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    Home » Technology » Oracle Warns Investors of Potential Financial Impact Due to New Law Banning TikTok in the US

    Oracle Warns Investors of Potential Financial Impact Due to New Law Banning TikTok in the US

    By Digpu News DeskJune 25, 2024 Technology No Comments3 Mins Read
    Oracle Warns Investors of Potential Financial Impact Due to New Law Banning TikTok in the US
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    The Austin-based company faces potential revenue loss and increased expenses as President Biden’s new law demands stricter controls over TikTok’s US data hosting services.

    Oracle Corp. has cautioned its investors about the possible adverse financial impact stemming from a new law that could potentially ban TikTok in the United States. The legislation, signed by President Joe Biden in April, prohibits providing internet hosting services to TikTok unless specific conditions are met by its China-based owners, Oracle disclosed in a recent regulatory filing on Thursday.

    The filing highlights that failure to provide services to TikTok, coupled with the inability to redeploy the corresponding capacity swiftly, could negatively affect Oracle’s revenues and profits. Additionally, complying with the new legislation might escalate operational expenses, the company noted.

    TikTok relies on Oracle’s cloud infrastructure to store and process data of its US users, marking TikTok as one of Oracle’s significant clients within its cloud services division. Derrick Wood, an analyst at TD Cowen, commented in April that Oracle could face a considerable revenue loss tied to hosting the majority of TikTok’s US operations.

    Kirk Materne, an analyst at Evercore ISI, estimated Oracle’s annual revenue from TikTok to range between $480 million and $800 million. Oracle’s cloud services unit, responsible for renting computing power and storage, reported approximately $6.9 billion in sales for the fiscal year ending May 31. The robust demand for artificial intelligence work within this growing sector has contributed to a 34% surge in Oracle’s stock this year, up until Friday’s close.

    Oracle did not respond to requests for comments regarding the matter.

    US lawmakers have expressed ongoing concerns about TikTok, citing security risks due to China’s laws that mandate companies to share data relevant to national security upon government request. The legislation signed in April grants TikTok a 270-day period to find a US buyer or face a ban, with a possibility for an extension.

    In response, TikTok has challenged these concerns legally, seeking to overturn the law. As part of its defense strategy, TikTok has emphasized its collaboration with Oracle to separate US data from its Chinese parent company, ByteDance Ltd., through an initiative called “Project Texas,” named after Oracle’s home state.

    Despite this collaboration, Oracle has remained relatively silent about its relationship with TikTok, not listing it among its major cloud service clients. In 2020, when the US initially pressured ByteDance to sell TikTok to a US buyer, Oracle was among the potential buyers but refrained from discussing its connection with TikTok.

    Should TikTok be sold, transitioning to a different cloud vendor would likely be a low priority, according to Materne’s analysis.

    As the situation unfolds, Oracle’s financial health remains closely tied to the resolution of TikTok’s future in the US market.

    TIKTOK Tiktok app tiktok usa
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