Alibaba Group Holding Ltd's cloud division has reportedly begun a round of layoffs, which could affect about 7 percent of its workforce, as part of a sweeping overhaul aimed at preparing the once-fast-growing segment for a spin-off and eventual IPO。

According to people familiar with the matter, Alibaba Cloud Services has begun notifying affected employees that they will receive severance pay at the compensation rate of N + 1 + 1 or be transferred to other Alibaba departments, but these messages have not been confirmed.。The person also added that the job cuts are mainly aimed at streamlining the business, as Alibaba aims to completely spin off it into a separate company within a year.。

Alibaba Cloud has always been a relatively prosperous business line under Alibaba, and the division has the potential to give the company a strong impetus like the growth of Amazon Web Services (Amazon Web Services).。Some analysts currently value the business at more than $30 billion, a key beneficiary of the post-ChatGPT upgrade, which relies on cloud resources to train the next generation of AI models.。

In this regard, some media said that Alibaba's savings from cutting 7% of its cloud department employees may not be enough to offset the profit drag of the department due to price cuts and fee reductions, nor to meet the consensus of 51% year-on-year growth in adjusted EBITA in fiscal 2024.。Despite an expected 15% drop in cloud profits in the three weeks to May 23。The media believes that cloud revenue after layoffs is at least 15% higher than a year ago, which may help the unit meet profit expectations。

Alibaba chose the cloud computing division as a candidate for an early IPO because its business model and customer image are more developed。Zhang Yong told analysts on an earnings call last week that the spin-off is aimed at simplifying the overall structure and meeting market demand, and that if it can attract the right external financing, an independent cloud platform could one day grow to exceed Alibaba's size.。

Jefferies analyst Thomas Chong said on Friday that "Alibaba's cloud business is relatively independent and different from other consumer-facing businesses."。They want to "bring in strategic investors who will help the business。"

 

Asia Pacific Cloud Computing TOP1 - Alibaba Cloud

 

Founded in 2009, Alibaba Cloud is the world's leading cloud computing and artificial intelligence technology company. It is committed to providing secure and reliable computing and data processing capabilities in the form of online public services, making computing and artificial intelligence a universal technology.。Alibaba Cloud serves leading companies in manufacturing, finance, government affairs, transportation, medical care, telecommunications, energy and many other fields。

On May 18, Alibaba Group announced its results for the quarter ended March 2023 and fiscal year 2023.。Performance data show that for the full year 2023, Alibaba's revenue was 8686.8.7 billion yuan (RMB, the same below), up 2% YoY; operating profit was 1,003.5.1 billion yuan, up 44% year-on-year;.0.9 billion yuan, up 17% year-on-year。

Among them, Ali's cloud business segment revenue for fiscal year 2023 was 772.3 billion yuan, up 4% year-on-year, accounting for 9% of Ali's total revenue, making it the largest business segment outside of Chinese commerce.。

It is worth noting that in April this year, Alibaba Cloud launched its latest Large Language Model (LLM)。Ali plans to integrate the new big language model into all business applications in the Alibaba ecosystem in the future to further enhance the user experience.。

In addition, in order to enable enterprise customers to benefit from AI-driven innovation, Alibaba Cloud will provide customers with access to the cloud and help them develop customized big language models for their business scenarios.。Since the release of the model, Ali has received test requests from more than 200,000 enterprise users in various industries to apply for access to Tongyi Qianwen.。

Earlier, IDC released the "China Public Cloud Services Market (Second Half 2022) Tracking" report.。According to the report, in China's IaaS + PaaS market, Alibaba Cloud ranks first in market share, accounting for about 32%。

IDC believes that "Alibaba Cloud is deeply engaged in the actual needs of large public cloud customers, and the growth rate is obvious in the Internet, finance, education and other industries."。In addition to seizing market share in China, Alibaba Cloud's international business is also developing rapidly.。It is reported that Alibaba Cloud currently operates 86 availability zones in 28 geographic regions around the world, serving more than 4 million customers worldwide.。

According to Gartner's ranking of the global cloud computing IaaS market in 2022, Alibaba Cloud ranked third in the world in 2022 and first in the Asia-Pacific market.。

 

Intense competition in cloud business, Ali provokes cloud "price war"

 

Today, the domestic cloud computing market smoke again, the price war is hot。

On April 26, at the 2023 Alibaba Cloud Partner Conference, Alibaba Cloud announced its largest price reduction since its establishment, with core product prices cut by 15% to 50% across the board and storage products cut by up to 50%.。First to trigger the cloud business price war。

It is reported that in the past ten years, Alibaba Cloud has reduced its computing costs by 80% and storage costs by nearly 90%.。Not long ago, Alibaba Cloud just launched two new products - ECS enterprise-class general-purpose computing power U instance, the price is up to 40% lower than the previous generation of major instances; object storage reserved space products, the price is up to 70% lower。

As competitors, Tencent and other cloud companies can't sit still。On May 16, Tencent Cloud announced a number of core products price cuts, and will take effect on June 1, which for some regions of the cloud server instance special duration to further increase the discount, the highest price reduction will reach 40%。

On the same evening, Mobile Cloud also announced price cuts for a number of cloud products, with some product lines falling by up to 60%.。

The rise of competitors is always challenging Alibaba Cloud's tense nerves.。So, in the public cloud market is gradually saturated at the moment, the giants how to find a new market growth direction？

In 2023, AI models will emerge as a new force, providing a new "problem-solving" idea for cloud computing.。For the AI model, Ali has begun to adjust the business and revenue generation model, and actively carry out the layout of related products.。