Alibaba Slashes Cloud Prices Globally as AI Demand Quickens – Yahoo Finance

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(Bloomberg) — Alibaba Group Holding Ltd. is cutting prices for cloud customers from the US to Singapore by as much as 59%, mirroring deep discounts at home as the once high-flying division struggles to fend off rivals and revive growth.

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The move coincides with a surge in demand for cloud computing to support a global boom in AI development, as well as a complicated internal restructuring. Chief Executive Officer Eddie Wu is spearheading a far-reaching overhaul to try and revitalize Alibaba’s main businesses including ecommerce. Alibaba canceled plans for a public listing of the cloud business in November, citing difficulties getting the high-end Nvidia Corp. chips it needs to compete, and has faced rising competition from Tencent Holdings Ltd. and state-backed providers.

The Hangzhou-based firm slashed prices on Monday by an average of 23% for around 500 cloud product specifications. Those discounts are now available to customers in 13 regions, including Japan, Indonesia, the United Arab Emirates and Germany.

The company’s shares in Hong Kong pared gains after the announcement to trade about 0.5% up.

Alibaba is China’s biggest cloud service provider, but a relatively small player compared to global leaders Amazon.com Inc. and Microsoft Corp. It has lost market share in China to state-backed rivals and struggled to gain any ground abroad in recent years as a crackdown on internet firms in China and US trade curbs hampered its expansion. Revenue at the cloud division, which surpassed $11 billion in its last full fiscal year, is projected to slip 2% in the March quarter.

Chairman Joe Tsai acknowledged in an interview with major shareholder Norges Bank last week that US chip curbs posed a “big issue” for Chinese cloud providers. While stockpiled inventories can still be used to train large language models for the next 12 to 18 months, limited access to Nvidia’s best-in-class AI hardware will impact the companies in the short to medium term before there are strong domestic alternatives, Tsai said.

What Bloomberg Intelligence Says

Alibaba’s price cuts for ex-China cloud services affirms a greater focus on revenue growth vs. profitability this fiscal year ending March 2025. Consensus estimates for a two-percentage-point rise in the business’ 2025 adjusted Ebita margin from a year earlier appear overly optimistic.

— Catherine Lim and Trini Tan, BI analysts

Read More: Alibaba Starts Its Cloud Arm Overhaul After Nixing Spinoff

The changes follow Alibaba’s domestic price cuts for more than 100 core cloud offerings by as much as 55% in February. Those spurred a price war, as rivals like JD.com Inc. responded with their own rounds of discounts. February also marked Alibaba’s second major price cut in recent months.

Cloud executives on Monday said that new and existing international customers would enjoy the new discounts, including cutting a one-year data storage package popular among small businesses from $63 to $16.99. The company also said it would increase discounts and commission rates for resellers, as well as making its artificial intelligence computing platform PAI-Lingjun available in Singapore.

“Our latest pricing strategy is designed not only to reward long-term subscribers with more substantial discounts, but also to ensure that businesses can have a stable foundation to develop their long-term strategies when planning and developing their own AI applications,” Selina Yuan, president of the cloud unit’s international business arm, said in a statement.

(Updates with analyst reaction)

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