(Bloomberg) — Alibaba Group Holding Ltd. is slashing prices for its cloud services for the second time in recent years, as Tencent Holdings Ltd. competes to provide essential tools for training artificial intelligence. The company aims to win back users from rivals like .
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The Chinese internet pioneer will cut prices on a number of its internet-based services by up to 55% and an average of 20% starting Thursday. Alibaba executives told reporters in Beijing that the discounts cover more than 100 products, including elastic computing options for data storage and online processing power.
The job cuts mark one of Alibaba’s more aggressive moves to stay ahead of Tencent and Baidu in its cloud business, and risk triggering a price war in an already competitive space. The move comes after Alibaba called off a spinoff and initial public offering of its once-fast-growing cloud unit Aliyun, a move that surprised investors who had been hoping for a buyout into a major AI-critical business. Alibaba shares fell as much as 2.5% in Hong Kong, their steepest decline since February 9.
The company is now focused on growing its public cloud, its domestic services division for enterprise customers, as U.S. sanctions limit the supply of advanced chips to Chinese companies. Chief Executive Officer Eddie Wu, who took over last year, took direct charge of the division and revamped key lines.
“Alibaba’s cloud business has been struggling with a weak macro environment and increasing competition for some time,” said Beisaan Lin, managing director of Union Bancare Prive. “The price cuts are surprising, especially now that a new management team is in place. It’s not something that should be done.” “It’s unclear whether this can reignite growth, but at least they’re more aggressive in acquiring business.”
Alibaba has struggled over the past year to revamp its vast e-commerce, logistics and cloud empire in the face of fierce competition and geopolitical risks. The company is aiming to return to growth after two years of regulatory scrutiny and coronavirus-era economic turmoil. The company is trying to assemble non-core assets to raise capital, while also trying to divide its vast business into more clearly defined areas.
But the cloud – a business born more than a decade ago out of the need to support large e-commerce operations – remains a focus. In recent years, the sector has lost customers not only to traditional rivals but also to state-backed entrants and relatively new entrants like Huawei Technologies Co.
“Therefore, we have launched a price reduction campaign to lower the threshold for cloud services and help more enterprises and developers enjoy the technological benefits and accelerate the adoption of advanced public cloud services,” said Liu Weiguang, president of the division. I decided to do it,” he said. The public cloud division said in a statement:
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The price cut for Alibaba’s cloud services from February 29 comes as the company plans to use incremental profits from the business, which soared 51% year-on-year in the nine months to December, to secure customers and improve technology until the end of the fiscal year. This confirmed the plan. March 2025. According to our scenario, Alibaba’s cloud revenue growth could only appear in the second half of his fiscal year starting in October.
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Last April, the company announced it would cut the cost of Alibaba Cloud’s core products from 15% to 50%, a move that leverages the demand for raw computing power needed for AI models such as Alibaba’s own Tongyi Qianwen. This is a movement aimed at. The previous round of discounts raised concerns that rivals such as Tencent and Baidu would follow suit, eroding margins across China’s internet industry.
Read more: Baidu falls by the most since 2022 as AI spending erodes profits
Thursday’s reduction will also be applied retroactively to customers who renew their discounted product orders for at least one year within the next three months on previously purchased, undelivered remaining cloud resources.
The price cuts by China’s largest cloud provider are aimed at attracting long-term customers, with special discounts on five-year plans. Free storage for consumers will also double from 10GB to 20GB.
Alibaba executives emphasized that the discounts will open up more opportunities, especially for small and medium-sized enterprises. The company has backed startups such as Zhipu and Moonshot AI, which are developing generative AI platforms to compete with sector leaders such as Baidu. China’s internet search leader reported disappointing results on Wednesday, hurt in part by soaring AI development costs.
“Alibaba tried the same strategy in 2023 with limited success, with Cloud Intelligence revenue up just 3% year over year in the calendar quarter,” said Bloomberg Intelligence analyst Robert Lee. ” he said. “We expect Tencent and Alibaba to continue losing cloud market share to Huawei until 2024.”
–With assistance from Vlad Savov.
(Updates with analyst comment after 5th paragraph)
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