Chinese tech giant Alibaba will cut the prices of its cloud services by up to 50% from today as it expects the sector to grow.
alibaba group (NYSE: BABA) recently announced it would cut the prices of its cloud by 50% to fuel business growth. The Chinese tech giant is looking to carve out a bigger chunk of its local cloud market amid increasing competition. By slashing prices of cloud-based products and services, it hopes to better compete with the likes of Alibaba Tencent,
The report said the price cut will take effect from today as Alibaba takes advantage of a surge in demand driven by artificial intelligence applications. The company’s cloud value growth also comes as it looks to grow its Aliyun business potential IPO,
Alibaba Cloud’s website says prices for elastic computing services that use Arm- and Intel-based semiconductors will drop by 15% to 20%. The platform further said that elastic computing services using Nvidia’s V100 and T4 graphics processing units will see a price reduction of between 41% and 47%.
While the price cut could help Alibaba attract more customers, a Chinese cloud computing research analyst suggested another. According to Zhang Yi of Canalys, the actual impact of Alibaba’s price cuts will depend on the specific services customers purchase.
Prime mover Alibaba Cloud faces stiff competition
Founded in 2009, Alibaba Cloud is one of China’s earliest local entrepreneurs in the cloud computing space. Although the service currently serves more than a third of China’s territory, it has faced increasing domestic competition in recent years. These include Chinese carriers such as China Telecom and China Unicom, as well as tech conglomerate Tencent.
Alibaba and Tencent compete to provide the raw computing power needed for popular AI platforms like ChatGPT. In a bid to gain the upper hand, Alibaba slashed its Aliyun subsidiary’s main products by up to 50% from 7 May. Although Alibaba Cloud provides data processing and storage services to countless businesses, developers and governments in more than 200 countries, the company pushes for more. Alibaba stressed that it is committed to growing its cloud business as a potential exponential growth driver.
Bloomberg Intelligence Analysts Estimate How Cloud Price Cuts Could Affect the Company’s Short-Term Bottomline
Despite the perceived optimism from Alibaba’s slashing of cloud services prices, bloomberg intelligence Analysts believe the company may face a short term fiscal deficit. According to Catherine Lim and Trini Tan:
“Alibaba’s price cuts for cloud services of up to 50% raise a risk that the unit’s adjusted EBITDA in fiscal 2024 at the end of March will fall below consensus expectations, even after slashing estimates by more than 5% over the past two weeks.” will leave behind.”
Furthermore, Lim and Tan also added:
“The cut increases the likelihood that Alibaba will focus on 2024 cloud profit gains to drive revenue growth and fend off heightened cloud and generative-AI rivalry from peers such as Tencent and Baidu this year.”
In other news, Alibaba announced Wednesday that more than 200,000 companies have requested to join its Tongyi Qianwen beta testing program. tech giants announced Its AI-powered large language model earlier this month.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to strip crypto stories down to the basics so that anyone anywhere can understand without a lot of background knowledge. When he is not delving deep into crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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