Alibaba Cloud to cut 7 per cent of staff, sending around 1,000 workers packing ahead of planned IPO

Alibaba’s cloud division is downsizing as it prepares to go public amid economic headwinds that pushed revenue down 2 per cent in the first quarter
The e-commerce giant as a whole has also been reducing headcount this past year, with payroll numbers down by more than 4,500 in the first quarter

Alibaba

Tracy Quin Shanghai

Published: 1:51pm, 24 May 2023

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Corrected [9:03am, 25 May, 2023]

[9:03am, 25 May, 2023]
Corrects "thousands" to "around 1,000" in the headline and lead

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Alibaba Cloud, the cloud computing division of e-commerce giant Alibaba Group Holding that is seeking an initial public offering in the next 12 months, is laying off about 1,000 workers amounting to 7 per cent of its staff, according to people briefed on the matter.

Alibaba, owner of the South China Morning Post, has not publicly commented on planned lay-offs and did not immediately respond to requests for comment. The move was reported by multiple Chinese media outlets on Tuesday.

Alibaba has been downsizing its payroll for months. Its headcount at the end of March was down by 4,524 people from December to 235,216, according to its first-quarter report. In the past 12 months, Alibaba has cut full-time employees by 19,725, 7.7 per cent of the company.

Technology companies in China rarely publicly announce job cuts and often refer to lay-offs as business restructuring. Alibaba has not disclosed the size of payrolls at individual business units, including its cloud division.

Alibaba will provide compensation of at least one month’s pay per year of service, the people briefed on the decision say, as required by Chinese labour law. It is also offering an additional two months of pay for those who leave within one month.

Cloud services have been a promising growth area for the company, but the unit has struggled this year. Alibaba Cloud revenue fell 2 per cent year on year in the first quarter to 18.6 billion yuan (US$2.6 billion), contributing 9 per cent of the group’s total revenue.

Alibaba chairman Daniel Zhang Yong, who took direct control of Alibaba Cloud in December, attributed the revenue decline to “external changes in the marketing environment and customer composition”.

In a plan unveiled this month, Alibaba will spin off the cloud unit at some point in the next year through a “stock dividend distribution to shareholders”, turning its cloud business into an “independent, publicly-listed company”.

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The tech conglomerate announced in March its largest-ever corporate restructuring. Under the plan, the company aims to reorganise its sprawling business into six independently run entities, each potentially seeking their own fundraising avenues through initial public offerings.

The company said that it expects the listing of Freshippo, its supermarket chain, to be completed in the next six to 12 months, while it is aiming to complete an IPO of Cainiao, its logistics arm, in 12 to 18 months.

Alibaba shares were down 1.5 per cent in Hong Kong by mid-day Wednesday.