Oracle Corp. warned its investors that a brand new law potentially banning TikTok within the U.S. could harm the corporate’s financial results.
The law, signed by President Joe Biden in April, “will make it unlawful to provide internet hosting services to TikTok” unless the China-based owners take certain steps, Oracle wrote in a regulatory filing on Thursday. “If we are unable to provide these services to TikTok, and if we are unable to redeploy this capacity in a timely manner, our revenues and profits would be negatively impacted.” Complying with the brand new law could also increase costs, the corporate added.
TikTok uses Oracle’s cloud infrastructure to store and process U.S. user data, and is seen by many Wall Street analysts as considered one of the Austin-based company’s biggest customers for that closely watched business. “Oracle could lose a significant portion of the revenue associated with hosting the majority of TikTok’s U.S. business,” TD Cowen analyst Derrick Wood wrote in April.
Oracle’s annual revenue from the favored video app could possibly be between $480 million and $800 million, estimates Kirk Materne, an analyst at Evercore ISI. The company’s division, which leases computing power and storage, generated revenue of about $6.9 billion within the fiscal 12 months ended May 31. The growing cloud infrastructure business, driven by demand for artificial intelligence, has helped Oracle’s stock rise 34 percent this 12 months through Friday’s close.
Oracle didn’t reply to a request for comment.
US lawmakers have long been concerned that TikTok poses a security threat for US users, as China requires its firms at hand over all security-related data to the federal government upon request. The law, signed in April, gives TikTok 270 days to seek out a buyer or face being banned within the US, with the potential for an extension.
TikTok has rejected these concerns and filed a lawsuit against tip over the law. As a part of its defense in recent times, TikTok it is figure with Oracle to shield US data from its Chinese parent company ByteDance Ltd. The initiative, called “Project Texas,” was named after the state where Oracle is headquartered.
Still, Oracle has traditionally been tight-lipped about its relationship with TikTok—it doesn’t list the corporate on its list of major cloud providers. Customer SuccessesWhen the U.S. first put pressure on ByteDance to sell the app to a U.S. buyer in 2020, Oracle was amongst those considering a deal. The company declined to reply questions on its relationship with TikTok on the time.
If TikTok is sold, replacing Oracle as a cloud provider would likely be a really low priority, Materne wrote.
