Alibaba said it won't spin off its cloud intelligence group citing US sanctions and an uncertain demand environment.

The company reported cloud revenue of $3.79 billion, up 2% from a year ago, for the quarter ended Sept. 30. EBITA for the cloud unit was $193 million. Alibaba recently launched a new proprietary large language model, built out its AI developer ecosystem and AI application development platform.

However, US expanded export controls are likely to hamper Alibaba's cloud unit and its ability to procure processors for AI inference and model training. Previously: Alibaba plans to spin off its Cloud Intelligence Group within 12 months

The company said in a statement:

"We believe that these new restrictions may materially and adversely affect Cloud Intelligence Group’s ability to offer products and services and to perform under existing contracts, thereby negatively affecting our results of operations and financial condition. These new restrictions may also affect our businesses more generally by limiting our ability to upgrade our technological capabilities."

Due to the uncertainty, Alibaba said it will hit the brakes on its cloud spin off. The company said it will focus on a "sustainable growth model for Cloud Intelligence Group under fluid circumstances."

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