Technology Sep 30

Alibaba’s cloud unit expected to turn a profit soon 

Chinese e-commerce giant said its parcel-tracking operator Cainiao is also likely to generate positive cashflow in the 2021 fiscal year

Alibaba’s cloud unit expected to turn a profit soon
Alibaba said revenue growth was robust, rising in the year to June 2020 by a third to 549 billion yuan (US$80.6 billion) year-on-year. File photo by Reuters.

China’s e-commerce giant Alibaba’s cloud unit will turn profitable and its parcel-tracking platform operator Cainiao is expected to generate positive operating cash flow in fiscal 2021, Chief Financial Officer Maggie Wu said at an investor day event on Wednesday.

Alibaba said revenue growth was robust, rising in the year to June 2020 by a third to 549 billion yuan (US$80.6 billion) year-on-year, driven by consumption in the world’s second largest economy.

The company, a dominant player in China's cloud market, is fending off challenges from domestic rival Tencent, which is also trying to capture cloud business opportunities.

The company said it had retained 98% of its high spending consumers (those spending over 7,000 yuan) and 96% of its moderate spending consumers (those spending between 2,000 and 7,000 yuan).

Wu said there was huge valuation potential and that even by applying a conservative multiple of 25 times on the adjusted EBITA, the equity value of Alibaba’s marketplace-based core commerce would reach $725 billion, equalling the current total market value of Alibaba Group. 

“This valuation does not calculate the new businesses including the industry-leading Freshippo, Tmall Global, Cainiao and Alibaba Cloud, nor does it consider our net cash and invested business valuations.”