Cloud business will become profitable for the first time

Exterior of Alibaba Group Beijing Headquarters on November 10, 2019 in Beijing, China.

VCG | Visual China Group | Getty Images

GUANGZHOU, China — Alibaba’s cloud computing business is expected to become profitable in this current fiscal year, for the first time, finance chief Maggie Wu said on Wednesday.

The Chinese e-commerce giant’s current fiscal year began in April and ends on March 31, 2021. 

That will be a welcome announcement for investors who have seen cloud computing as a very critical component for the company’s future growth. Current chairman and CEO Daniel Zhang told CNBC in a 2018 interview that cloud computing would be Alibaba’s “main business” in the future.

In a speech on Wednesday, Zhang called the technology a “growth engine” but said the world is in a “nascent stage of the global cloud era.”

The Alibaba CEO said cloud computing is “the kind of opportunity that comes only once in a generation.”

Alibaba’s CFO Wu also said its Cainiao logistics arm is expected to turn operating cash flow positive in the current fiscal year.

Cloud computing has been one of Alibaba’s fastest-growing businesses in recent years as it’s expanded outside of China to Europe and Asia. In the June quarter, revenue from cloud computing grew 58.5% to 12.35 billion yuan ($1.75 billion). However, it still just contributes to 8% of Alibaba’s total revenue. 

Alibaba is the second-largest cloud computing player by revenue in the Asia-Pacific region, behind Amazon, according to Synergy Research, but it’s number one in China. Globally, it sits behind Amazon, Microsoft and Alphabet’s Google.

In April, Alibaba said it would invest 200 billion yuan in its cloud computing division over the next three years. 

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