Cloud expansion comes first
In its cloud push, Alibaba (BABA) has drawn up a strategy to guide its execution. In that strategy, Alibaba—like most of its cloud competitors such as Amazon (AMZN), Microsoft (MSFT) and Alphabet’s (GOOGL) Google—is prioritizing growth over profitability.
Despite profits not being the immediate prize, Alibaba is maintaining a focus on running an efficient cloud operation. Alibaba’s management noted in its earnings statement for fiscal 1Q18,[1. fiscal 1Q18 ended June 2017] “Market expansion remains our top priority, and we will continue to invest to acquire customers by developing innovative solutions and deploying efficient and cost effective products and services.”
Expanding cloud capacity
The chart above offers a summary of Alibaba’s cloud margins and earnings. As part of its expansion drive, Alibaba is investing in growing its cloud computing capacity by planting cloud data centers in various regions. The company recently announced plans to build two new cloud data centers in Malaysia and Indonesia is it doubles down on its efforts to increase its international presence.
Alibaba Cloud is available in 14 countries. This international push has won Alibaba some prominent enterprise cloud customers. The company noted that Malaysia’s AirAsia, the largest low-cost carrier in Asia, has adopted its cloud for security and content delivery network services.
Alibaba cloud continues China penetration
In China (MCHI) (FXI), Alibaba Cloud is gaining traction among some of the country’s large corporations. For example, China Huaneng Group, a Fortune 500 company, is using Alibaba Cloud to digitize its global procurement systems. ITIC Group, a state-owned multinational Chinese company, is using the hybrid version of Alibaba Cloud to support the integration of its internal processes.