June 25, 2024 – Oracle, the American software giant, has issued a warning to investors about the potential impact of a new law that may ban TikTok in the United States. The law, signed by President Joe Biden in April, “will prohibit the provision of internet hosting services to TikTok” unless its parent company, ByteDance, takes certain measures, the company stated in a regulatory filing on Thursday. Oracle expressed concerns that if they are unable to provide these services to TikTok and cannot promptly redeploy their capabilities, their revenue and profits will be adversely affected. Additionally, the company noted that complying with the new law may also result in increased expenses.
TikTok utilizes Oracle’s cloud infrastructure to store and process data from its American users, making it one of the largest clients in this business sector, according to numerous Wall Street analysts. Derrick Wood, an analyst at Deutsche Bank (TD Cowen), suggested in April that Oracle could lose a significant portion of its revenue related to hosting most of TikTok’s U.S. operations. Kirk Materne, an analyst at Evercore ISI, estimated that Oracle’s annual revenue from TikTok could range between 480millionand800 million. In the fiscal year ending May 31, the company’s division renting computing power and storage space generated approximately $6.9 billion in sales. The growth of the cloud infrastructure business, fueled by demand for artificial intelligence work, has contributed to Oracle’s stock price rising by 34% this year.
U.S. legislators have long been concerned about the potential security threats posed by TikTok to American users. The law signed in April gives TikTok 270 days to find a buyer, otherwise, it will be banned in the United States. TikTok has been disputing these concerns and has filed a lawsuit attempting to overturn the law. As part of its defense in recent years, TikTok has stated that its partnership with Oracle separates U.S. data from its parent company, ByteDance. This plan is known as the “Texas Project,” named after the state where Oracle’s headquarters is located.