ORACLE CORPORATION JAPAN

The Company provides products and services of Oracle Corporation (U.S.) to the Japanese market and is entirely dependent on the parent company's products and technology. Delays in new product launches, product defects or flaws, or changes in provision policy could lead to a decline in the Company's competitiveness and customer attrition, directly affecting its business results and financial condition. The Company's scope for independent product development is limited, and it inherently bears the risk of the parent company's strategic changes.

The Company has entered into distributor agreements with Oracle International Corporation and Nihon Oracle Information Systems, LLC, and pays a certain percentage of net sales as royalties. If the royalty rate or scope of application is changed due to the effects of transfer pricing taxation or other factors, the Company's cost structure could deteriorate, potentially affecting its business results and financial condition. In fact, the royalty rate was raised from the fiscal year ended May 2011, and there is a risk of further changes.

AI technologies, including generative AI, agentic AI, and large language models (LLMs), are evolving rapidly, and competition is intensifying. If the Company is unable to bring new AI products to market in a timely manner, or fails to achieve performance equal to or better than competing products, it may become difficult to recover AI-related investments, potentially damaging the business and its reputation. Because the Company depends on the AI strategy led by its parent company, delays in global development could directly affect the Company's competitiveness.

The Company's cloud services and managed cloud services manage and operate customers' core business systems and critical information, creating a risk that equipment malfunctions, disasters, personnel errors, cyberattacks, or other events could cause customer information systems to stop or result in leaks of critical information. If delays or lost business opportunities occur for customers, claims for damages and other consequences could have a material impact on the Company's business results and financial condition. Although the Company states that it takes thorough security measures and data backup/recovery measures, complete elimination of this risk is difficult.

The Company's products and services, including Oracle Cloud Services, store and process large volumes of highly confidential customer data from sectors such as health sciences, financial services, and government agencies, and the Company itself recognizes that it is a target for computer hackers and others. If unexpected information leaks occur, in addition to damage to social credibility, response costs and damages claims could affect the Company's business results and financial condition. The concentration in highly confidential industries increases the severity of this risk.

The information services industry in which the Company operates is highly competitive, with rapid technological innovation. Intensifying competition, including from new entrants, downward pressure on prices, the launch of superior new products by competitors, and strategic alliances among competitors, could affect the Company's competitiveness and market share. In particular, competition with major domestic and international IT companies continues in the cloud market, and changes in the market environment directly affect the Company's business results and financial condition.

The Company's products and services rely heavily on indirect sales through partner companies such as hardware manufacturers, system integrators, and independent software developers, and indirect sales accounted for a large share of net sales during the fiscal year under review. If relationships with partner companies deteriorate, if competitors capture partner companies, or if partner companies' financial condition worsens, the Company's sales capability could decline significantly, potentially affecting its business results and financial condition.

The Company has a high proportion of Cloud & License revenue (Software License (Cloud License & On-Premise License), and Cloud Services & License Support) and a high contribution to profit from this segment, resulting in a revenue structure concentrated in specific segments. If sales in these areas decline due to changes in the market environment or intensifying competition, this could have a disproportionately large impact on the Company's overall business results and financial condition.

In the information services industry, competition for talent acquisition continues along with a trend toward labor shortages, and the Company also recognizes the recruitment, training, and retention of highly specialized sales and technical personnel as an important management challenge. If key employees leave or the Company is unable to secure sufficient qualified personnel, this could lead to a decline in service quality and the loss of business opportunities, potentially affecting its business results and financial condition.

The Company provides implementation planning, system design, and operational support to assist customers with product deployment. If project progress deviates from plan due to customer-requested specification changes or work exceeding initial estimates, additional costs may arise, and penalties may be incurred due to delivery delays. Although the Company is strengthening quality, development schedule, and profitability management, deterioration in profitability on large-scale projects directly affects its business results and financial condition.