Oracle (ORCL) is warning investors that it could take a hit if TikTok is banned in the U.S. Oracle stock slipped Tuesday as analysts attempted to size up what TikTok’s business is worth to Oracle.
TikTok relies on Oracle’s cloud infrastructure to power its short-video app in the U.S. In its annual report filed with regulators Monday, Oracle said that a U.S. law to ban TikTok’s short-video app could force it to stop offering those services.
“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,” the company wrote in a Securities and Exchange filing.
On the stock market today, Oracle stock fell a half-percent to 139.13. A bill signed by President Joe Biden in late April would ban TikTok within a year unless the video service is sold by its China-based owner, ByteDance. Backers of the law say TikTok poses a data security risk to the U.S.
TikTok denies it shares U.S. data with the Chinese government. ByteDance has vowed not to sell the app and has sued to block the law.
Oracle’s Cloud Infrastructure business is the primary cloud vendor for TikTok’s U.S. business, where the short-video app has more than 170 million users. TikTok signed a cloud hosting deal with Oracle in 2022 in an effort to answer scrutiny about how it was handling data from U.S. users.
What TikTok Is Worth To Oracle
Oracle has never disclosed the total value of its deal with TikTok. The Information reported in 2020 that it could reach $1 billion annually.
In a client note Tuesday, Oracle stock analysts with Morgan Stanley estimated TikTok could be worth anywhere from $370 million to $1.3 billion in annual revenue for Oracle.
Morgan Stanley analyst Keith Weiss wrote to clients that his view “skews more towards the lower end.” The estimated $370 million in TikTok spending represents less than 1% of Oracle’s fiscal year 2024 sales.
ByteDance has a January 2025 deadline to sell TikTok. Weiss said the deadline and TikTok’s legal challenge mean the ban is unlikely to be an issue for Oracle until the second half of its current fiscal year, which ends in May 2025, or during its May 2026 fiscal year.
Separately, Evercore ISI analysts estimated in April that TikTok could be worth between $480 million and $800 million in annual revenue for Oracle Cloud Infrastructure, or about 5% of the division’s sales.
If TikTok is sold, Evercore analyst Kirk Materne wrote, “we expect that flipping out the cloud infrastructure would be a low priority post-sale, given that Oracle is likely already offering very attractive pricing.”
He added that it is “very early days in terms of worrying about any fundamental impact on Oracle’s OCI business.”
Oracle reported fiscal fourth-quarter earnings earlier this month. TikTok did not come up on the June 11 analyst conference call to discuss the company’s Q4 results.
Oracle’s cloud infrastructure business grew sales 42% year over year to $2 billion in the May ended quarter.
Oracle Stock: Breaks Out After Q1 Earnings
Including Tuesday’s dip, Oracle stock has gained 33% this year compared to a 14.5% gain for the S&P 500.
Shares gained 13% following Oracle’s fourth-quarter earnings report on June 11. The gains saw Oracle stock break out of a cup base, according to IBD MarketSurge charts.
