Oracle said a TikTok ban could hurt its cloud revenue should the social network be banned in the US. The company revealed the risk factor in its annual report filed with the SEC.

In April, President Biden signed a law that would make it illegal to provide cloud services to TikTok unless its parent ByteDance could separate its operations from the Chinese government. The bill demands that ByteDance sell TikTok in nine months, or one year if extension approved.

TikTok runs on Oracle cloud services under an effort called Project Texas to keep US user data secure.

Oracle said that if it can't provide those services to TikTok its "revenues and profits would be adversely impacted." However, Oracle also is seeing strong demand for Oracle Cloud Infrastructure (OCI) and it's possible that capacity could be redeployed. OCI revenue for fiscal 2024 was $6.9 billion.

Oracle also noted that TikTok's compliance with US laws may increase its expenses. Constellation Research analyst Holger Mueller said:

"Losing TikTok workloads will dent Oracle Cloud utilization, but should hamper the overall growth of Oracle Cloud. Being the only cloud with available Nvidia capacity will keep Oracle Cloud revenue growing - with TikTok revenue - or not. Also given that we are in an election year and TikTok's popularity, it is unlikely neither the old or any new administration will ban TikTok completely in 2024."

While the TikTok note will garner attention, there were multiple other tidbits that stood out in Oracle's annual report. Here's a look.

  • As of May 31, Oracle owns 29% of Ampere, which makes Arm-based processors for cloud workloads including AI inference.  Convertible debt investments in Ampere mature in June 2026 and convert to equity. Oracle invested $600 million in convertible debt issued by Ampere in fiscal 2024 and has options to buy more equity from co-investors through January 2027. The upshot, Oracle could obtain control of Ampere if options are exercised by the company or co-investors.
  • Oracle said it has managed through supply chain shortages in part by "committing to higher purchases and balances of hardware products that we market and sell to our customers and that we use as a part of our cloud infrastructure to deliver our cloud offerings, relative to our historical positions." However, that move to secure manufacturing capacity increases inventory and obsolescence risks.
  • Multi-cloud partnerships were cited as a risk factor. Oracle said: "Use of our competitors’ technologies can influence a customer’s purchasing decision or create an environment that makes it less efficient to utilize or migrate to Oracle products and services. For example, we offer our customers multicloud services whereby our customers can combine cloud services from multiple clouds with the goal of optimizing cost, functionality and performance. OCI’s multicloud services work with a number of our competitors’ products, including Microsoft Azure, Amazon Web Services and Google Cloud Platform. This multicloud strategy could lead our customers to migrate away from our cloud offerings to our competitors’ products or limit their purchases of additional Oracle products, either of which could adversely affect our revenues and profitability." Obviously, multicloud partnerships are expected to drive more revenue than risk.
  • Oracle spent $8.9 billion on research and development in fiscal 2024, up from $8.6 billion in 2023 and $7.2 billion in 2022. Oracle ended fiscal 2024 with 47,000 employees in R&D.
  • 37% of Oracle's applications revenue are cloud services in fiscal 2024, up from 32% in 2023.
  • Oracle ended the fiscal year with 159,000 full-time employees with an average tenure of eight years. About 58,000 of those employees were in the US.

 

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