Alibaba says its cloud has become profitable for the first time.
The Chinese e-commerce giant today announced its latest financial figures, and the numbers [PDF] – which cover the three-month period to December 31 – were unsurprisingly enormous: 902 million mobile monthly active users generated $33.9bn of sales, a 37 percent year-on-year jump that delivered a 56 percent year-on-year jump improvement in net income, which reached of $11.95bn.
AliCloud delivered $2.47bn of the revenue, and CEO Daniel Zhang told investors that represented “its first profitable quarter with positive adjusted EBITDA.” The black ink was attributed to “realization of economies of scale.” Alibaba’s retail operations helped as it shifted to AliCloud a couple of years ago and the latter scaled to the point at which it handled 583,000 orders per second during November 2020’s Singles Day internet shopping frenzy.
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In fact, AliCloud's revenue was up 50 percent compared to 2019’s December quarter, “reflecting the massive potential of China's cloud computing market,” Zhang said. “We believe the market is still at an early stage as data intelligence applications and the demand for computing power will become universal across all industry sectors,” he added.
On the mega-corp's earnings call, Zhang returned to the topic of analytics applications, and said they matter because Chinese customers want to quickly move beyond infrastructure-as-a-service.
“In China, today, when you talk with many clients who want to use cloud, their purpose is not about only moving to the cloud,” he said. “Instead, what they want is by moving to the cloud [is] better use of their data.”
And the CEO thinks Alibaba has an edge with its data-wrangling products. In response to financial analyst questions about AliCloud’s growth prospects, Zhang declared the company’s data intelligence capabilities are “very superior” to rival clouds. “In terms of some of the key product features in cloud such as database, such as storage, middleware services … our quality of the product and services are better than our competitors,” he added.
Alibaba announced its financial results a few hours before Amazon did likewise, with the American titan's cloud business netting $12.7bn in quarterly revenue, a 28 percent year-on-year growth, which is about five times the size of AliCloud's sales. AliCloud focuses its expansion plans on the booming South-East Asian market, and China has lately struck trade pacts with the European Union, so there are growth opportunities abound.
In cloud database, storage, and middleware services our quality of product is better than competitors
The US market is more complicated. Alibaba escaped Trump-era crack downs on US investments and is not barred from operating in America. However, the United States' Clean Cloud plan, an effort to expunge Chinese technology from the Land of the Free, explicitly mentions AliCloud as an entity that US firms should not use to store data.
Alibaba also has government worries at home: Beijing stepped in at the last minute to squash the IPO of its financial services arm, Ant Group. The company addressed that scuffle on its earnings call, saying “recent significant change in the fintech regulatory environment in China” have led to Ant Group “developing its ratification plan, which will need to go through the relevant regulatory procedures.” That plan is a work in progress, and Alibaba will update markets once it’s been completed and considered.
Zhang addressed the issue of whether Ant Group being reined in could tighten credit offered to customers and thus affect Alibaba’s overall financial performance. He shrugged off that suggestion, saying punters shop on Alibaba because it sells stuff they like and need rather than because they can get credit.
China’s anti-monopoly action against Alibaba also got an airing, with execs saying they will tell the authorities the internet giant wants to be a good corporate citizen. ®