Oracle warns TikTok ban could hurt earnings

By Kimberley Kao

Oracle Corp (ORCL) has warned that a ban of TikTok in the U.S. could cut into the software giant's earnings.

The Texas-based technology company said in a regulatory filing that a new law that could ban the popular video app would effectively deprive Oracle from a significant source of business in providing internet hosting services to TikTok.

"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 a report filed on June 20.

TikTok in 2022 moved to route traffic of data of its U.S. users through Oracle's cloud infrastructure rather than use its own data centers, as part of its efforts to alleviate concerns about data security in the U.S. TikTok, owned by China's Bytedance, said earlier this year that it had spent about $1.5 billion on data security efforts.

In an April report, UBS estimated that Oracle's annual revenue from TikTok ranges between $600 million and $650 million. That would be just a little over 1% of Oracle's total annual revenue, though UBS also noted that TikTok is currently the largest customer of Oracle Cloud Infrastructure, which competes with Amazon (AMZN), Microsoft (MSFT) and Google (GOOG) in that space.

A multiyear struggle between TikTok and the U.S. led to President Biden signing a law earlier this year to force Bytedance to divest its U.S. TikTok operations or have the app banned from the American market. U.S. lawmakers who introduced and passed the bill say they are worried about how TikTok could affect national security, including the potential for China to collect intelligence on U.S. users or spread Beijing's favored messages regarding sensitive topics such as the Israel-Hamas war.

China's ByteDance said in April, a day after the legislation was signed, that it won't sell TikTok's U.S. business.

TikTok has repeatedly said that it has never shared U.S. user data with the Chinese government and would refuse any such requests.

Last year, TikTok Chief Executive Shou Zi Chew denied having ties to the Chinese Communist Party in a congressional hearing, an issue that came up again earlier this year in a Senate hearing about online safety for children on social-media platforms.

TikTok has about 170 million American users, according to the company.

Write to Kimberley Kao at kimberley.kao@wsj.com

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06-25-24 0339ET

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