How a TikTok ban could impact Oracle financially

Oracle (ORCL) has warned that the proposed TikTok ban could negatively impact the company's operations and revenue. The tech giant provides cloud infrastructure and services to TikTok.

Yahoo Finance's Seana Smith and Madison Mills break down the details.

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This post was written by Angel Smith

Video transcript

All right, let's take a look at oracle.

The software company warning in its annual report yesterday that a tiktok ban is going to hurt its business.

Oracle provides cloud infrastructure services for Tik Tok.

Tik Tok has over 100 and 50 million users.

Here in the US are talking about the significance exactly the impact that this is going to have on oracle.

Some of those details do remain unknown.

Oracle has not disclosed the details of its financial ties to tiktok.

But back in April, this called my attention ever co had estimated that if Tik Tok is generating sales of about 16 billion in the US per year.

With me here, it could be spending 3 to 5% of that revenue on cloud infrastructure w which will work out to anywhere between 480 million to 800 million.

So a very wide range here, but that does put some numbers into context here just about the impact that a Tik Tok Ban is going to have or could potentially have on oracles specifically.

And of course, we know that this has really been a top priority for the Biden administration as well.

As former president, Donald Trump had been very critical of this issue although he has flip flopped uh just a bit.

But the Biden administration, uh President Biden signing a bill demanding that China's byte dance does sell to if it does want to avoid a ban in the US.

Yeah.

And Sean and to your point about the note from T DC and also several analysts have mentioned that oracle is heavily used by Tik Tok.

Tik Tok using Oracle cloud infrastructure to store and process us data.

Tik Tok is considered to be one of Oracle's biggest customers across several of these notes.

One from Evercore estimating that the annual revenue coming from Tik Tok to Oracle could be anywhere between 480 to 800 million dollars from Tik Tok specifically.

So potential $800 million annual revenue driver for Oracle could be washed away if Tik Tok does get fully banned.

Now, they could still use Oracle, particularly if they do get sold off.

It doesn't seem like if there is a sale, there would be a huge push to switch cloud can compute offerings for the company moving forward so it could they could stick with Oracle moving forward.

But the company warning that that is a potential risk to come.