Oracle Corp ORCL has cautioned investors about the potential financial implications of a U.S. ban on TikTok.
What Happened: Oracle, in a regulatory filing on Thursday, highlighted that a new law signed by President Joe Biden in April could make it illegal to provide internet hosting services to TikTok, unless certain conditions are met by its Chinese owners.
The company stated, “If we are unable to provide those services to TikTok, and if we cannot redeploy that capacity in a timely manner, our revenues and profits would be adversely impacted.”
Oracle’s cloud infrastructure is used by TikTok to store and process U.S. user data, making it one of the company’s most significant customers in this area. The potential ban could lead to a substantial loss in revenue for Oracle.
Analysts estimate Oracle’s annual revenue from TikTok to be between $480 million and $800 million. This revenue is a significant contributor to Oracle’s cloud infrastructure business, which generated about $6.9 billion in sales in the year ending May 31, reported Bloomberg on Tuesday.
U.S. lawmakers have long been concerned that TikTok poses a security threat to American users due to a Chinese law requiring companies to share national security-related data with the government upon request. A law signed in April mandates that TikTok has 270 days to find a buyer or face a ban in the U.S., with a potential for an extension.
TikTok has pushed back against these concerns by suing to overturn the law. As part of its defense, TikTok has highlighted its collaboration with Oracle to separate U.S. data from its Chinese parent company, ByteDance Ltd. This initiative, called “Project Texas,” is named after the state where Oracle is headquartered.
Why It Matters: Despite this partnership, Oracle has been traditionally silent about its relationship with TikTok, not listing the company among its flagship cloud customers. In 2020, when the U.S. first pressured ByteDance to sell the app to an American buyer, Oracle was among the interested parties but declined to comment on its relationship with TikTok.
TikTok has been at the center of a geopolitical storm, with concerns raised by U.S. lawmakers about the security of user data. The law signed by President Biden gives TikTok 270 days to find a buyer or face a ban in the U.S., with the possibility of an extension.
TikTok has been pushing back against these concerns, arguing that the U.S. could have considered alternatives to banning the app to address national security concerns. The company has also taken steps to secure a stable supply of high-end chips amid U.S.-China tensions.
Price Action: Oracle Corp.’s stock closed at $139.89 on Monday, down 1.14% for the day. In after-hours trading, the stock dipped 0.10%. Year to date, Oracle’s stock has experienced significant growth, rising by 34.43%, according to the data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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