Alibaba cloud business will become ‘profitable for the first time’, says company

Alibaba chief finance officer Maggie Wu said on Wednesday that the company’s cloud computing business will hopefully become profitable in this fiscal year, for the first time.

The company’s current fiscal years began in April 2020 and will end on March 31, 2021.

The announcement is one that comes off as appealing to many investors who are optimistic about the cloud computing business and see it as a key feature in the company’s business strategy in the years to come. Alibaba chairman and CEO Daniel Zhang told CNBC in 2018 that the cloud computing business will become Alibaba’s “main business” in the years to come.

In a Wednesday speech, Zhang referred to the cloud computing technology as a “growth engine” but the world is still in a “nascent stage of the global cloud era.” He also added that such an opportunity only comes once in a generation and the company was grabbing that opportunity.

“We typically spend 8 to 10 years incubating, nurturing, and growing a new business,” Zhang told investors. “We still regard ourselves to be in the nascent stage of the global cloud era.”

The company’s CFO Wu said there are also expectations for Alibaba’s Cainiao logistics segment to have a steady operating cash flow in the current fiscal year.

The Chinese e-commerce giant has relentlessly sought ways to return to pre-COVID levels as the Chinese economy gradually recovers from the impacts of the pandemic.

The company saw its biggest gain in over a month after its shares rose 3.8% in Hong Kong, on Wednesday. In addition, its cloud computing business is growing at roughly 60% to annual revenue of nearly $7 billion, according to Wu at an annual company conference.

Alibaba has invested billions of dollars to host cloud computing for corporations, at the same time building a large logistics network across the nation. Profitability in its cloud computing segment will enable Alibaba to revitalize growth, as it recovers in the broader Chinese economy. The company has also seen increasing levels in online consumer spending as more people use its e-commerce services.

Like its American competitor, Amazon, Alibaba’s need for developing a cloud computing service emerged from its need to have a reliable computation to handle billions of online shopping orders, transaction, and database. The company’s cloud computing service, today, competes with Amazon Web Services (AWS), Google, and Microsoft Corp., as it dominates the Chinese cloud computing market.