Alibaba’s Cloud profit provides a shard of light as slowing economic growth challenges broader e-commerce outlook
- Alibaba’s revenue from the cloud business increased 21 per cent for the year to 100.2 billion yuan
- CEO Daniel Zhang said Alibaba’s cloud business has abundant potential as the country’s total cloud market could reach one trillion yuan by 2025
Amid the thunder clouds of an economy hindered by pandemic lockdowns and months of increased regulatory scrutiny of Big Tech, there was a bright spot in e-commerce giant Alibaba Group Holding’s earnings announcement – its cloud services unit turned in a full year profit for the first time in thirteen years.
The Hangzhou-based company, which owns the South China Morning Post, on Thursday reported a profit of 1.1 billion yuan (US$164 million) for its cloud business for the 12 months to March 31, the first profit since 2009 and bolstering hopes the business will add a new growth driver for Alibaba just as Amazon Web Services has helped lift performance at the US tech giant.
Alibaba’s shares gained 15 per cent on Thursday in New York and were up 12 per cent on Friday in Hong Kong.
Livia Li, senior analyst at Frost & Sullivan, said the turnaround marks a significant milestone for the entire domestic cloud business sector.
“I think other domestic cloud providers will mark this as a symbolic moment,” said Li. “Building cloud infrastructure needs a lot of investment in the early stages.”
Li expects Alibaba Cloud to be the “driving force of the company’s future growth” although competition will also be fierce. “For other businesses such as e-commerce, growth will be limited as it is facing competitors including JD.com, Pinduoduo and ByteDance. This means other businesses built around the e-commerce business will also be affected,” said Li.
Alibaba’s revenue from the cloud business increased 21 per cent for the year to 100.2 billion yuan, or about 12 per cent of its total revenue. At Amazon, revenue at AWS accounted for about 16 per cent of total revenue in the last quarter.
Alibaba chairman and chief executive Daniel Zhang said on an earnings call on Thursday that Alibaba’s cloud business has abundant potential to grow in China as the country’s total cloud market is expected to reach one trillion yuan by 2025. Zhang said Alibaba’s cloud revenues could double or even triple if it maintains market leadership in coming years.
