US TikTok ban could hit Oracle’s revenue and profit, cloud provider warns
The law signed by President Joe Biden in April “will make it unlawful to provide internet hosting services to TikTok” unless certain steps are taken by its China-based owners, Oracle wrote Thursday in a regulatory filing. “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”. Compliance with the new law may also increase expenses, the company added.
TikTok uses Oracle’s cloud infrastructure to store and process US user data, and is considered by many Wall Street analysts to be one of the Austin-based company’s largest customers for that closely watched business. “Oracle could lose a sizeable portion of revenue associated with hosting the bulk of TikTok’s US business,” Derrick Wood, an analyst at TD Cowen, wrote in April.
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Oracle’s annual revenue from the popular video app may be in the range of US$480 million to US$800 million, estimated Kirk Materne, an analyst at Evercore ISI. The company’s unit that rents computing power and storage generated about US$6.9 billion in sales in the year ended May 31. The growing cloud infrastructure business, fuelled by demand for artificial intelligence work, has helped propel Oracle’s shares to a 34 per cent gain this year through Friday’s close.