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Alibaba Execs: Company’s Cloud Business Continues to Grow

Alibaba’s cloud business continues to grow and make up an increased percentage of overall revenue for the company, which sees the potential for increased profit potential from the segment on a long-term basis, according to Alibaba executives.

The “Alibaba ecosystem continues to deliver significant user scale and growth,” Maggie Wu, the company’s CFO, said Dec. 17, during Alibaba’s online Investor Day event.

“In the past 12 months, our consumer base has seen robust growth, adding 203 million consumers globally to reach 1.24 billion active consumers,” she noted.

Through the company’s “three engine strategy” that includes China consumption, globalization and technology, its revenue has become more diversified, she said.

Its Alibaba Cloud and international commerce businesses “continue to deliver strong revenue growth,” she said, noting: “These segments now already contribute to about 17 percent of [the] last 12 months’ revenue.”

The Alibaba Cloud business has become profitable and quarterly revenue has increased to over 20 billion RMB.

Investment Strategy

The company, meanwhile, is taking a “disciplined” approach to its investment plans, according to Toby Xu, Alibaba deputy CFO.

“We are very excited about long-term revenue and profit-generating potential” of the Alibaba Cloud business, he said, noting the company achieved strong revenue growth of 37% year-over-year for the 12 months ended Sept. 30, with revenue increasing to 69 billion RMB.

As the company diversifies its revenue mix, the percentage of revenue from non-Internet businesses has grown to about 49%, he said.

Alibaba Cloud is “well-positioned to enjoy the tailwind of China digitalization,” he told viewers, adding investing in  the future is becoming increasingly important.

“Redefining Cloud Computing”

Alibaba is redefining cloud computing in China, according to Daniel Zhang, the company’s CEO and chairman.

“Cloud computing and data intelligence are the fundamental enablers of digitization, for industries and the economy,” he said.

He went to explain Alibaba’s cloud strategy in-depth. “First of all, we are focused on strengthening our core technology competencies in cloud and data intelligence,” he told viewers.

In the Infrastructure-as-a-Service (IaaS) layer, “we will continue to develop cutting-edge technologies in core products such as computing, storage, network and security,” he said.

Alibaba has also been “extending our strengths in software and cloud operating system to proprietary hardware technologies, achieving major breakthroughs in key areas such as server chips, memory chips and computing chips,” he pointed out, noting these are “essential core capabilities we need to build for the future” of cloud.

“Alibaba was the first company that introduced the concept of a middle platform strategy,” he said. “Today, our middle platform has grown beyond an internal strategy. It has become a vital part of our cloud computing and data intelligence services to external customers. We hope our middle platform services in data analytics, enterprise digitalization” and the Internet of Things (IoT) can “benefit more customers and ecosystem partners,” he noted, adding that, “in essence, middle platform” is a Platform-as-a-Service (PaaS) layer.

Alibaba offers technology PaaS “such as database and big data platforms, as well as business PaaS such as DingTalk,” he noted. “Developers and customers can leverage these middle platforms to develop customized applications more easily, while taking advantage of the computing resources, basic algorithms, enterprise digitalization solutions and IoT infrastructure made available on cloud.”

Another significant part of Alibaba’s cloud strategy is about “developing industry solutions via ecosystem partnership for sectors such as Internet, public services, retail, finance, transportation and manufacturing,” he told viewers, explaining:
“We believe industry solution is a critical path for bringing our cloud technologies and products to market in the future.”

Alibaba has “never viewed DingTalk as a standalone service,” he said, adding: “Rather, it is a robust enterprise digitalization platform which enables Alibaba Cloud customers to operate digitally both from a business perspective and an organization perspective. Today, a platform like DingTalk is relevant across all industries. All sectors are going digital and digital transformation of the organization and collaboration is the first step in that process. This is the broadest customer demand we aim to meet by integrating DingTalk with cloud and intelligence.”

Meanwhile, Alibaba’s “cloud computing and data intelligence products are backed by our cutting-edge technologies,” he said, noting these “proprietary fundamental technologies come from research in our Damo Academy and go beyond cloud and intelligence.”

Tech investments

In other areas of technology investment at Alibaba, artificial intelligence (AI) is an “integral part of everything we do,” Zhang said. “We have not only developed strong fundamental capabilities such as voice recognition, image recognition,” natural language processing (NLP) and decision intelligence, “but we are also applying them in real-world use cases to empower our customers in different sectors,” he explained.

For example, its “City Brain” large-scale, security-oriented visual computing platform “enables smart operation of municipal services leveraging advanced AI capabilities in vision, voice and image processing,” he said.

Alibaba is also “developing AI solutions for agriculture, healthcare and many other sectors,” he noted.

“Another important part of our technology strategy is developing proprietary full-stack cloud-native infrastructure,” he told viewers. “We are aggressively investing in core technologies related to data centers, network, chips and cloud servers. We are also making our cloud operating system compatible with multiple processor architectures in order to provide highly scalable services to our customers together with our diversified ecosystem partners. We hope our research and innovation could create… next-generation hardware.”

Alibaba executives believe “cloud-native devices could redefine the next generation of computers, mobile phones or smart devices,” he added.

Carbon Neutrality

Also on Dec. 17, Alibaba announced a pledge to achieve carbon neutrality in its operations by 2030 and introduced a Scope 3+ target, an initiative it said is “aiming to facilitate 1.5 gigatons of decarbonization across its business ecosystem by 2035.”

Details about Alibaba’s goals were shared by the company in the inaugural Alibaba Carbon Neutrality Action Report. Alibaba plans to provide updates annually with progress verified by accredited auditors, it said.

Carbon neutrality is “in line with Alibaba’s commitment to social responsibility,” Xu said during the Investor Day event.

The company also sees it as an opportunity and a “game changer” that he predicted will “fundamentally change how we produce, transport and consume” and also “give rise to new technologies and business models.”