Welcome to Oracle's second quarter fiscal 2015 earnings call. As a reminder, this call is being recorded for replay purposes. I'd like to now turn the call over to Ken Bond, Vice President of Investor Relations.
Thank you, operator. Good afternoon, everyone, and welcome to Oracle's second quarter fiscal year 2015 earnings conference call. A copy of the press release and financial tables, which includes a GAAP to non-GAAP reconciliation and other supplemental financial information, can be viewed and downloaded from our investor relations website. On the call today are Executive Chairman and Chief Technology Officer, Larry Ellison, and CEOs Safra Catz and Mark Hurd. As a reminder, today's discussion will include forward-looking statements, including predictions, expectations, estimates, or other information that might be considered forward-looking. Throughout today's discussion, we will present some important factors relating to our business, which may potentially affect these forward-looking statements. These forward-looking statements are also subject to risks and uncertainties that may cause actual results to differ materially from statements being made today.
As a result, we caution you against placing undue reliance on these forward-looking statements, and we encourage you to review our most recent reports, including our 10-K and 10-Q and any applicable amendments, for a complete discussion of these factors and any other risks that may affect our future results or the market price of our stock. Finally, we are not obligating ourselves to revise our results or public release any revisions to these forward-looking statements in light of new information or future events. Before taking questions, we'll begin with a few prepared remarks. With that, I'd like to turn the call over to Safra.
Thanks, Ken. I'm going to focus on our non-GAAP results for Q2. I'll then review guidance for Q3 and turn the call over to Larry and Mark for their comments. Clearly, we are very pleased with our results, as hardware and total revenue were both above my CD guidance, while total software was up at the high end. Cloud grew 47%, on-premise software license and support grew 6%, hardware systems grew 4%, and total revenue grew 7% in constant currency. The as-reported numbers were heavily impacted by the strengthening of the U.S. dollar in comparison to other currencies. Total revenue saw a 4% currency headwind, which was double what it was at the time of my guidance. Software and cloud, as well as hardware systems, saw growth rates affected by 3%. My comments today are generally going to reflect constant dollar growth rates.
Total cloud revenue was $519 million, growing 47%, with cloud SaaS and PaaS revenue of $364 million, up 41% from last year, and more than double last year's growth. The cloud bookings momentum of several quarters is now helping drive SaaS and PaaS revenue growth. When bookings turn into revenue depends on many factors, but as I reviewed the numbers over the last few quarters, one thing is clear: The acceleration in the business bodes very well for our future. Cloud IaaS revenue was $155 million, up 62%, but due in part to prior year compares being low. Overall, our cloud results were better than expected, as we're clearly growing faster than salesforce.com, and we're more than 3 times the size of Workday. Our goal remains to be bigger and grow faster in the cloud than both companies while improving our already high levels of profitability.
Total software revenues were $7.3 billion, up 8% from last year. Software updates and product support revenues drove nearly half of total company revenue at $4.8 billion, up 9% from last year. Attach and renewal rates remain at their usual high levels as our growing installed base of customers continue to power earnings and cash flow. New software license revenues were $2 billion. Looking at GAAP software and cloud results by region, the Americas grew 8%, with North America database growing double digits and very strong cloud growth. EMEA grew 9%, with cloud growth of more than 80%, and Asia-Pacific grew 7%, powered by Japan. Overall, the hardware business, including hardware support, grew 4%, with hardware system product revenue of $717 million and hardware support revenue of $619 million.
Our engineered systems saw solid growth with particular strength in both Exalogic and Big Data Appliance as we continue to gain share. For the company, total revenue for the quarter was $9.6 billion, up 7% from last year. Non-GAAP operating income was $4.4 billion, also up 7% from last year, and the operating margin was unchanged at 46%. Excluding MICROS, both hardware growth margin and operating margin expanded by more than 1%. That we're able to maintain our industry-leading operating margins with MICROS, now part of the business, while growing our cloud business 47%, is a testimony to the strength of our business model. The non-GAAP tax rate for the quarter was 24.3%. That's higher than my guidance of 23%, and EPS was $0.69 in US dollars.
The GAAP tax rate was 23.5%, a point higher than my guidance, and GAAP EPS for the quarter was $0.56 in US dollars. The higher tax rate reduced EPS for both GAAP and non-GAAP by $0.01. This was a result of revenue mix by region, driven primarily by foreign currency impact and a couple of other small factors. Free cash flow over the last four quarters was down very slightly at $14.5 billion as we increased CapEx spending a little bit. Just so that you get a sense of the size here, CapEx spending over the last four quarters is about $150 million higher than that same four quarters the previous year. We now have nearly $45 billion in cash and marketable securities. Net of debt, our cash position is approximately $12 billion.
As we've said before, we are committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases, prudent use of debt, and a dividend. In terms of acquisitions, we continue to focus on finding the right companies at the right valuations, and both are critically important. This quarter, we repurchased 52.8 million shares for a total of $2.1 billion. Over the last 12 months, we've repurchased more than 200 million shares for a total of $8.1 billion, paid out dividends of $2.1 billion, for a total that is more than 70% of our free cash flow, and the board of directors declared a quarterly dividend of $0.12 per share. Now to the guidance. As you can imagine, we feel very good about our prospects and our performance.
I have to tell you, I'm always keeping an eye on the situation in the macro environment, especially abroad. Additionally, given the unusually high volatility in exchange rates, we expect currency will affect revenue by more than 4% and EPS by $0.04 if rates stay as they are just about now. As we just don't know how much, I'm going to provide constant currency guidance today. SaaS and PaaS, on a non-GAAP basis, is expected to grow 30%-34% in constant currency. On a GAAP basis, SaaS and PaaS revenue is expected to grow 31%-35%. Cloud IaaS on a GAAP and non-GAAP basis is expected to grow 29%-33%. Software and cloud revenue on a GAAP and non-GAAP basis, including SaaS and PaaS and IaaS, new software license, and software support, is expected to grow between 5%-8%.
Hardware system revenue on a GAAP and non-GAAP basis, which includes hardware system products and hardware system support, is expected to be somewhere between -2% and +8% in constant currency. Total revenue growth on a GAAP and non-GAAP basis is expected to range from 4%-8%. Non-GAAP EPS is expected to be somewhere between $0.69 and $0.74. Again, all of this in constant currency. GAAP EPS is expected to be somewhere between $0.55 and $0.60. This guidance assumes a GAAP tax rate of 23% and a non-GAAP tax rate of 24%, but this too may end up being different, especially as tax rate is very heavily impacted by the mix of earnings, which is impacted by currency. With that, I'm going to turn this over to Larry for his comments.
Thank you, Safra. As Oracle Cloud business gets bigger, our growth rate is going up. As our competitors' cloud businesses get bigger, their growth rates are going down. This has big implications I'd like to explain. In Q2, we booked more than $170 million in new SaaS and PaaS annually recurring revenue or ARR. In other words, we sold over $170 million of new SaaS and PaaS annual subscriptions this past quarter. In Q4 of this fiscal year, we expect to sell more than $250 million of new annual SaaS and PaaS subscriptions. That means during our next fiscal year, we will sell well over $1 billion of new SaaS and PaaS annual subscriptions. What makes this particularly interesting is that next year Oracle will sell about the same total dollar amount of new SaaS and PaaS business as cloud market leader salesforce.com. Stay tuned.
It's going to be close. We're catching up to them, and we're catching up very quickly. Mark, over to you.
Thank you. Okay. Let me just give you a couple numbers and a few names, and then we'll go to your questions. SaaS, PaaS revenue, as Safra mentioned, grew 41% in CD. ERP/EPM revenue grew more than 80%. CX revenue grew nearly 50%. I think that company Larry mentioned, salesforce.com, reported 28. CX marketing automation grew 200% in revenue, where we are the clear number one. Bookings grew nearly 150%. I want to say one more time, it was 150%. Fusion bookings, ERP, HCM, and Salesforce automation all grew triple digits. All pillars saw booking growths in excess of 50%. We added more than 860 SaaS customers, with more than 230 that subscribed to more than one pillar when they bought a cloud subscription from us. Nearly 650 existing customers expanded their cloud services in the quarter. In HCM, we added 230 new customers.
In CX, more than 460 new customers. In ERP/EPM, 250 new customers. In one quarter, we added two and a half times Workday's entire install base. Nearly 150 of the new ERP customers did not have any Oracle ERP before they bought cloud subscription from Oracle in the quarter. Overall, Fusion had triple-digit bookings growth, triple-digit revenue growth. We had over 125 go lives in Q2. That's SaaS. In PaaS, we had a breakout quarter. We had 150 brand-new PaaS customers. As many of you know, we announced PaaS at Oracle OpenWorld, the end of September. Three-quarters subscribed to multiple PaaS services. The PaaS opportunity is big given the size of our install base, and you might argue as big or bigger than the SaaS opportunity. Let me read you a few names from the quarter.
In HR, Fidelity National Financial, Pella, Siemens, Barnes & Noble, Baylor Scott & White Health, DirecTV, Honeywell, Johnson & Johnson, Kaiser, Nokia, Northrop Grumman, Société Générale, Skanska. In sales service clouds, Flowserve, 3M, Adidas, Equifax, DirecTV, Fiat, TELUS, United Parcel Service, Visa, Yahoo, BITZER , Cypress Semiconductor. In marketing cloud, Bloomberg, Equifax, Fiat, Honeywell, Ricoh, Siemens, Telefónica, Visa, Emerson, Kroger, LEGO Systems. In ERP/EPM Cloud, Odebrecht in Brazil, H.J. Heinz, InBev, Lafarge, Michael Baker. I don't have more time to read more. These are a huge list of logos that we gained in the quarter. Couple other comments. Premise software grew 6% in CD. I continue to expect this business to grow nicely while our cloud continues to maintain hypergrowth. Moving quickly just to mention hardware. Engineered systems bookings grew double digits. Bookings for Exalogic, Supercluster, and Big Data Appliance to Safra's point all grew more than 50%.
I just want to make sure for those of you that don't listen to traditional hardware companies' calls, it is clear we are taking substantive market share in hardware. In wrapping up, our cloud revenue's already at a $2 billion rate. As I said at the financial analyst meeting, our SaaS pipeline is large. Since then, it's gotten bigger. We outpaced our bookings growth plan for the first half of the year and set our sights on 100% bookings growth for Q3. With that, we will take your questions.
To ask a question, please press the star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Your first question comes from the line of Rick Sherlund with Nomura Securities.
Thank you for taking the question, good quarter. On the cloud side, I'm curious, as far as the new versus existing customers, I think you've got some metric there. Can you give us a sense of, are you seeing a conversion from existing on-prem customers, or is most of this new business that you're picking up?
Well, first, let's go through it by pillar, because I think that's the way you have to do it. In marketing, everything is really new. We don't have a marketing install base. When we give you those numbers, Rick, they're really everything coming is a net new logo. Now, it may be in a company that's got Oracle product, but it's all net new. Most of our sales cloud is net new. There is some Siebel conversion, but as I mentioned at the financial analyst meeting, our Siebel install base, when you look at the support numbers, is fairly stable. We have a lot of net new even in, if you will, sales cloud. We have a mix in HR, both conversion and net new.
I think the important thing you saw this quarter as we've talked before, Rick, I think it's not just the fact that our strategy isn't be just best of breed in each of these apps, but also to have a suite of capability. That's why I wanted to mention the multi-pillar deals that occurred in Q2, because we have customers now that are not just buying ERP from us, but they're buying ERP and HR. They're buying sales cloud and marketing. We also get the opportunity, as you know, to go back into that install base once we've got one app and sell a second app, a third app, a fourth app. So, it was an exciting quarter across a number of those metrics.
I'd just like to add.
For PaaS.
Go ahead, Rick. Let me just add one thing. As Mark said, you got to take it pillar by pillar. You also have to take it layer by layer in the cloud. Where a lot of our SaaS business are brand new logos, people who've never done business with Oracle before, you would expect that in PaaS, it's virtually all our install base. The reason being almost every moderate size company in the world is already an Oracle user. The PaaS we're selling into this install base, as Mark said, SaaS is a bit of a mix, depending on pillar.
Larry, you're seeing customers pivoting now to PaaS and infrastructure as a service, if you could maybe spend a moment on that.
Well, again, I think what we're pushing very hard is PaaS, as opposed to infrastructure as a service. That's where our huge differentiation is. That's where we give you so much more automation in terms of database tuning and installation and backup and recovery and logging and security. Our big push is into PaaS. We are in infrastructure as a service, which is a low-cost commodity business where we have the same pricing as Amazon and Google and the rest. We're in that because when our customers come, as Mark said earlier, they buy one pillar, they'll buy another. I can talk about layers in the cloud, where they'll buy a few SaaS applications, they'll buy some PaaS, and they'll buy some infrastructure as a service, as they want to have a unified security model and a fast network to interconnect all of these pieces.
Thank you.
Thank you, Rick.
Next question, please.
Your next question comes from the line of Jason Maynard with Wells Fargo.
Hey, good afternoon, guys. I have two questions. One, I want to follow up on the cloud piece and then a question on the database. On the cloud piece, Larry, you talked about $1 billion in bookings. I just want to make sure that I'm reading this correctly. That's an incremental $1 billion on top of your-
Yes. That's another $1 billion that we will have sold when you annualize it. This is not total contract value. This is in terms of annual subscription rates.
On top of your-
That we will sell next fiscal year, in excess, we expect to sell well in excess of $1 billion of new annual subscriptions.
That's on top of your current-
Which is about what Salesforce will be selling in their next fiscal year. I think they're at $1.1 billion, something like that, best as we can estimate. We think we have a good chance of passing them. I don't know if we could pass them or catch them. It's going to be very close. We're in that ballpark. We're selling new business at the same rate as the market leader next year, which I think, again, we're experiencing this hypergrowth. Salesforce is slowing down. We're speeding up. They're only twice as big as us. Round numbers, they're $4 billion, we're $2 billion. We're growing a lot faster, and we have a lot more products. We have a large install base to sell into. We think, again, I said, I know it's just words.
We said we think we can become number one in the cloud. We think we will be number one in the cloud, and we will be number one in the cloud very quickly.
Jason, just to add to your question, most of all of our comments that Larry made, that I made today, we're all talking about ARR-
Right
not TCV.
Right.
There's not a multiplier on it. Our average contract value is obviously longer than annual-
Right
we're talking in comparisons of ARR.
Yeah, IBM will announce a billion-dollar deal over 10 years.
Right. Yeah.
That billion-dollar deal to us would be $100 million. If it's a 10-year deal and it's evenly distributed, we would count that as $100 million of ARR.
Right.
100 million over one year. We annualize all of this stuff. Once they're installed and running, and there's a delay between when we book something and when we start collecting revenue, because we don't collect revenue till the users are up and running, and it's implemented. There's that delay. Once they're up and running, it's an annualized number we're giving you, not a total contract value number we're giving you.
I got that part. I also want to make sure I'm clear. This is incremental on top of your current $2 billion-
Of course
plus run rates.
It should be a lot more than $2 billion, by the way, because that's next fiscal year. We're not going to end this fiscal year still at $2 billion. That will grow.
You have bookings that have been booked that have yet to be provisioned.
Yeah.
Therefore, you will have a bigger base on which those bookings will go. At the same time, the bookings we get in the future will take time to provision.
Right
As they go forward. It's a layered model as you build up on the revenue, Jason.
Great.
I know you know that.
I want to ask one thing on the database business. Larry, a lot of customers in the past have been conditioned to wait for R2 of the database to come out. This time around, you guys made a major release this past summer with the in-memory option. I'd be curious to get your take on, what are you seeing in terms of customer adoption? Are we starting to see folks say, "Hey, we're going to move to this incremental dot release that came out," I think it was June, July timeframe, or are some folks still waiting for R2? What's the advice or the guidance from Oracle in terms of when customers should migrate to 12c? Thanks.
Okay. There are two major pieces of our new database release. One, as you mentioned, is the in-memory option, but that's not the only driving factor of people upgrading the database version. The other is multi-tenancy, the multi-tenant option, which is appropriate for the cloud, allows them to, again, convert all of their existing Oracle applications and make them multi-tenant applications while preserving security and reliability, a better way than do multi-tenancy at the application layer. We think those two features in concert will drive a much more rapid adoption of the Oracle database over the next couple of years. We think our database business is going to have a very strong 24 months coming up.
Yes. Jason, the options did very well in the quarter. There's no question customers are extremely interested and are buying the option.
All right. Great. Thank you, guys. Appreciate the answers.
Your next question comes from the line of Kash Rangan with Bank of America.
Hi. Happy holidays and good news from Oracle. Good to hear that. Can you talk about the net new cloud bookings and what exactly is driving that? If you can give us color by product, is it HCM or CRM? To Larry's point, the layer, is it the PaaS or the SaaS layer? Geographies? In particular, layer, if you could drill into the PaaS layer and help us understand, is it a net new market or could it come at the expense of the traditional database business, which maybe gets cannibalized or maybe not? Just wanted to get your thoughts on that. Thank you.
Mark will probably give you a more detailed answer, but my answer is yes.
Everything.
It's all of the above. We have such a broad. If you look at our product line versus our competitors, we're salesforce.com's only real competitor in sales automation. We're the leader in marketing automation. We're fighting hard to be the leader in service automation, where our competitor is salesforce.com. We're Workday's only real competitor in HCM. We think we pass them in HCM. You can make an argument, we're both fighting hard in HCM. We're killing Workday in ERP. If you conclude ERP and EPM together, it's planning, budgeting, performance management, and the classic ERP, all of that, we sold two and a half times more customers this past quarter than they've done in the life of their company. We are the clear leader in mid-range and high-end ERP with no competition from Workday. They're just not there. When they're there, they're losing every time.
We're very strong in HCM. We're very strong in ERP. We're the leader in ERP. We're the leader in marketing. We're the leader in EPM. We're contending for leadership in service automation and in HCM. We're the guys in second place behind salesforce.com in sales force automation. Every place else, except for that one segment, that one niche, we're the leader, or fighting to be the leader. We have an incredible breadth of SaaS products. Our SaaS products are built on top of Java and the Oracle Database, the platform. Companies want to make extensions to the applications. They want to link the applications to their existing applications and so on. Using our platform makes a lot more sense than using a proprietary platform from salesforce.com. We don't think it's a fair fight. By the way, salesforce.com uses our platform to build their applications.
They just can't sell our platform as a part of their service offering to their customers because they have no license to do so. We can sell our platform. We do sell our platform. We sell the same platform that we build on to our customers. We've seen a huge amount of interest, both from our SaaS customers using our platform and also that it's this enormous, this huge install base we have in the database business, interested in moving test and development and certain aspects of their database work to the cloud. Not everything, but a part of it, a bit of a hybrid. We're seeing these customers now experimenting. They're at the experiment level. The potential for this, as Mark said, is probably bigger than our SaaS business. I think we're going to be by far the leading SaaS company in the cloud.
Look at our product portfolio. Kash, who wins in all of these battles? The suite vendors always beat the point solution guys. It's happened in every generation of computing, where the end user, the customer, doesn't want to be the integrator of 30 separate applications from 30 separate vendors. No different now, just all in the cloud now. Same problem. They don't want to integrate a lot of different stuff. We have all the stuff pre-integrated. We think we're in a great position. We're seeing hypergrowth at SaaS. We're seeing hypergrowth in PaaS. We're getting bigger and our growth rates are getting higher. Unlike anyone else in the cloud business.
Thanks and happy holidays. Yeah.
Yeah.
Yeah. Listen, add to it, the products are more mature. We're on release nine of our SaaS products. Right? Not only are our products more mature, we have more of them. Our suite is broader. We added sales capacity before. Two and a half years ago. Realigning the sales force, adding capacity, they're trained, they're getting more training, and we have references. When you add the familiarity now of the SI community to it.
You just have a lot of factors. There's no one of these factors in isolation. It's the culmination of a lot of work over a lot of period of time.
Next question, please.
Certainly. Your next question comes from the line of Heather Bellini with Goldman Sachs.
Great. Thank you. Mark, I was wondering if you could share with us, your performance this quarter, given what's going on with currency, was definitely better than I think people were expecting on a constant currency basis even. I'm just wondering how much of that is due do you think maybe the U.S. deal closing environment getting a little bit better from a macro perspective, and how much of it is due to sales force efficiency improvement?
You're saying macro versus us?
No, macro in the U.S., right, seems to be doing better. How much of it is due to kind of, is your sales force productivity improving and that's what's driving the confidence in the guidance for next quarter, and your results on a constant currency basis this quarter? I think versus what everyone was thinking, things are looking better.
I don't think anything changed from what we had been seeing for a while. The only difference is we saw it in pipeline, we saw it in proposal. Now it's turned into actual numbers and performance. I don't think this is an event. I think this is a set of activities that have occurred over a long period of time, as I tried to reference in my previous question. I would not take some short-term improvement in the U.S. macro and turn that into, "That's why Oracle had great cloud bookings in Q2." I think our performance was driven by exactly the phenomena that I described. Great products, more mature products, better references, lots of capacity in our sales force, that's better trained, that's out in the market and winning deals. That's what I think drove it.
Yeah.
Okay, and then the-
I'd like to second what Mark said, is we're just further up the learning curve on everything. Our sales management team is terrific. We realigned our sales force against our secular competitors. We have an HCM sales force that goes up against Workday. We have a sales automation sales force that goes up against salesforce.com. We have a service automation sales force that goes up, but they're different, that goes up against salesforce.com. We have a marketing automation sales force. We have an ERP sales force. We have an EPM sales force. We have all of these specialized sales forces. Mark created those several years ago. We've been hiring, staffing, and they are much more mature. We started working on some of these products. A lot of these products, we built them internally. We started now 10 years ago.
After 10 years of development, the Fusion applications, again, Mark says we're in release nine. They're getting really good. The user interface is getting good. We have a lot of good customer feedback, again, over a period of years. We've improved the UIs, we've improved the multinational capability. We've improved security in the cloud. I think we're the leader in application security in the cloud. It's just walking up the learning curve. At some point it becomes visible to everybody. Now, Mark, a few quarters ago, talked about the size of the pipeline. Looked pretty good, but kind of stunning. I know the next thing is it turns into bookings. The next thing, it turns into revenue. The next thing is we have more revenue than anyone else in the cloud, I think that's the next shoe that's going to drop.
Great. Thank you.
Thanks, Heather.
Your next question comes from the line of John DiFucci with Jefferies & Company.
Thanks. I have a question for Safra. Safra, as you said, CapEx has creeped up a little bit. It's up 26% on a trailing 12-month basis or about $150 million. non-GAAP operating margins have really held steady, as has free cash flow. As you transition to more cloud-based business, should we expect free cash flow to trail off a bit, even if it's just temporarily?
It's all so tiny. These amounts are so small in the scheme of what's going on. I think it's kind of unusual that I would even call out a $150 million increase year-over-year on capital expenditure. Since you guys aren't even used to it, I figure, all right, let me call it out as small as it is. Obviously, in the launch for PaaS and the volumes that we are expecting, we made our investments. As we expand, we'll continue. These are really tiny numbers and are totally dwarfed by our $14-plus billion in free cash flow. I'm not sure other companies would've even mentioned it, and you're probably asking me because other companies make these enormous announcements of spending billions and billions. You have to remember, I mentioned it at Financial Analyst Day, we control almost our entire supply chain.
You see, we're very close to starting with sand, then we have computers. We make almost everything, as a result, we get everything at the best possible prices and economies of scale. We're already a very large company, we already had huge investments over the years, so we have a lot of capacity. Again, I would not fret on this really small number, because I'm not planning on making some announcement that we're going to spend billions, because we've already spent, and it's just showing up little teeny bitties at a time.
Okay. Thanks. That's helpful. If I could, just a quick sort of tactical follow-up, and it's in regards to guidance. We can go through our own calcs for foreign exchange effects to get a reported number relative to the constant currency guidance. Generally, what's the delta in growth for the top line between constant currency and reported numbers that you have?
In this past quarter that we just had?
I think he's saying guidance.
No, actually, I'm talking about guidance, yeah.
Listen, the rates right now compared to last year, depending on which line item, because it depends for us geographic distribution and all of those things, it's over 4%. In some areas, it approaches 5%. A number of currencies really collapsed in comparison to the dollar. If that's what you're asking me, I think I'm answering. If things stay as they are today, it is over 4% of impact in many of the numbers you guys follow.
Okay, great. That's helpful. Thank you.
Your next question comes from the line of Brent Thill with UBS.
Good afternoon. Safra, just on operating margins, there's been a lot of focus if you can continue to drive steady operating margin improvement despite this transition to the cloud. I think you were clear to John that the investments are already in. As you look at kind of the next level of operational improvement, where do you see the biggest levers? I guess as you transition to the cloud, as more of the business gets there, is this inherently a more profitable business from your perspective as you get to that side?
Oh, yes. There's no question. We've done the analysis, and I think I shared at least some of it with you all during Financial Analyst Day. There is no question that at scale, we continue to improve our margins dramatically, taking advantage of both our economies of scale and our control of almost our entire supply chain, and really our intense automation, which really ultimately results in our being very price competitive and allowing our customers to spend much less all in than they ever did, and yet we get a much more significant percentage of their wallet share. I'm very pleased with where margins laid out this quarter. As we get to volume, I actually think we will do better and continue to do better.
Thank you.
Your next question comes from the line of Phil Winslow with Credit Suisse.
Hi, thanks for taking my questions, I'd just like to echo the congratulations for this quarter. Most people have touched on a lot of the other lines businesses so far, but I want to ask a question about hardware. You guys exceeded your guidance this quarter and are guiding for growth year-over-year again next quarter. Just give us a sense for what you're seeing just in that hardware line. We've finally hit that point that you all have talked about, that the stuff that you're not focused on is getting small enough and declining less, that the growth areas are starting to show through, or just how we should think about that would be great.
Well, I think you should think about that we're just winning. That would be the overriding thing I would take away. If you look at some of the markets we're in, particularly in computers that are scale computers, the $20,000, $25,000 and up category that you typically see for most of the research firms, we're gaining startling amounts of share. When you're talking about growth rate, gains of share that are 7, 8, 9, 10 points of share gain. If you ask what the drivers are underneath it, they're what we've been talking about before. We had double-digit bookings growth in engineered systems, as I described a few minutes earlier. Safra and I both mentioned a couple of products, and we've had very good performance out of what's called the Oracle SuperCluster. The SPARC SuperCluster has had significant growth.
We've had very good growth in a product we don't talk about much called the Oracle Database Appliance. It's had significant growth for us. This whole strategy of aligning hardware and software together is what customers want. I can make an argument to you, it's the same market trend you see in the cloud. We just do more work for the customer. We integrate the products for the customer. The customer doesn't have to do it. We optimize the software for the solution, and it's delivered us strong growth. When you look across really every line for us, we had very good performance. By the way, I should add in storage. Storage, our network attached product, again, off now what's a bigger base, had very strong growth in the quarter as well.
We're quite pleased with the performance we've seen in most of our product categories across most of our geographies, particularly in terms of share gains.
Great. Thanks, guys, and congratulations again.
Thank you.
Thank you.
Your final question comes from the line of Karl Keirstead with Deutsche Bank.
Thank you for fitting me in. I've got a question about two growth metrics that stood out to me that exceeded my expectations, and I'd love some color. The first, maybe this is directed to Mark. Mark, it felt like North American database in the prior few quarters ran a little bit less than expectations, yet Safra mentioned in her comments that North American database sales were back to double digits, and I'd love to understand what drove that. It doesn't feel like there's a big, broader demand improvement, so I'd love to know how you pulled that off. It's impressive. For Safra, you put up 9% software support revenue growth in constant currency. That's actually the best number you've put up in a little while, and I'd love a little color on that. Thank you.
Well, I think on the database question in North America, Larry answered that a bit earlier, talking about 12c. We're into a new release. We've talked about the time frames that would come on board. You saw good performance in North America. Frankly, when you looked at database overall in CD, we grew five, six points, I want to say six in CD. Again, my guess would be we're gaining share again as you look at database overall. I know you mentioned the metric you described about database, but as I tried to go through a financial analyst meeting, when you look at the CAGR on a three-year basis, it is a very strong upper single-digit CAGR in database. While you talk about one quarter or another, this is not a new phenomena that you see this kind of performance in database.
Now with 12c, our pipeline has grown in database, and I think it's reflected in the numbers that you saw in the quarter.
Thanks. Safra, yeah.
Yeah, sure. I'm actually looking at all the numbers and the contract base and it's been going up. It jumps around, but I have other quarters where it's very close. Remember, we're selling an extremely large amount. Cancellation rates are very low. Attach rates are extremely high. All of that added together, just ends up with a good number.
Right. Okay. Thanks a lot.
Thank you.
Thank you. I'd now like to turn the call back over to Mr. Bond for his closing remarks.
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