026 4,737 / 6,523 - 1 = -27.4%; fourth-quarter licences 1,881 / 4,737 = 39.7%. Software (licence plus support) FY2022 5,878 + 19,365 = 25,243; FY2023 5,779 + 19,426 = 25,205; FY2026 24,541 / 24,724 - 1 = -0.7%; software share 24,541 / 67,357 = 36.4%. Cloud infrastructure FY2026 18,101 / 10,234 - 1 = 76.9%; FY2024 to FY2026 18,101 / 6,840 = 2.6 times; share 18,101 / 67,357 = 26.9%; Q1 FY2027 share 7,388 / 19,345 = 38.2%; annual run rate 7,388 x 4 = 29,552. Cloud applications FY2025 14,272 / 12,934 - 1 = 10.3%; FY2026 15,888 / 14,272 - 1 = 11.3%; share 15,888 / 67,357 = 23.6%; trailing twelve months 15,888 - 3,839 + 4,219 = 16,268. Applications ecosystem revenue 18,172 / 16,651 - 1 = 9.1%; 19,383 / 18,172 - 1 = 6.7%. Hardware segment margin 2,017 / 3,084 = 65.4% (FY2026); 1,709 / 4,152 = 41.2% (FY2017); 1,903 / 3,443 = 55.3% (FY2020); 1,932 / 3,274 = 59.0% (FY2023); 452 / 774 = 58.4% (Q1 FY2027); hardware revenue 3,084 / 4,152 - 1 = -25.7%; 3,084 / 5,205 - 1 = -40.7%; share 3,084 / 67,357 = 4.6%. Services margin 1,533 / 5,743 = 26.7% (FY2026); 993 / 5,233 = 19.0% (FY2025); 698 / 3,359 = 20.8% (FY2017); 450 / 3,106 = 14.5% (FY2020); 1,104 / 5,594 = 19.7% (FY2023); 445 / 1,414 = 31.5% (Q1 FY2027); services growth 5,743 / 5,233 - 1 = 9.7%; share 5,743 / 67,357 = 8.5%; revenue per services employee 5,743 / 34,000 = about $169,000. Cloud and software segment margin 20,801 / 30,452 = 68.3% (FY2017); 23,169 / 34,101 = 67.9% (FY2021); 26,126 / 41,086 = 63.6% (FY2023); 28,514 / 44,464 = 64.1% (FY2024); 30,930 / 49,230 = 62.8% (FY2025); 34,468 / 58,530 = 58.9% (FY2026); 7,691 / 12,907 = 59.6% (Q1 FY2026); 9,358 / 17,157 = 54.5% (Q1 FY2027); segment expenses 16,850 / 8,783 - 1 = 91.8%; segment revenue 58,530 / 44,464 - 1 = 31.6%; Q1 segment revenue 17,157 / 12,907 - 1 = 32.9%. Revenue growth 67,357 / 57,399 - 1 = 17.3%; FY2022 to FY2026 67,357 / 42,440 - 1 = 58.7%; Cerner share of FY2023 revenue 5,900 / 49,954 = 11.8%. Research and development 10,272 / 5,524 = 1.9 times; 10,272 / 67,357 = 15.3%. Sales and marketing 8,274 / 52,961 = 15.6% (FY2024); 8,651 / 57,399 = 15.1% (FY2025); 8,331 / 67,357 = 12.4% (FY2026); 8,331 / 8,651 - 1 = -3.7%; revenue per dollar of selling 52,961 / 8,274 = 6.4 and 67,357 / 8,331 = 8.1. Operating margin 15,353 / 52,961 = 29.0%; 17,678 / 57,399 = 30.8%; 20,606 / 67,357 = 30.6%; before amortisation (15,353 + 3,010) / 52,961 = 34.7%, (17,678 + 2,307) / 57,399 = 34.8%, (20,606 + 1,671) / 67,357 = 33.1%; amortisation 1,671 / 67,357 = 2.5%; non-GAAP less GAAP operating income 28.9 - 20.6 = 8.3 bn. Headcount 162,000 - 141,000 = 21,000, 21,000 / 162,000 = 13%. Headcount against the fiscal 2023 peak 164,000 - 141,000 = 23,000. Hardware FY2015 to FY2026 3,084 / 5,205 - 1 = -40.7%. Amortisation Q1 420 - 202 = 218. Stock compensation plus restructuring FY2026 4,811 + 1,838 = 6,649. Americas 44,478 / 36,339 - 1 = 22.4%; Americas share 23,679 / 42,440 = 55.8% (FY2022), 33,122 / 52,961 = 62.5% (FY2024), 44,478 / 67,357 = 66.0% (FY2026), 13,711 / 19,345 = 70.9% (Q1 FY2027); Asia Pacific 7,582 / 6,750 - 1 = 12.3%; EMEA plus Asia Pacific Q1 FY2027 3,726 + 1,908 = 5,634. US long-lived assets 102,717 / 45,439 = 2.3 times. Free cash flow FY2025 20,821 - 21,215 = -394; FY2024 18,673 - 6,866 = 11,807. Capital expenditure share of revenue 6,866 / 52,961 = 13%; 21,215 / 57,399 = 37%; 55,663 / 67,357 = 83%; 28,499 / 19,345 = 147%. Property added 127,845 - 99,957 = 27,888. Q1 FY2027 operating cash flow excluding prepayments 23,103 - 11,363 = 11,740; prepayments share 11,363 / 23,103 = 49%; free cash flow excluding prepayments -5,396 - 11,363 = -16,759. Borrowings 130,105 / 87,202 - 1 = 49%; net debt May 2025 92,568 - 10,786 - 417 = 81,365; May 2026 129,541 - 31,289 - 605 = 97,647; August 2026 7,625 + 117,712 - 36,369 - 708 = 88,260. Interest 1,428 / 923 - 1 = 55%; interest over operating income 1,428 / 6,728 = 21%. Leases not yet commenced over borrowings 288 / 125.3 = 2.3 times; over total assets 288 / 303.3 = 95%. Depreciation 3,156 / 1,351 = 2.3 times. Diluted shares 3,000 / 2,823 - 1 = 6.3%, 3,000 - 2,823 = 177 million; Ellison 1,158.2 / 3,023.7 = 38.3%; pledged 346 / 1,158 = 30%. Remaining performance obligations: 664 / 138 = 4.8 times; 664 / 455 - 1 = 46%; next twelve months 12% x 638 = 77 bn and 13% x 664 = 86 bn; beyond 36 months 100% - 13% - 37% = 50%; quarterly increases 455 - 138 = 317, 523 - 455 = 68, 553 - 523 = 30, 638 - 553 = 85, 664 - 638 = 26. Targets: 225 / 67.357 = 3.3 times; 225 - 24.5 = about 200 bn; 144 / 18 = 8 times; 20 / 2.4 = 8.3 times; Q1 FY2027 revenue 19,345 / 90,000 = 21.5% of guidance. Other: total assets 303,259 - 261,759 = 41,500 in one quarter; revenue FY2026 against FY2023 67,357 / 49,954 - 1 = 34.8%; cloud infrastructure Q1 FY2027 over Q4 FY2026 7,388 - 5,787 = 1,601; quarterly steps 4,079 - 3,347 = 732, 4,888 - 4,079 = 809, 5,787 - 4,888 = 899; cloud applications share 3,839 / 14,926 = 25.7% (Q1 FY2026) and 4,219 / 19,345 = 21.8% (Q1 FY2027); dividends over support 5,787 / 19,804 = 29.2%; interest, research and dividends 4,599 + 10,272 + 5,787 = 20,658; support FY2015 to FY2026 19,804 - 18,847 = 957; US revenue share 39,835 / 67,357 = 59.1%. Trailing twelve months to August 2026: revenue 67,357 - 14,926 + 19,345 = 71,776; net income 17,087 - 2,927 + 4,760 = 18,920; diluted EPS 5.83 - 1.01 + 1.56 = 6.38; P/E 421,930 / 18,920 = 22.3; P/S 421,930 / 71,776 = 5.88 - growth rates, segment margins and line totals. — FY2015-Q1 FY2027 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Oracle's Forms 10-K and 10-Q, results releases and market data; operands shown in the source line.
  3. ReportedUnder the reporting that Oracle used until fiscal 2025, cloud licence and on-premise licence revenue was $6,523 million in fiscal 2017 and $5,081 million in fiscal 2024.
    Oracle Form 10-K for fiscal 2019 - revenue by line and segment for FY2017-FY2019 on the ASC 606 basis. — FY2019 · publ. June 2019 · source ↗
  4. ReportedUnder the reporting that Oracle used until fiscal 2025, cloud licence and on-premise licence revenue was $6,523 million in fiscal 2017 and $5,081 million in fiscal 2024.
    Oracle Form 10-K for fiscal 2025 - revenue by ecosystem, lease commitments, employees and borrowings. — FY2025 · publ. June 2025 · source ↗
  5. ReportedLicence revenue was $655 million in the first quarter of fiscal 2027, against $766 million a year earlier, about 14.5% lower.
    Oracle first-quarter fiscal 2027 results release, Form 8-K exhibit 99.1, with supplemental tables - revenue by line and region for the quarter. — Q1 FY2027 · publ. 10 September 2026 · source ↗
  6. Moat Explorer calcLicence revenue was $655 million in the first quarter of fiscal 2027, against $766 million a year earlier, about 14.5% lower.
    Moat Explorer calculation from Oracle's reported figures ($ millions unless stated; fiscal years end 31 May). Revenue lines: software support 19,804 / 19,365 - 1 = 2.3% (FY2022-FY2026); support share 19,804 / 67,357 = 29.4%; support Q1 FY2027 4,895 / 4,955 - 1 = -1.2%; licences FY2026 4,737 / 5,201 - 1 = -8.9%; licences Q1 FY2027 655 / 766 - 1 = -14.5%; licences FY2017 to FY2026 4,737 / 6,523 - 1 = -27.4%; fourth-quarter licences 1,881 / 4,737 = 39.7%. Software (licence plus support) FY2022 5,878 + 19,365 = 25,243; FY2023 5,779 + 19,426 = 25,205; FY2026 24,541 / 24,724 - 1 = -0.7%; software share 24,541 / 67,357 = 36.4%. Cloud infrastructure FY2026 18,101 / 10,234 - 1 = 76.9%; FY2024 to FY2026 18,101 / 6,840 = 2.6 times; share 18,101 / 67,357 = 26.9%; Q1 FY2027 share 7,388 / 19,345 = 38.2%; annual run rate 7,388 x 4 = 29,552. Cloud applications FY2025 14,272 / 12,934 - 1 = 10.3%; FY2026 15,888 / 14,272 - 1 = 11.3%; share 15,888 / 67,357 = 23.6%; trailing twelve months 15,888 - 3,839 + 4,219 = 16,268. Applications ecosystem revenue 18,172 / 16,651 - 1 = 9.1%; 19,383 / 18,172 - 1 = 6.7%. Hardware segment margin 2,017 / 3,084 = 65.4% (FY2026); 1,709 / 4,152 = 41.2% (FY2017); 1,903 / 3,443 = 55.3% (FY2020); 1,932 / 3,274 = 59.0% (FY2023); 452 / 774 = 58.4% (Q1 FY2027); hardware revenue 3,084 / 4,152 - 1 = -25.7%; 3,084 / 5,205 - 1 = -40.7%; share 3,084 / 67,357 = 4.6%. Services margin 1,533 / 5,743 = 26.7% (FY2026); 993 / 5,233 = 19.0% (FY2025); 698 / 3,359 = 20.8% (FY2017); 450 / 3,106 = 14.5% (FY2020); 1,104 / 5,594 = 19.7% (FY2023); 445 / 1,414 = 31.5% (Q1 FY2027); services growth 5,743 / 5,233 - 1 = 9.7%; share 5,743 / 67,357 = 8.5%; revenue per services employee 5,743 / 34,000 = about $169,000. Cloud and software segment margin 20,801 / 30,452 = 68.3% (FY2017); 23,169 / 34,101 = 67.9% (FY2021); 26,126 / 41,086 = 63.6% (FY2023); 28,514 / 44,464 = 64.1% (FY2024); 30,930 / 49,230 = 62.8% (FY2025); 34,468 / 58,530 = 58.9% (FY2026); 7,691 / 12,907 = 59.6% (Q1 FY2026); 9,358 / 17,157 = 54.5% (Q1 FY2027); segment expenses 16,850 / 8,783 - 1 = 91.8%; segment revenue 58,530 / 44,464 - 1 = 31.6%; Q1 segment revenue 17,157 / 12,907 - 1 = 32.9%. Revenue growth 67,357 / 57,399 - 1 = 17.3%; FY2022 to FY2026 67,357 / 42,440 - 1 = 58.7%; Cerner share of FY2023 revenue 5,900 / 49,954 = 11.8%. Research and development 10,272 / 5,524 = 1.9 times; 10,272 / 67,357 = 15.3%. Sales and marketing 8,274 / 52,961 = 15.6% (FY2024); 8,651 / 57,399 = 15.1% (FY2025); 8,331 / 67,357 = 12.4% (FY2026); 8,331 / 8,651 - 1 = -3.7%; revenue per dollar of selling 52,961 / 8,274 = 6.4 and 67,357 / 8,331 = 8.1. Operating margin 15,353 / 52,961 = 29.0%; 17,678 / 57,399 = 30.8%; 20,606 / 67,357 = 30.6%; before amortisation (15,353 + 3,010) / 52,961 = 34.7%, (17,678 + 2,307) / 57,399 = 34.8%, (20,606 + 1,671) / 67,357 = 33.1%; amortisation 1,671 / 67,357 = 2.5%; non-GAAP less GAAP operating income 28.9 - 20.6 = 8.3 bn. Headcount 162,000 - 141,000 = 21,000, 21,000 / 162,000 = 13%. Headcount against the fiscal 2023 peak 164,000 - 141,000 = 23,000. Hardware FY2015 to FY2026 3,084 / 5,205 - 1 = -40.7%. Amortisation Q1 420 - 202 = 218. Stock compensation plus restructuring FY2026 4,811 + 1,838 = 6,649. Americas 44,478 / 36,339 - 1 = 22.4%; Americas share 23,679 / 42,440 = 55.8% (FY2022), 33,122 / 52,961 = 62.5% (FY2024), 44,478 / 67,357 = 66.0% (FY2026), 13,711 / 19,345 = 70.9% (Q1 FY2027); Asia Pacific 7,582 / 6,750 - 1 = 12.3%; EMEA plus Asia Pacific Q1 FY2027 3,726 + 1,908 = 5,634. US long-lived assets 102,717 / 45,439 = 2.3 times. Free cash flow FY2025 20,821 - 21,215 = -394; FY2024 18,673 - 6,866 = 11,807. Capital expenditure share of revenue 6,866 / 52,961 = 13%; 21,215 / 57,399 = 37%; 55,663 / 67,357 = 83%; 28,499 / 19,345 = 147%. Property added 127,845 - 99,957 = 27,888. Q1 FY2027 operating cash flow excluding prepayments 23,103 - 11,363 = 11,740; prepayments share 11,363 / 23,103 = 49%; free cash flow excluding prepayments -5,396 - 11,363 = -16,759. Borrowings 130,105 / 87,202 - 1 = 49%; net debt May 2025 92,568 - 10,786 - 417 = 81,365; May 2026 129,541 - 31,289 - 605 = 97,647; August 2026 7,625 + 117,712 - 36,369 - 708 = 88,260. Interest 1,428 / 923 - 1 = 55%; interest over operating income 1,428 / 6,728 = 21%. Leases not yet commenced over borrowings 288 / 125.3 = 2.3 times; over total assets 288 / 303.3 = 95%. Depreciation 3,156 / 1,351 = 2.3 times. Diluted shares 3,000 / 2,823 - 1 = 6.3%, 3,000 - 2,823 = 177 million; Ellison 1,158.2 / 3,023.7 = 38.3%; pledged 346 / 1,158 = 30%. Remaining performance obligations: 664 / 138 = 4.8 times; 664 / 455 - 1 = 46%; next twelve months 12% x 638 = 77 bn and 13% x 664 = 86 bn; beyond 36 months 100% - 13% - 37% = 50%; quarterly increases 455 - 138 = 317, 523 - 455 = 68, 553 - 523 = 30, 638 - 553 = 85, 664 - 638 = 26. Targets: 225 / 67.357 = 3.3 times; 225 - 24.5 = about 200 bn; 144 / 18 = 8 times; 20 / 2.4 = 8.3 times; Q1 FY2027 revenue 19,345 / 90,000 = 21.5% of guidance. Other: total assets 303,259 - 261,759 = 41,500 in one quarter; revenue FY2026 against FY2023 67,357 / 49,954 - 1 = 34.8%; cloud infrastructure Q1 FY2027 over Q4 FY2026 7,388 - 5,787 = 1,601; quarterly steps 4,079 - 3,347 = 732, 4,888 - 4,079 = 809, 5,787 - 4,888 = 899; cloud applications share 3,839 / 14,926 = 25.7% (Q1 FY2026) and 4,219 / 19,345 = 21.8% (Q1 FY2027); dividends over support 5,787 / 19,804 = 29.2%; interest, research and dividends 4,599 + 10,272 + 5,787 = 20,658; support FY2015 to FY2026 19,804 - 18,847 = 957; US revenue share 39,835 / 67,357 = 59.1%. Trailing twelve months to August 2026: revenue 67,357 - 14,926 + 19,345 = 71,776; net income 17,087 - 2,927 + 4,760 = 18,920; diluted EPS 5.83 - 1.01 + 1.56 = 6.38; P/E 421,930 / 18,920 = 22.3; P/S 421,930 / 71,776 = 5.88 - growth rates, segment margins and line totals. — FY2015-Q1 FY2027 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Oracle's Forms 10-K and 10-Q, results releases and market data; operands shown in the source line.
  7. ReportedLicence sales are lumpy and seasonal: Oracle says its revenues are "typically highest in our fourth fiscal quarter", and in fiscal 2026 the quarters ran $766 million, $939 million, $1,150 million and $1,881 million.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - Item 1 business and executive officers: products, competitors, employees and seasonality. — FY2026 · publ. 22 June 2026 · source ↗
  8. ReportedLicence sales are lumpy and seasonal: Oracle says its revenues are "typically highest in our fourth fiscal quarter", and in fiscal 2026 the quarters ran $766 million, $939 million, $1,150 million and $1,881 million.
    Oracle first-quarter fiscal 2027 results release, Form 8-K exhibit 99.1, with supplemental tables - supplemental quarterly revenue, capital expenditure and free cash flow tables. — Q1 FY2027 · publ. 10 September 2026 · source ↗
  9. ReportedUnder the definitions Oracle used before fiscal 2018, new software licences were $8,535 million in fiscal 2015.
    Oracle Form 10-K for fiscal 2017 - revenue by line for FY2015-FY2017 on the older basis, including cloud SaaS and PaaS/IaaS. — FY2017 · publ. June 2017 · source ↗
  10. ReportedThe licence line reported today, $4,737 million in fiscal 2026, is not strictly comparable, but on any basis Oracle sells far fewer perpetual licences than it did a decade ago.
    Oracle Corporation Form 10-K for fiscal 2026 (year ended 31 May 2026) - Item 7 MD&A and segment note: revenue by line, segment margins, geography and remaining performance obligations. — FY2026 · publ. 22 June 2026 · source ↗
Sources
Generated September 25, 2026