Alibaba Group Holding expects its cloud computing services business to become profitable before the company’s current financial year ends in March 2021, driven by demand from China’s fast-growing digital economy and strategic overseas expansion.
Hangzhou-based Alibaba Cloud – ranked by Gartner as the world’s third-biggest infrastructure-as-a-service provider in 2019, behind Amazon Web Services and Microsoft Corp’s Azure – is expected to turn a profit by the end of March next year, according to Alibaba chief financial officer Maggie Wu Wei, who spoke at the e-commerce giant’s webinar for investors on Wednesday.
Established in 2009, Alibaba Cloud has already become China’s biggest cloud computing services provider as well as the company’s second-largest revenue contributor behind its core e-commerce operations. Alibaba’s cloud services revenue reached 12.3 billion yuan (US$1.7 billion) in the quarter ended June, up 59 per cent from a year ago, on the back of more than three million paying customers.
“We are redefining cloud computing to integrate data with commerce and business use cases, so as to create real value for the real economy and industry verticals,” said Daniel Zhang Yong, Alibaba’s chairman and chief executive, in a separate webinar for investors on Wednesday.
Zhang indicated that Alibaba and other service providers remain in the nascent stage of the global cloud era. “We believe this is an industry-wide opportunity across all sectors,” he said. “It’s the kind of opportunity that comes only once in a generation.”
Cloud computing enables companies to buy, sell, lease or distribute a range of software and other digital resources as an on-demand service over the internet, just like electricity from a power grid. These resources are managed inside data centres, each of which typically runs tens of thousands of servers.
China experienced an accelerated adoption of cloud services in the second quarter on the back of increased demand for online collaboration and remote working tools, e-commerce, remote learning and content streaming, as the country emerged from Covid-19 lockdown.
“In the midst of so many uncertainties, the future of digitalisation is the biggest certainty we can see,” Zhang said. “Digitalisation is the biggest opportunity of our time.”
Alibaba Cloud said it operates 64 availability zones that cover its more than three million customers located in more than 200 countries and territories. It is also working with about 10,000 global partners to serve more than 350,000 business customers worldwide.
“No matter how the geopolitical landscape changes and how international relations evolve, we believe that global consumers are living in one digital world,” Zhang said. “The global supply chain is deeply integrated. Collaboration is the only way to drive higher efficiency and stronger synergy.”