(Bloomberg) — Alibaba Group Holding Ltd. foresees its cloud services arm turning profitable for the first time this year, a milestone for the decade-old business that underscores how Asia’s largest corporation expects a return to pre-pandemic levels as China’s economy rebounds.
Alibaba’s shares rose as much as 4% in Hong Kong, their biggest intraday gain in over a month. Its internet computing business is growing roughly 60% at an annual revenue run rate of about $7 billion, Chief Financial Officer Maggie Wu told investors at an annual company conference. The unit should turn profitable in the year ending March, she said.
Cainiao, the logistics service Alibaba folded fully into its broader empire in 2017, should generate positive cash-flow on an operating basis over the same period, she added.
China’s most valuable corporation has invested billions in hosting computing for corporations over the cloud, while building a nationwide logistics network that can handle the billions of parcels its e-commerce business throws out. Achieving profitability will boost Alibaba as it tries to revitalize growth alongside a recovery in the broader Chinese economy. The e-commerce giant is riding a pick-up in consumer spending — particularly online — in a country among the first to recover from Covid-19.
“We typically spend 8 to 10 years incubating, nurturing and growing a new business,” Chief Executive Officer Daniel Zhang told investors. “We still regard ourselves to be in the nascent stage of the global cloud era.”
Like Amazon.com Inc.’s, Alibaba’s cloud service emerged from the computational power needed to handle billions of online shopping transactions to become one of its fastest-growing initiatives. The Chinese company today relies on the service, which competes globally with Amazon Web Services, Microsoft Corp. and Google, to underpin both its global expansion and forays into newer arenas such as