Oracle fears US TikTok ban will dent its cloud profits

Dance! Dance for me!

ByteDance may not be the only company hurt by a US ban on TikTok: Oracle put a warning in its recently filed annual report that such a move could hit its revenue and profits as a provider of hosting services.

The US Senate passed a bill back in April that aims to force the China-based owner of the video-serving social media platform to either offload its US operations to an American buyer or face a ban.

This was based on fears that the app could be used by Beijing to spy on US citizens, and attempt to manipulate them by spreading misinformation.

ByteDance has until January 25, 2025, to comply with the new legislation, but has filed a legal challenge against the law on the grounds that is unconstitutional, violating the First Amendment rights of content creators that use the platform.

In the meantime, Oracle is in danger of becoming a victim of collateral damage from Washington's actions. The cloud and database company was selected by ByteDance to become TikTok's secure cloud technology provider back in 2020, and it also became a minority investor in TikTok Global.

Now, Big Red has declared in its annual report for the fiscal year ended May 31 that the threat of a TikTok shutdown poses a risk to its bottom line.

"In April 2024, the US president signed into law a bill that will make it unlawful to provide internet hosting services to TikTok that are used to enable the distribution, maintenance, or updating of TikTok for users within the US if certain steps are not taken by TikTok’s owners within a set time frame," the company states.

"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 says.

According to Bloomberg, many Wall Street analysts consider TikTok to be one of Big Red's largest cloud customers, and revenue that it gets from the arrangement could be in the range of $480 million to $800 million per year.

Late last month it was reported that ByteDance has been working on developing a clone of its content algorithm specifically for use in the US since late last year that would keep content for American users completely separate from the Chinese version of TikTok.

More recently, the FT reported that agencies representing TikTok’s biggest advertisers have begun drawing up contingency plans as the deadline for enforcement of a potential ban creeps closer, including seeking break clauses in their marketing contracts.

TikTok is believed to be generating sales of $16 billion annually in the US, largely from advertising. ®

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