Alibaba’s cloud growth overtakes Amazon and Microsoft

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Alibaba Group Holdings Ltd.’s head office is lit up the night before the annual November 11 online shopping event in Hangzhou, China on Sunday November 10, 2019.Qilai Shen | Bloomberg | Getty Images

GUANGZHOU, China – Growth of Alibaba’s cloud business overtook Amazon and Microsoft in the quarter ending September, and the Chinese tech giant reiterated its commitment to make the unit profitable by next March .Alibaba reported that cloud computing generated revenue of 14.89 billion yuan ($ 2.24 billion) in the three months ending September 30. That’s a 60% year-over-year increase and its fastest growing rate since the December 2019 quarter.

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

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

We believe cloud computing is a fundamental infrastructure for the digital age, but it is still in its early stages of growth.

For comparison, Amazon Web Services generated revenue of $ 11.6 billion while revenues from Microsoft’s smart cloud, which includes other products as well as Azure, totaled $ 13 billion as of during the September quarter.

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

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

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

In September, Alibaba CFO Maggie Wu said the company’s cloud computing business would likely 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 due to cloud computing activity was 3.79 billion yuan in the September quarter, much more than the loss of 1.92 billion yuan recorded in the same period last year. However, Wu pointed to earnings before interest, taxes, depreciation and amortization (EBITA), another measure of profitability.

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

Based on this, Wu said during the earnings call that Alibaba management “definitely expects profitability in the next two quarters.”

“As I mentioned on Investor Day, we see no reason why in the long run Alibaba cloud computing cannot achieve the level of margin that we see in other comparable companies. expanding our leadership in the cloud computing market and also increasing our profits, ”she said.

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