Content, CSPs, Enterprise

Alibaba Cloud Services: Growing Fast But Losing Money

Alibaba Cloud revenues are growing fast, but the China-based cloud services provider (CSP) business is still losing money as it expands globally and battles Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP) for world dominance.

First, the good news: Alibaba Group's cloud revenues surged 93 percent to US$710 million in Q1 2019 compared the the corresponding quarter last year, the company says.

Moreover, the business unit launched more than 660 new products and features during the quarter, including language-based document and analysis tools, hybrid disaster recovery for enterprises, and big data analytics tools, Alibaba Group CEO Daniel Zhang said during the company's earnings call. (SeekingAlpha has the complete transcript here.)

More than basic infrastructure as a service (IaaS), Alibaba Cloud has emerged as a massive video streaming and CDN (content delivery network) service provider. The platform managed the live, online broadcast of FIFA World Cup Series matches -- which were viewed by hundreds of millions of people in China.

Still, all that cloud capacity comes at a cost. For the quarter, adjusted EBITDA margin for the business unit was negative 10 percent -- worse than the negative 4 percent from the corresponding quarter last year. The company said infrastructure and capacity investments triggered the quarterly loss.

Alibaba Group CEO Daniel Zhang
Alibaba Group CEO Daniel Zhang

In stark contrast, both AWS and Azure are profitable and their gross margins are growing, according to anecdotal evidence from each company's quarterly earnings calls.

Alibaba Cloud: International Opportunities, Challenges

Best known in the China market, Alibaba Cloud has been expanding internationally -- though the company could face political and competitive hurdles in the U.S. market.

Recent moves include high-level discussions with the IT consulting wing of BT (formerly British Telecom). BT could help the cloud firm compete against AWS, in particular, in Europe.

The cloud company's future looks less promising in the U.S. Rather than buck the Trump administration’s "America First"policy, Alibaba has instead pared its U.S. operations, Bloomberg says.

Alibaba Cloud: Number 4 CSP Worldwide

Nevertheless, Alibaba is the No. 4 cloud services provider worldwide -- trailing only AWS, Azure and Google -- and ranked ahead of IBM, Synergy Research Group says. Predictably, the story is even strong in APAC (Asia Pacifico) -- where the company trails on AWS, Synergy's Q1 2018 research results say.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.