INCOME TAXES

12 Months Ended

May 31, 2026

Income Tax Disclosure [Abstract]

INCOME TAXES

12.INCOME TAXES

Our effective tax rates for each of the periods presented are the result of the mix of income earned and losses incurred in various tax jurisdictions that apply a broad range of income tax rates. Our provision for income taxes varied from the tax computed at the U.S. federal statutory income tax rate for fiscal 2026, 2025 and 2024 primarily due to earnings in foreign operations, state taxes, the U.S. research and development tax credit, settlements with tax authorities, the tax effects of stock-based compensation, the Foreign Derived Intangible Income deduction and the tax effect of Global Intangible Low-Taxed Income (GILTI).

The following is a geographical breakdown of income before income taxes:

	Year Ended May 31,
(in millions)	2026		2025		2024
Domestic	$	8,693	$	4,376	$	3,023
Foreign		10,861		9,784		8,718
Income before income taxes	$	19,554	$	14,160	$	11,741

The provision for income taxes consisted of the following:

	Year Ended May 31,
(Dollars in millions)	2026			2025			2024
Current provision:
Federal	$	1,072		$	1,172		$	999
State		307			196			420
Foreign		2,005			1,986			1,994
Total current provision	$	3,384		$	3,354		$	3,413
Deferred benefit:
Federal	$	(1,783	)	$	(2,208	)	$	(2,020	)
State		(152	)		(202	)		(280	)
Foreign		1,018			773			161
Total deferred benefit	$	(917	)	$	(1,637	)	$	(2,139	)
Total provision for income taxes	$	2,467		$	1,717		$	1,274
Effective income tax rate	12.6%			12.1%			10.9%

In fiscal year ended May 31, 2026, we adopted ASU 2023-09 prospectively. The following table reconciles the provision for income taxes to the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes for the year ended May 31, 2026:

(Dollars in millions)	Amount			Percent
U.S. federal statutory income tax rate	$	4,106		21.0%
Foreign tax effects		(77	)	-0.4%
Switzerland
Statutory tax rate difference between Switzerland and U.S.		(377	)	-1.9%
Other		21		0.1%
Malta
Statutory tax rate difference between Malta and U.S.		255		1.3%
Equity allowance		(546	)	-2.8%
Other		(78	)	-0.4%
Bermuda
Statutory tax rate difference between Bermuda and U.S.		(105	)	-0.5%
Income exclusion		(263	)	-1.4%
Other foreign jurisdictions		1,016		5.2%
Effect of changes in tax laws or rates enacted in the current period(1)		933		4.8%
Tax credits		(1,587	)	-8.1%
Federal research and development credit		(621	)	-3.2%
Foreign tax credits		(965	)	-4.9%
Other		(1	)	0.0%
Nontaxable or nondeductible items		(1,970	)	-10.1%
Stock-based compensation		(2,062	)	-10.6%
Other		92		0.5%
Changes in unrecognized tax benefits		847		4.3%
Other adjustments(2)		215		1.1%
Effective income tax rate	$	2,467		12.6%

(1)Primarily related to the tax effects of enactment of the U.S. One, Big, Beautiful Bill Act.

(2)Includes the tax effects of changes in valuation allowances, effect of cross-border tax laws and state taxes, net of federal benefit. California, Virginia and Missouri represent the majority of the state taxes net of federal benefit.

The following table reconciles the provision for income taxes to the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes for the year ended May 31, 2025 and 2024:

	Year Ended May 31,
(Dollars in millions)	2025			2024
U.S. federal statutory income tax rate	21.0%			21.0%
Tax provision at statutory rate	$	2,974		$	2,466
Foreign earnings at other than U.S. rates		(381	)		(262	)
State tax expense, net of federal benefit		128			81
Settlements and releases from judicial decisions and statute expirations, net		(149	)		(124	)
Tax contingency interest accrual, net		322			157
Domestic tax contingency, net		75			131
Federal research and development credit		(411	)		(372	)
Stock-based compensation		(801	)		(624	)
Realization of a one-time tax attribute		—			(235	)
Other, net		(40	)		56
Total provision for income taxes	$	1,717		$	1,274

Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended May 31, 2026 was as follows (in millions):

Federal	$	2,460
State(1)		249
Foreign
Korea		(262	)
Japan		203
India		193
Other		861
Total cash paid for income taxes, net of refunds received	$	3,704

(1)No individual state accounted for more than 5%.

The components of our deferred tax assets and liabilities were as follows:

	May 31,
(in millions)	2026			2025
Deferred tax assets:
Accruals and allowances	$	1,195		$	790
Employee compensation and benefits		1,006			1,068
Differences in timing of revenue recognition		970			894
Lease liabilities		9,333			3,279
Basis of property, plant and equipment and intangible assets		6,882			7,800
Capitalized research and development		5,784			4,153
Tax credit and net operating loss carryforwards		6,602			5,857
Total deferred tax assets		31,772			23,841
Valuation allowance		(2,483	)		(1,962	)
Total deferred tax assets, net		29,289			21,879
Deferred tax liabilities:
Acquired intangible assets		(544	)		(920	)
GILTI deferred		(6,852	)		(6,949	)
ROU assets		(9,181	)		(3,207	)
Withholding taxes on foreign earnings		(424	)		(364	)
Other		(1,069	)		(191	)
Total deferred tax liabilities		(18,070	)		(11,631	)
Net deferred tax assets	$	11,219		$	10,248
Recorded as:
Non-current deferred tax assets	$	11,541		$	11,877
Non-current deferred tax liabilities		(322	)		(1,629	)
Net deferred tax assets	$	11,219		$	10,248

At May 31, 2026, we had an estimated deferred tax liability of approximately $2.0 billion for which U.S. income taxes have not been provided on undistributed earnings and other outside basis differences of investments in foreign subsidiaries.

Our net deferred tax assets were $11.2 billion and $10.2 billion as of May 31, 2026 and 2025, respectively. We believe that it is more likely than not that the net deferred tax assets will be realized in the foreseeable future. Realization of our net deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credit carryforwards. The amount of net deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

The valuation allowance was $2.5 billion and $2.0 billion as of May 31, 2026 and 2025, respectively, primarily related to U.S., state and foreign tax credits and net operating loss carryforwards. Any subsequent reduction of the valuation allowance will be recorded to our provision for income taxes unless the conclusion of an acquisition valuation allowance and the recognition of the associated tax benefits is within the measurement period (as defined above).

At May 31, 2026, we had federal net operating loss carryforwards of approximately $374 million, which are subject to limitation on their utilization. Approximately $140 million of these federal net operating losses expire in various years between fiscal 2027 and fiscal 2038. Approximately $234 million of these federal net operating losses are not currently subject to expiration dates. We had state net operating loss carryforwards of approximately $2.7 billion at May 31, 2026, which are subject to limitations on their utilization. Approximately $2.4 billion of these state net operating losses expire in various years between fiscal 2027 and fiscal 2046. Approximately $275 million of these state net operating losses are not currently subject to expiration dates. We had total foreign net operating loss carryforwards of approximately $2.0 billion at May 31, 2026, which are subject to limitations on their utilization. Approximately $1.9 billion of these foreign net operating losses are not currently subject to expiration dates. The remainder of the foreign net operating losses, approximately $79 million, expire between fiscal 2027 and fiscal 2046. We had foreign capital loss carryforwards of approximately $260 million, which are not currently subject to expiration dates. We had tax credit carryforwards of approximately $1.5 billion at May 31, 2026, which are subject to limitations on their utilization. Approximately $939 million of these tax credit carryforwards are not currently subject to expiration dates. The remainder of the tax credit carryforwards, approximately $518 million, expire in various years between fiscal 2027 and fiscal 2046.

Current income taxes payable are included in other current liabilities in our consolidated balance sheets and totaled $583 million and $2.3 billion as of May 31, 2026 and 2025, respectively.

We classify our unrecognized tax benefits as either current or non-current income taxes payable in the accompanying consolidated balance sheets. The aggregate changes in the balance of our gross unrecognized tax benefits, including acquisitions, were as follows:

	Year Ended May 31,
(in millions)	2026			2025			2024
Gross unrecognized tax benefits as of June 1	$	9,438		$	8,785		$	7,715
Increases related to tax positions from prior fiscal years		192			239			492
Decreases related to tax positions from prior fiscal years		(70	)		(98	)		(128	)
Increases related to tax positions taken during current fiscal year		931			846			889
Settlements with tax authorities		(171	)		(161	)		(46	)
Lapses of statutes of limitation		(216	)		(162	)		(129	)
Cumulative translation adjustments and other, net		22			(11	)		(8	)
Total gross unrecognized tax benefits as of May 31	$	10,126		$	9,438		$	8,785

As of May 31, 2026, 2025 and 2024, $4.9 billion, $4.5 billion and $4.2 billion, respectively, of unrecognized tax benefits would affect our effective tax rate if recognized. We recognized interest and penalties related to uncertain tax positions in our provision for income taxes line of our consolidated statements of operations of $594 million, $321 million and $199 million during fiscal 2026, 2025 and 2024, respectively. Interest and penalties accrued as of May 31, 2026 and 2025 were $2.7 billion and $2.1 billion, respectively.

Domestically, U.S. federal and state taxing authorities are currently examining income tax returns of Oracle and various acquired entities for years through fiscal 2024. Many issues are at an advanced stage in the examination process, the most significant of which include issues related to transfer pricing, domestic production activity, one-time transition tax, foreign tax credits and research and development credits. Our U.S. federal income tax returns have been examined for all years prior to fiscal 2013 and, with some exceptions, we are no longer subject to audit for those periods. Our U.S. state income tax returns, with some exceptions, have been examined for all years prior to fiscal 2010, and we are no longer subject to audit for those periods.

Internationally, tax authorities for numerous non-U.S. jurisdictions are also examining or have examined returns of Oracle and various acquired entities for years through fiscal 2024. Many of the relevant tax years are at an advanced stage in examination or subsequent controversy resolution processes, the most significant of which include issues

related to transfer pricing and withholding tax. With some exceptions, we are generally no longer subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal 2001.

We are under audit by the IRS and various other domestic and foreign tax authorities with regards to income tax and indirect tax matters and are involved in various challenges and litigation in a number of countries, including, in particular, Australia, Brazil, Canada, Egypt, India, Indonesia, Ireland, Israel, Pakistan, Saudi Arabia, South Korea and Spain, where the amounts under controversy are significant. In some, although not all, cases, we have reserved for potential adjustments to our provision for income taxes and accrual of indirect taxes that may result from examinations by, or any negotiated agreements with, these tax authorities or final outcomes in judicial proceedings and we believe that the final outcome of these examinations, agreements or judicial proceedings will not have a material effect on our results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of benefits in the period we determine the liabilities are no longer necessary. If our estimates of the federal, state and foreign income tax liabilities and indirect tax liabilities are less than the ultimate assessment, it could result in a further charge to expense.

We believe that we have adequately provided under GAAP for outcomes related to our tax audits. However, there can be no assurances as to the possible outcomes or any related financial statement effect thereof.

Pursuant to the U.S. One, Big, Beautiful Bill Act that was signed into law on July 4, 2025, we recorded a net tax expense of $933 million during fiscal 2026, primarily related to the remeasurement of a deferred tax liability previously recorded during fiscal 2021 as part of the partial realignment of our legal entity structure.