Alibaba’s cloud computing services business under spotlight again, following service outage in December, as revenue growth slows
- Alibaba Cloud posted a 3 per cent year-on-year revenue increase in the December quarter, marking the subsidiary’s slowest growth last year
- The company attributed that result to a decline in internet customers during the quarter
Alibaba Cloud posted a 3 per cent year-on-year revenue increase to 20.18 billion yuan (US$2.92 billion) in the three months ended December 31 to mark its slowest growth last year, when sales reached as high as 12 per cent in the March quarter and 10 per cent in the June quarter.
Zhang said the cloud business is “an opportunity of extreme strategic importance to Alibaba”, which owns the South China Morning Post.
That optimism stems from the profit performance of Alibaba Cloud. The business posted 356 million yuan in adjusted earnings before interest, taxes and amortisation – a measure of a company’s profitability to investors – in the December quarter, nearly triple the amount from a year ago, according to the group’s latest financial results.
In Hong Kong, Alibaba’s shares closed down 5.36 per cent to HK$90.05 at the end of trading on Friday.
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“Just like other [tech industry] segments, it was hard to achieve high revenue growth last year because of the pandemic [control measures],” said Shawn Yang, managing director at boutique investment bank Blue Lotus Capital. “Profits were better because costs were being controlled.”
Still, Yang expected tech companies to “try to push for more revenue growth this year and focus less on profit”.
“If you don’t grab market share this year, others will come to take yours,” he said.
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Cloud computing services enable 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.
The annual growth rate for cloud infrastructure services slowed for three consecutive quarters for the first time last year, falling below 10 per cent, according to a report by research firm Canalys in December.
Cloud infrastructure services expenditure in mainland China grew 8 per cent year on year in the third quarter last year to US$7.8 billion, accounting for 12 per cent of overall global cloud services spending, according to Canalys.
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On a potential return to higher growth for cloud services providers, some analysts see no immediate jump in sales.
“I don’t expect a significant [growth] recovery [of the cloud market] in the short term,” said Zhang Xiaorong, director of research institute Shendu Technology.
Echoing the suggestion of Blue Lotus’ Yang, Zhang said state-controlled cloud services providers have a big impact on the market, especially in signing up government clients. “Privately owned cloud providers that have advanced technology like Alibaba Cloud don’t have a significant advantage in this market,” he said.