Morningstar

Oracle: Participation in the TikTok Deal Secures Business from Key Cloud Infrastructure Customer

We think the deal maintains Oracle’s existing benefit from hosting TikTok with limited upside.

The Oracle logo is on display on a pavilion.
Joan Cros/NurPhoto via Getty
Securities in This Article
Oracle Corp
(ORCL)

Key Morningstar Metrics for Oracle

The Wall Street Journal reported that an investor consortium including Oracle ORCL, Silver Lake, and Andreessen Horowitz is finalizing a deal to hold a roughly 80% stake in the new entity that operates TikTok in the United States. Oracle shares are down 3% following the news.

Why it matters: We believe the deal’s main value for the firm is that Oracle Cloud Infrastructure can keep hosting TikTok. Oracle’s constrained cash position and heavy pressure to deliver AI data center capacities are unlikely to make it a major stakeholder among the three investors.

  • Notably, Oracle did not mention ByteDance or other longtime major OCI customers during its most recent earnings call. While OCI’s relationship with ByteDance should remain solid, we surmise that Oracle has shifted its priorities to delivering capacities related to AI model training and inferencing.
  • The reported 80% stake for the American consortium was larger than we expected. While the US investors’ stake should give them an outsize share of TikTok’s growth, the group also has limited experience in social media. ByteDance’s commitment is necessary for TikTok’s continued success.

The bottom line: We are maintaining our $330 per share fair value estimate for wide-moat Oracle, as we think the deal maintains its existing benefit from hosting TikTok with limited upside, especially given OCI’s gigantic AI data center bookings. Shares look slightly undervalued at the moment.

  • We reiterate our Uncertainty Rating of High for Oracle, as demand for AI now has an oversize impact on OCI’s performance. We think Oracle stock has become a proxy for many investors to gain exposure to privately held OpenAI, as it accounts for about two-thirds of OCI bookings.

Key stats: We estimate that less than 5% of OCI’s fiscal 2025 revenue comes from ByteDance. As OCI’s AI workloads continue to scale, ByteDance’s revenue contribution to OCI should decrease rapidly over the next five years.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

Sponsor Center