Alibaba eyes a future with AI and cloud as dual growth engines
Alibaba Group has unveiled plans to widen its cloud footprint with new data centers in key Asian markets, and has earmarked artificial intelligence (AI) as a growth driver.
"Over the next decade, no industry will be spared the disruption brought about by AI," Alibaba Chairman Joe Tsai and Alibaba CEO Eddie Wu noted in a joint letter to shareholders following the group's fiscal 2024 results. The company reported an 8% year-on-year increase in revenue to 941.17 billion yuan ($130.35 billion) for the year ended March 31, on a net income of 71.33 billion yuan ($9.88 billion), up 9% from the previous year.
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With AI driving change globally, Alibaba will be looking to the technology for growth across its businesses, each of which will have use cases to offer, wrote Tsai and Wu in their shareholder memo.
Pointing to AI as "the single most powerful element that will change and accelerate the growth of our businesses," they added that AI deployment will fuel demand for computing and, in turn, growth for the company's cloud business.
"AI will not be a threat, but will herald in massive opportunities as the driver for breakthrough user experience and business models," they wrote. "If we don't keep up with the constant and marvelous improvements that AI is showing us on a daily basis, we will be displaced."
Alibaba is looking to do so through varying investment goals for its operations, including e-commerce, which is one of its two core businesses -- alongside the cloud -- and encompasses Taobao and Tmall Group and Alibaba International Digital Commerce Group. The latter remains nascent and needs upfront investment, while Taobao and Tmall Group is a more mature business and will need to innovate fast, according to the senior executives.
With the cloud, Alibaba is targeting to be China's leading public cloud infrastructure provider, offering a range of services spanning elastic computing, security, and AI. This focus on the public cloud will require forgoing short-term revenue from projects that yield low margins, they noted.
The Chinese tech giant, however, will be looking to expand its data center footprint globally, with new sites planned for key markets.
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In particular, Alibaba Cloud will launch its first cloud region in Mexico and add data centers in South Korea, Malaysia, Thailand, and the Philippines over the next three years. These investments in international markets are part of Alibaba's efforts to boost its global cloud and AI offerings, the company said in a statement on Friday.
Alibaba added that its generative AI development platform, Model Studio, will be available soon for international customers via its availability zones in Singapore. This will provide access to Alibaba's large language model Tongyi Qianwen (Qwen).
Alibaba in March called off IPO plans for its logistics unit Cainiao, citing uncertain market conditions. The move followed its decision last November to backtrack on its plan to spin off its cloud business, with Wu pointing to growing US restrictions on chip sales to China as the reason for the detour.
Wu also noted the value of keeping its cloud competencies alongside the development of AI. "The deep convergence and flywheel effect of AI [plus] cloud computing will be an important impetus and advantage for our future development," he said.