Oracle Corporation, a major player in the software and cloud infrastructure market, has acknowledged in its annual report that a potential U.S. ban on TikTok could significantly impact its business.
This disclosure comes amidst increasing regulatory pressure on TikTok’s Chinese parent company, ByteDance, due to national security concerns over user data.
In April, President Joe Biden signed a bill demanding that ByteDance sell TikTok within nine months, with the possibility of a one-year extension, to avoid a U.S. ban. The ownership structure of TikTok has been a contentious issue in the United States, fueled by fears that user data could be accessed by the Chinese government.
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Oracle has been providing cloud infrastructure services to TikTok, which boasts over 170 million users in the U.S. These users rely on the app for various purposes, including business, news, entertainment, and social connection.
In its annual report for the fiscal year ended May 31, Oracle stated, “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.”
Concerns over TikTok’s ownership and data security are not new. In 2020, then-President Donald Trump pushed for the sale or divestiture of TikTok’s U.S. assets, which led to negotiations with Microsoft and ultimately resulted in Oracle being selected as a key cloud services provider.
ByteDance’s proposal to the U.S. Treasury Department included Oracle’s involvement to ensure TikTok’s continued operation in the U.S. under the initiative known as Project Texas. This initiative aimed to safeguard user data by housing TikTok’s U.S. operations on Oracle’s cloud infrastructure within the country. Additionally, Oracle was tasked with compiling the app and delivering it to third-party app stores.
Oracle CEO Safra Catz highlighted the positive relationship with TikTok in a 2022 conference call with analysts, saying, “The one thing I can tell you is we have an excellent relationship with the folks at TikTok.”
Oracle has not disclosed specific financial details regarding its relationship with TikTok. However, analysts from Evercore estimated in April that TikTok could be generating annual U.S. sales of $16 billion, potentially spending 3% to 5% of its revenue on cloud infrastructure. This translates to an estimated $480 million to $800 million in revenue for Oracle.
For the fiscal year, Oracle’s cloud infrastructure revenue totaled $6.9 billion, indicating that the potential loss of TikTok as a client would be a substantial blow.
Advocacy and Opposition to the Ban
The potential ban on TikTok has sparked significant opposition from both institutions and individual users. Over 170 million Americans use TikTok not just for entertainment but as a crucial tool for business and information dissemination. Small business owners, influencers, educators, and journalists rely on the platform to reach audiences and generate income. Some users have sued the government while others have mobilized to advocate against the ban, highlighting TikTok’s role in fostering economic opportunities and community engagement.
Advocacy efforts include petitions, social media campaigns, and lobbying efforts aimed at convincing lawmakers to allow TikTok to continue operating in the U.S. Critics of the ban argue that it infringes on free speech and disrupts the livelihoods of millions of Americans.
Elon Musk, the owner of microblogging social media platform X, formerly Twitter, said in April that the move is “contrary to freedom of speech and expression,” adding he is against the proposed TikTok controls “even though such a ban may benefit the X platform.”
TikTok’s Efforts to Remain Operational in the US
In response to the mounting pressure, TikTok has made several efforts to address security concerns and remain operational in the U.S. The company has invested in Project Texas, an initiative designed to keep TikTok services for U.S. users running on Oracle’s 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, enhancing data security.
Furthermore, TikTok said it has been transparent about its data handling practices and has implemented measures to prevent unauthorized access to user data. Recently, the company said it moved to create an independent algorithm for its US users. Despite these efforts, the U.S. government remains firm on its stance, with bipartisan legislation targeting TikTok and President Biden’s signing of the bill mandating its sale.
The U.S. government has taken substantial steps toward potentially banning TikTok. The new legislation requires ByteDance to sell TikTok within a specified timeframe or face a ban. In addition to legislative actions, there have been ongoing investigations and hearings scrutinizing TikTok’s data practices and its ties to China.
TikTok has filed a lawsuit arguing that the law mandating its sale violates First Amendment free speech protections. The legal battle is expected to be prolonged, with significant implications for both TikTok and Oracle.