Dive Brief:
- Alibaba anticipates that AI products will be the primary driver of its cloud segment growth this year, as stated by CEO Eddie Wu during a Q2 2024 earnings call. He emphasized the importance of investment in AI for digitalized enterprises.
- The company experienced a 6% increase in cloud revenue year over year in the three-month period ending June 3, surpassing the growth rates of the previous quarters.
- Despite the revenue growth, Alibaba slipped to fourth place in public cloud infrastructure market share last year, falling behind Google for the first time since Gartner began tracking the segment.
Dive Insight:
Alibaba’s cloud challenges contrast sharply with its larger competitors, who maintained double-digit revenue growth during economic uncertainties over the past two years.
The company’s cloud struggles have affected its global market position, with AWS holding the highest market share at 39% in 2023, followed by Microsoft at 23% and Google at over 8%. Alibaba’s share was only 7.9%, according to Gartner.
To address these challenges, Alibaba established a dedicated cloud division last year and reduced prices for core cloud services earlier this year. The company is now focusing on AI infrastructure investments to drive growth.
Alibaba is investing in AI-optimized chip technologies, particularly graphics processing units, to align with the industry trend towards GPU-based AI product development.
The global cloud market is projected to exceed $800 billion this year, with a 20% annual growth rate, driven by the increasing adoption of AI technologies. Alibaba is already seeing a rise in AI budgets among its cloud customers.
