Alibaba scraps plans to spin off its cloud business

(Image credit: Alibaba)

Following poor revenue growth last quarter and Alibaba has done a full 180 and now plans to keep its cloud division in-house rather than spinning it off as planned.

The Chinese giant cited concerns over US export curbs over chips being used for AI, which has created uncertainty for many companies while simultaneously increasing the pressure on China's domestic production.

Alibaba has also halted plans to IPO its groceries business, Freshippo, claiming that it wants to evaluate market conditions to ensure maximum value.

Alibaba’s reversed decision is also troubling

Although a spinoff might have been problematic for the company amid geopolitical tensions, reversing its decision has also proven to be an unpopular decision – shares in the company were down 9% in Thursday trading.

Thomas Hayes, chairman of the Great Hill Capital hedge fund, noted on X: “The market does not like surprises… Investors had hoped to receive separate shares of the cloud business in hopes the segment would achieve a higher multiple in the public markets due to its growth potential.”

AliCloud has a cloud market share in China of around 38%, says Hayes. The company’s most recent quarter saw revenue for its Cloud Intelligence Group climb 2% year-on-year.

AWS and Azure, two of the world’s leading cloud providers, are also owned by their parent companies.

Looking ahead, group chairman and company co-founder, Joseph Tsai, confirmed that Alibaba will continue to focus on growing its cloud business and invest in artificial intelligence.

More broadly, Alibaba saw quarterly revenue stand at $30.81 million in the three months leading up to September 30, 2023, representing a 9% year-on-year increase.

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Craig Hale

With several years’ experience freelancing in tech and automotive circles, Craig’s specific interests lie in technology that is designed to better our lives, including AI and ML, productivity aids, and smart fitness. He is also passionate about cars and the decarbonisation of personal transportation. As an avid bargain-hunter, you can be sure that any deal Craig finds is top value!