Alibaba, the Chinese tech-giant, beats third-quarter estimates with the first profit for its cloud computing business in a continued push to diversify its business beyond ecommerce despite Chinese regulators tightening up their grip on the country’s tech giants.
In December, China’s State Administration for Market Regulation (SAMR) opened an antitrust investigation into Alibaba over monopolistic practices, such as “forced exclusivity”; a practice that forces sellers to pick only one platform as their exclusive distribution channel.
However, the Chinese ecommerce giant said it has established a “special task force with leaders from our relevant business units to conduct internal reviews” in regards to the SAMR probe.
The tech-giant posted its earnings before interest, tax and amortisation (EBITA) of RMB24 million during the three months ended December, as compared to a loss of RMB356 million in the same period in 2019.
According to a ranking by Canalys, Alibaba operated the world’s fourth-biggest cloud computing service in the quarter ended September, behind Amazon Web Services (AWS), Microsoft’s Azure and Google Cloud.
Cloud computing was a major growth driver for the company. Alibaba’s fiscal third quarter came in at RMB16.11 billion, a 50% year-on-year rise. That is below the RMB16.69 billion expected, according to a StreetAccount consensus estimate.
“Our cloud computing business continues to expand market leadership and show strong growth, reflecting the massive potential of China’s nascent cloud computing market as well as our years of investment in technology,” Alibaba CEO Daniel Zhang said in a press release.
While in another news disclosure, Alphabet Inc., said its Google’s cloud business reported operating loss of USD5.61 billion in fiscal year 2020, which ended December 31, on an USD13.06 billion in revenue for the year.
The company disclosed the cloud unit lost USD4.65 billion on USD8.92 billion in revenue in 2019 and lost USD4.35 billion on USD5.84 billion in revenue in 2018.
According to Ruth Porat, chief financial officer of Alphabet and Google, in an interview with Bloomberg Television, she said an important element of their operating loss is that they have been building out their organisation ahead of revenue, and that includes their product portfolio, the network of data centers.
Google began breaking out cloud revenue for the first time, one year ago, and has invested heavily in its cloud service and tried to diversify its revenue, which primarily comes from advertising, a business that showed its vulnerability, particularly in 2020. Google Cloud includes infrastructure and data analytics platforms, collaboration tools such as Google Docs and Sheets, and “other services for enterprise customers.