Alibaba cloud growth outpaces Amazon and Microsoft

The Alibaba Group Holdings Ltd. headquarters stand illuminated at night ahead of the annual November 11 Singles’ Day online shopping event in Hangzhou, China, on Sunday, Nov. 10, 2019.

Qilai Shen | Bloomberg | Getty Images

GUANGZHOU, China — The growth of Alibaba’s cloud business outpaced Amazon and Microsoft in the quarter ending in September, and the Chinese tech giant reiterated its commitment to making the unit profitable by next March.

Alibaba reported cloud computing brought in revenue of 14.89 billion yuan ($2.24 billion) in the three months ending Sept. 30. That’s a 60% year-on-year rise and its fastest rate of growth since the December quarter of 2019.

That was faster than Amazon Web Service’s 29% year-on-year revenue rise and Microsoft Azure’s 48% growth in the September quarter.

It’s important to note that Alibaba’s cloud computing business is significantly smaller than these two market leaders.

We believe cloud computing is fundamental infrastructure for the digital era, but it is still in the early stage of growth.

For comparison, Amazon Web Services brought in revenue of $11.6 billion while Microsoft’s intelligent cloud revenue, which includes other products as well as Azure, totaled $13 billion in the September quarter.

Alibaba is the fourth largest public cloud computing provider globally, according to Synergy Research Group.

Alibaba CEO Daniel Zhang said that public sectors and financial services contributed the highest growth to the company’s cloud division.

“We believe cloud computing is fundamental infrastructure for the digital era, but it is still in the early stage of growth. We are committed to further increasing our investments in cloud computing,” Zhang said on the earnings call.

In September, Alibaba chief financial officer Maggie Wu said the company’s cloud computing business is likely to become profitable for the first time in the current fiscal year. Alibaba’s fiscal year began in April 2020 and ends on March 31, 2021. 

Alibaba’s loss from the cloud computing business was 3.79 billion yuan in the September quarter, much wider than the 1.92 billion yuan loss reported in the same period last year. However, Wu pointed to the earnings before interest, taxes, and amortization (EBITA), another measure of profitability.

EBITA loss narrowed to 156 million yuan from 521 million yuan in the same period last year. The EBITA margin was negative 1%.

On this basis, Wu said on the earnings call that Alibaba management “definitely expect to see profitability in the following two quarters.”

“As I talked about during the Investor Day, we do not see any reason that for the long‑term, Alibaba cloud computing cannot reach to the margin level that we see in other peer companies. Before that, we are going to continue to focus expanding our cloud computing market leadership and also grow our profits,” she said.

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