Alibaba Group Holding Ltd. will invest 200 billion yuan ($28 billion) on cloud infrastructure such as datacenters over the next three years, a major effort to extend one of its fastest-growing businesses to more countries.
That huge outlay — equivalent to about half the revenue the entire company generated in fiscal 2019 — underscores the importance of a division Alibaba relies on to spearhead its international expansion. The Chinese e-commerce giant now plans to build more datacenters to complement an existing network covering 21 regions globally and support the development of technologies in areas such as AI-inference chips, it said in a statement.
Cloud computing has become one of Alibaba’s fastest-growing initiatives beyond the traditional e-commerce sphere. The division’s revenue rose 62% to 10.7 billion yuan in the December quarter as Alibaba chipped away at Amazon.com Inc.’s and Microsoft Corp.’s global lead in the business of providing online computing as a service. The Chinese company is now recognized as one of Asia’s leading cloud players, though Tencent Holdings Ltd. and Baidu Inc. are stepping up competition at home and abroad.
“The key focus in the medium term is to gain scale, in customers, infrastructure and product offerings,” Bloomberg Intelligence analyst Vey-Sern Ling said of the cloud division. “Profitability is not a near-term focus. The amount they are spending over three years should be just about equivalent to the revenue they generate, keeping the segment at near-break-even level as it has been for the past few quarters.”