Alibaba Cloud returns to profitability for the first time in 11 years, becoming the third largest share in the world

Alibaba Cloud, the cloud computing business unit of Chinese e-commerce giant Alibaba, went into the black for the first time in the most recent quarter (October-December 2020) on February 2, local time. Announced in the financial report.

Alibaba’s cloud division has been in business since 2009, but finally achieved a surplus in adjusted EBITA (earnings before interest payments, taxes and depreciation) this quarter. The company says the milestone is part of the “realization of economies of scale.”

Incorporating everything from databases, storage, big data analytics, security, machine learning to IoT services, Alibaba Cloud has dominated the Chinese cloud infrastructure market for the last few years and continues to grow its share globally. There is. According to a Gartner survey, the company boasts a 9% global market share as of 2019, and as a public cloud company (IaaS vendor), Amazon’s AWS and Microsoft’s (Microsoft) It was ranked third in the world after Azure.

The new coronavirus has boosted cloud digital adoption around the world by forcing people to turn their offline activities online. Alibaba, for example, points out in its financial results that after the new corona epidemic in China, demand for digitization in the restaurant and service industry continues to be strong, a trend for its food delivery and on-demand service apps. It also benefits “Ele.me”. Revenue from the company’s cloud business increased to $ 2.47 billion in the December 2020 quarter, mainly from customers in the Internet industry, retail and public sectors. It is said that “stretching” is the driving force.

Commerce was again the largest driver of Alibaba’s revenue this quarter, accounting for nearly 70% of revenue, while cloud contributed 7%.

The closest Alibaba Cloud rival is Tencent’s cloud business unit. As of 2019, the latter had a global market share of 2.8%, according to Gartner. As Alibaba’s vice president Joe Tsai pointed out in a earnings announcement for analysts in August 2020, China’s (IaaS) industry still has plenty of room for growth.

“According to a third-party survey, the Chinese cloud market is expected to grow from $ 15 billion to $ 20 billion. The US market is about eight times that, which means that the Chinese market is still quite early, “Tsai said.

“The Chinese market is an environment where digitalization is steadily progressing and corporate cloud usage is expanding rapidly, and it is in the process of growing from a small base of about one-eighth of the US market. I feel that we are in a very good position to enter the Chinese market. ”

An important strategy for Alibaba Cloud to grow is the integration of the cloud into Alibaba’s enterprise chat app Dingtalk, which the company hopes will enable all industries to take advantage of cloud services. This is reminiscent of the relationship between Microsoft 365 and Azure, as Alibaba Cloud President Jianfeng Zhang suggested in a previous interview.

Alibaba CEO Daniel Zhang said at a financial results briefing in August 2020, “We don’t want to provide the cloud just as an infrastructure service.” “If we provide it only as an infrastructure service and as a SaaS service, price competition will be inevitable, and all cloud services will become like commodity businesses. Currently, Alibaba’s cloud provides cloud + intelligence services. It is the power of cloud + data utilization. ”