The requirement put forward in April by US authorities for the Chinese company ByteDance to sell its assets associated with the social network TikTok within nine months, according to Oracle representatives, poses a serious threat to the cloud business of this American company. The fact is that it maintains the TikTok cloud infrastructure in the United States, and therefore may lose an important source of revenue and profit.
Oracle highlights this business risk in its annual report, noting that if TikTok leaves the United States, it would significantly impact their revenue. However, the report does not specify the exact amount of potential loss. The US authorities have set clear conditions for ByteDance: either sell the American business to individuals not associated with China, or the operation of the social network in the United States will be completely prohibited. ByteDance, which owns TikTok, is now challenging this requirement in court, arguing it contradicts the First Amendment to the US Constitution.
Historical Context and Potential Buyers
The transfer of data TikTok receives from its American users to Oracle’s cloud infrastructure occurred several years ago at the request of then-President Donald Trump. Oracle management had previously stated they had an “excellent relationship” with TikTok representatives. Recently, investor Frank McCourt and former US Treasury Secretary Steven Mnuchin showed interest in buying TikTok’s American business, but the deal did not come to fruition. We’ll keep you updated on any further developments in this area.
Evercore analysts estimate that TikTok could spend 3% to 5% of its $16 billion US revenue annually on Oracle services, notes NIX Solutions. In other words, if TikTok is banned in the United States, Oracle risks losing between $480 to $800 million in annual revenue. Against the backdrop of Oracle’s annual revenue in the cloud services segment, reaching $6.9 billion, these are not modest amounts. Therefore, it is quite expected that ByteDance’s unwitting partner is worried about this.