Alibaba Cloud regains ambition

Author | Chai Xuchen

Editor | Zhou Zhiyu

As AI steps out of the dialogue box and quickly permeates daily life, the major cloud manufacturers are once again presented with an opportunity for "rapid wealth accumulation."

A month ago, Eddie Wu made his debut as the CEO of Alibaba Cloud, presenting a grand concept—reconstructing the physical world with AI. As large models enter the automotive and machinery industries, intelligent driving and humanoid robots are rapidly becoming a reality. This has led to an explosion in the demand for GPU computing power, which is essential for the growth and iteration of AI.

Sensing the opportunity, Alibaba Cloud quickly launched a series of "game changers"—upgrading computing power, iterating large models, and significantly reducing prices. Once a leader in CPU computing power, Alibaba Cloud now aims to bind itself with AI players at this "track change" juncture.

This could very well be a "century change" that allows Alibaba Cloud to transform its fate once again.

After several quarters of slow growth, Alibaba Cloud's ambitions are reigniting. Riding the wave of AI, it aims to lead the entire Alibaba Group to pivot and become a global giant like Amazon, waiting to be revalued by the market.

After all, under the siege of rising competitors like Douyin and Pinduoduo, Alibaba, the "e-commerce king," is unwilling to be seen merely as a passive defender. Eddie Wu is determined to lead Alibaba out of the shadows and towards the next brilliance.

Reshape

Around AI, Alibaba Cloud intends to position itself as the infrastructure of the new era to achieve faster growth.

At the Cloud Habitat Conference on September 19, Alibaba Cloud's CTO Zhou Jingren unveiled a "game changer." Centered on AI, Alibaba Cloud has comprehensively upgraded its cloud architecture system, covering everything from servers to computing, storage, networking, data processing, model training, and inference platforms.

At the same time, Alibaba Cloud aims to minimize the cost of using AI. The Tongyi flagship model Qwen-Max has been upgraded, and over a hundred models have been open-sourced; the three main models of Tongyi Qianwen have also seen significant price reductions, with discounts of up to 85%, and the price for one million tokens dropping to as low as 0.3 yuan.

Alibaba Cloud is determined to lower the threshold for using large models to a sufficient level. Zhou Jingren stated that only in this way can the explosion of AI applications be promoted. Behind the "low-price customer acquisition" strategy, Alibaba senses the opportunity for AI to once again disrupt the industry.

Currently, AI has reached a transformative juncture and is gradually permeating daily life—XPeng's AI car is carrying He Xiaopeng into the Cloud Habitat Conference, and Elon Musk's humanoid robot is preparing to take over factories. Startups and internet companies focused on large models are also rapidly joining the AI race, aiming to reconstruct more industries with AI.

"The greatest imagination of generative AI is to take over the digital world and change the physical world." In Eddie Wu's view, the value created by generative AI could be tenfold or even dozens of times that of the mobile internet.

Demand from downstream has already begun to overflow. Eddie Wu stated that over 50% of the current new computing power demand is driven by AI, and the scale continues to expand. "In the past year, Alibaba Cloud has invested in building a large amount of AI computing power, which is still far from meeting the strong demand from customers." A sweeping transformation is upon us, and beneath the iceberg of AI imagination, cloud infrastructure has become an important driving force. Alibaba Cloud aims to get more people on its fast track to seize this wave of AI dividends. This time, it has provided many AI players with irresistible reasons; the slogan from twenty years ago, "Make it easy to do business anywhere," has quietly transformed into "Make it easy to develop AI applications everywhere."

By placing AI in the spotlight, Alibaba Cloud is laying the groundwork for a new narrative. However, whether it’s competing on price, models, or configurations, the core issue remains the same—regaining ambition and returning to growth.

Although it is a leader in the domestic cloud computing sector, Alibaba Cloud has bid farewell to the era of high growth, facing the reality of declining growth rates due to black swan events and internal turmoil over the past three critical years. After taking office, Eddie Wu urgently needs to help Alibaba Cloud regain its competitive edge and boost morale.

Capturing incremental growth has become the top priority. Alibaba Cloud firmly believes that "cloud AI" and "AI cloud" are more certain and promising directions. As the internet reignites enthusiasm for cloud services, Alibaba Cloud seeks to capitalize on this momentum by selling AI computing power and model services. By remaining behind the scenes, it can achieve a turnaround in its fortunes.

To this end, Alibaba Cloud has personally stepped in to promote popular applications like "Miao Ya Camera" and "National Subject Three," attempting to replicate the successful path of Chat GPT through consumer perception; on the other hand, it continues to build high walls, binding itself deeply with star companies such as Moon's Dark Side, MiniMax, Zhipu AI, Baichuan Intelligence, Zero One Everything, and Jiyue Xingchen through aggressive investments since last year.

The incremental growth brought by AI has begun to be released. In the first quarter of the 2025 fiscal year, Alibaba Cloud's revenue growth rate rose to 6%, with AI-related product revenue achieving triple-digit growth and public cloud business achieving double-digit growth.

Eddie Wu has finally led Alibaba Cloud out of the eye of the storm, racing toward the vast blue ocean of "AI penetrating the physical world."

Ballast

In March last year, Alibaba launched its largest organizational transformation ever, announcing a "one split into six" strategy. Alibaba Cloud was seen as the business segment most likely to be the first to go public independently under Alibaba Group, attempting to leverage the capital market for growth.

However, eight months later, due to market reasons, the spin-off of Alibaba Cloud was suspended.

Joseph Tsai, Chairman of Alibaba Group, stated that with the wave of AI sweeping in, developing mature, highly networked, and scalable cloud infrastructure requires continuous investment. The management no longer focuses on financial means but hopes to achieve revenue and profit growth in the future through the development of cloud business.

Not spinning off is actually a good thing.

In fact, there has never been a large-scale public cloud IaaS (Infrastructure as a Service) business that has been spun off and listed separately in the global cloud market. Companies like Amazon AWS, Microsoft Azure, and Google Cloud all operate their businesses backed by their parent companies.

Industry insiders point out that, on one hand, cloud businesses share servers, data centers, and other infrastructure with their parent companies, making it difficult to achieve a completely fair spin-off. More importantly, against the backdrop of the AI computing power arms race, Alibaba Cloud needs the group as a strong backing.

At the August earnings meeting, Alibaba's management disclosed that the company will maintain high spending on artificial intelligence in the coming quarters. The current AI frenzy is driving a structural transformation in cloud computing, and Alibaba Cloud is eager to seize the opportunity to widen the gap with its competitors "The computing system dominated by CPUs over the past few decades is rapidly shifting towards an AI computing system dominated by GPUs." Eddie Wu pointed out that all the customers, developers, and CTOs that Alibaba Cloud has interacted with are almost all using AI to reconstruct their products. GPUs are rewriting the AI landscape, and major tech companies with cloud computing businesses (Microsoft, Amazon, Google) are increasing their investments in AI computing power.

Alibaba Cloud, which maintained its lead during the CPU-dominated computing phase, now needs to secure its winning edge at this "track change" juncture; and to seize the opportunity before Moore's Law, it aims to reduce the cost of using AI and cloud to the critical point of explosion, which is the full picture of Alibaba Cloud's counterattack.

Alibaba Cloud Vice President Zhang Qi told Wall Street Insights that just like telecom operators' speed increases and cost reductions, today's mobile data fees are completely incomparable to those from 20 years ago. It is precisely the speed increases and cost reductions by telecom operators that have spurred innovation in the mobile internet, and the decline in cloud infrastructure prices will also lead to an explosion in AI applications.

Returning to its roots, Alibaba Cloud will also create greater imaginative space for the entire Alibaba Group, which is a lesson learned from the experiences of international cloud giants.

In recent years, Amazon's "e-commerce + cloud" business structure has been well recognized by the capital markets. In the second quarter of this year, cloud computing revenue accounted for only 18% of Amazon's total revenue but contributed 64% of its profits, pushing Amazon's overall market value past the $2 trillion mark.

Individuals close to the cloud business have pointed out that one of the investment logics for not spinning off Alibaba Cloud is to use Amazon and AWS as a reference. In comparison, after Amazon turned a profit, it has enjoyed a high valuation and still ranks among the top five giants in the U.S. stock market with a PE ratio of 45 times. In contrast, Alibaba (currently at a PE ratio of 24 times) clearly has a higher imaginative space.

Under the siege of rising competitors like Douyin and Pinduoduo, the market position of the once-dominant e-commerce giant Alibaba has been shaken. A Goldman Sachs report shows that as early as 2022, the market share of Taobao and Tmall had dropped to 44%, a significant decline from 66% in 2019.

At this turbulent time, Alibaba Cloud must take on the role of a new ballast stone for the group's profits and market value.

In November last year, when Alibaba's market value was first surpassed by Pinduoduo, Jack Ma appeared on the company's internal network to speak, expressing his belief that Alibaba would change. The AI era has just begun, presenting both opportunities and challenges for everyone.

Alibaba is slowly emerging from its low point and is trying to regain the initiative in its development