Alibaba’s shares were up slightly in Friday trading, after the e-commerce giant reported a strong quarterly earnings result. The company also expects further growth in its cloud computing business.
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Alibaba has beaten its Q2 estimates with 40% year-on-year revenue growth. The Cloud computing business also skyrocketed 64% year-on-year to CNY 9.3 billion (USD 1.3 billion) in FY 2020 Q2. It has grown the fastest during the past quarter among the other main three business sectors – Core commerce (CNY 101.2 billion, +40%), Digital media and entertainment (CNY 7.3 billion, +23%), along with innovation initiatives and others (CNY 1.2 billion, +14%). Similarly, Alibaba’s US counterpart AWS (Amazon Web Services) continued to grow faster than its parent company. It generated USD 9 billion last quarter, representing 35% in year-on-year growth.
Though Alibaba Cloud’s performance is far less than that of the cloud market leader, AWS, these results still make Alibaba a leader in China and shed some light on the path of revolution that the e-commerce giants are following in the ‘Cloud era.’
AWS was launched in 2006 and Alibaba Cloud was established three years later. For the past four years, AWS has provided the bulk of Amazon’s operating income. Though Alibaba did not manage to generate positive EBITA (earnings before interest, taxes, and amortization) yet, the Cloud business is expected to play the same important role as AWS in powering and running the machine in the foreseeable future. Goldman Sachs claims Alibaba Cloud is on pace to generate USD 5 billion in revenue in 2019. Based on EqualOcean’s estimations, if the business can grow its revenue at an impressive 60%, the whole year’s result will surpass USD 5 billion.
Alibaba has been expanding its cloud offerings and has made a presence in different sectors: in the AI landscape, with its AI chip subsidiary Pingtouge, and mergers and acquisitions deals with smaller industry players. As Alibaba Cloud continues to seek more clients beyond the Internet and media industry, it is also striving to add more partnerships in the ecosystem. In July, it announced it would be the exclusive provider of Salesforce in China. In October, it cooperated with database vendor MongoDB to offer a Database-as-a-Service solution for its customers.