Oracle warns that a TikTok ban would hurt business

Oracle warns that a TikTok ban would hurt business

Oracle CEO Safra Catz, center, departs following a meeting on Capitol Hill in Washington on June 18, 2024. Chief executives from major companies including Palantir Technologies and Oracle Corp. met with senators at the Capitol Tuesday to press for US support of Israel amid its invasion of Gaza, while seeking a way to release hostages held by Hamas.

Graeme Sloan | Bloomberg | Getty Images

A U.S. ban of TikTok might hurt Oracle‘s business, the software company acknowledged in its annual report on Monday.

In April, President Joe Biden signed a bill demanding that China’s ByteDance sell TikTok in nine months, or one year if an extension is approved, if the short-video company wants to avoid a ban in the U.S. TikTok’s ownership structure has long been a source of tension in the U.S. due to concerns about user data making its way to China.

Oracle provides cloud infrastructure for TikTok, which has over 150 million users in the U.S.

“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 said in its annual report for the fiscal year ended May 31.

Concern over TikTok and its Chinese ownership dates back to 2020, when Donald Trump, who was then president, pushed for a sale or divestiture of the U.S. assets. That pressure prompted deal talks with Microsoft. Weeks later, Oracle announced that it was part of ByteDance’s proposal to the U.S. Treasury Department to provide cloud services that could help TikTok remain available in the U.S.

TikTok moved forward with an initiative called Project Texas, designed to keep TikTok services for U.S. users running on Oracle cloud infrastructure located inside the country. TikTok said Oracle would also be responsible for compiling the app and delivering it to third-party app stores.

“The one thing I can tell you is we have an excellent relationship with the folks at TikTok,” Oracle CEO Safra Catz said on a 2022 conference call with analysts.

Following the bipartisan legislation this year targeted at TikTok, and Biden’s signing of the bill mandating its sale, TikTok filed a lawsuit arguing that the law violates First Amendment free speech protections.

Real estate investor Frank McCourt and former Treasury Secretary Steven Mnuchin have expressed interest in buying TikTok, but no deal has materialized.

Oracle hasn’t disclosed details of its financial ties to TikTok. Evercore analysts estimated in April that if TikTok is generating sales of $16 billion in the U.S. annually, it could be spending 3% to 5% as a percentage of revenue on cloud infrastructure, which would work out to $480 million to $800 million. Oracle’s cloud infrastructure revenue for the fiscal year came to $6.9 billion.

TikTok didn’t immediately respond to a request for comment.

WATCH: Investors want to see a sale of TikTok, says Carnegie’s Peter Harrell

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