Alibaba's cloud business accelerated in the company's fiscal first quarter with revenue growth of 26% and an annual revenue run rate approaching $19 billion.
The company's Cloud Intelligence Group reported first quarter revenue of $4.66 billion, up 26% from a year ago, with earnings before interest, taxes and amortization of $2.34 billion. According to the Wall Street Journal, Alibaba has created its own chip for AI workloads similar to other cloud providers. AWS, Microsoft and Google Cloud all have custom silicon to lessen their dependence on Nvidia. In Alibaba’s case, the custom chip is designed to be a substitute for Nvidia’s H20.
Alibaba said its cloud revenue growth was driven by public cloud services as well as AI-related workloads.
For comparison, AWS has an annual revenue run rate of $124 billion compared to $50 billion for Google Cloud and $75 billion in annual sales for Microsoft Azure. Alibaba’s annual revenue run rate is in the ballpark of Oracle Cloud, which is at about $27 billion pending Oracle’s earnings report in September.
Alibaba, however, represents AI workloads in China, which has been leveraging open source models without the latest Nvidia chips to advance its ambitions. Alibaba will capture a lot of those workloads and its Qwen open source LLM is popular. During Nvidia’s second quarter earnings call, CEO Jensen Huang said China is critical to the AI market.
“About 50% of the world's AI researchers are in China. The vast majority of the leading open source models are created in China. And so it's fairly important, I think, for the American technology companies to be able to address that market,” said Huang. “And open source, as you know, is created in one country, but it's used all over the world. The open source models have come out of China."
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Eddie Wu said Alibaba's cloud demand is driven by external customers with AI workloads. "We remain committed to investing in our two strategic pillars of consumption and AI + Cloud to capture historic opportunities and drive long-term growth," said Wu.
According to Alibaba, AI-related product revenue delivered triple-digit revenue growth for the eighth consecutive quarter. AI demand is also driving increased demand for Alibaba's compute and storage services to support AI adoption.
The company noted that it will continue to invest in its cloud unit to meet demand.
Alibaba, including its e-commerce operations, reported first quarter net income of $6.02 billion on revenue of $34.57 billion.
