Alibaba Group reported profitability for its cloud computing business for the first time in a continued push to diversify its business beyond e-commerce as it faces regulatory scrutiny in China, CNBC's Arjun Kharpal, reports.
The company reported adjusted EBITA (earnings before interest, taxes, and amortization) of 24 million yuan (US$3 million) for its cloud business in the December quarter. Adjusted EBITA is one measure of profitability. That compares to a loss of 356 million yuan in the same period in 2019.
Alibaba previously said that it expects its cloud division to become profitable within its current fiscal year which began in April and ends on March 31, 2021.
The milestone will be welcomed by investors who have put great importance on cloud computing to drive Alibaba’s future growth. Current chairman and Chief Executive Daniel Zhang told CNBC in a 2018 interview that cloud computing would be Alibaba’s “main business” in the future.
Cloud computing revenue for Alibaba’s fiscal third quarter came in at 16.11 billion yuan, a 50 percent year-on-year rise. That is below the 16.69 billion yuan expected, according to a StreetAccount consensus estimate.
“Our cloud computing business continues to expand market leadership and show strong growth, reflecting the massive potential of China’s nascent cloud computing market as well as our years of investment in technology,” Alibaba CEO Daniel Zhang said in a press release.
Alibaba’s total revenue came in at 221.08 billion yuan (US$33.88 billion) for the December quarter, beating analysts’ estimates of US$214.4 billion yuan.
Earnings per share stood at 22.03 yuan ahead of 20.87 yuan estimated by analysts.
It was Alibaba’s core commerce business, which accounts for 89 percent of revenue, which powered the growth. Core commerce revenue came in at 195.54 billion yuan for the fiscal third quarter, up by 38 percent year-on-year.
