Alibaba is looking to spin out and list its cloud unit separately from the main parent company.
The news was announced as part of the company’s Q1 2023 earnings this week following recent plans to restructure the organization.
“We are taking concrete steps towards unlocking value from our businesses and are pleased to announce that our board has approved a full spin-off of the Cloud Intelligence Group via a stock dividend distribution to shareholders, with intention for it to become an independent publicly listed company,” said Daniel Zhang, chairman and CEO of Alibaba Group.
“In an increasingly complex world, we have proactively transformed our organization to strengthen the competitiveness of our businesses through greater independence to address the evolving needs of different customers and capture new opportunities,” he added.
In April, Alibaba announced plans to reorganize the company into six business groups, including a ‘Cloud Intelligence Group’ to hold its cloud unit (known locally as Aliyun). Daniel Zhang, Alibaba's current CEO, was set to remain CEO of both the Alibaba Group and of the Cloud Intelligence Group which he first took over in January.
The other five business groups will include Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group, and Digital Media and Entertainment.
Alibaba said that prior to the spin-off, the company plans to bring in external strategic investors through private financings.
“We target to complete the spin-off in the next 12 months,” the company said.
Overall, company revenue for the quarter was RMB 208.2 billion ($30.3 billion), an increase of 2 percent year-over-year.
Income from operations was RMB 15.2 billion ($2.2 billion), a decrease of nine percent year-over-year. Adjusted EBITA increased by 60 percent year-over-year to RMB 25.2 billion ($3.6bn), while Net income was RMB 22 billion ($3.2bn), compared to a net loss of RMB 18.3bn in the same quarter last year.
Alibaba’s Cloud segment – comprising Alibaba Cloud and DingTalk – posted total Q1 2023 revenue (before inter-segment elimination, which includes revenue from services provided to other Alibaba businesses) was RMB 24.55 billion ($3.57bn), a decline of three percent year-over-year.
Cloud revenue after inter-segment elimination, was RMB 18.58 billion ($2.7bn), a decline of two percent year-over-year. Income loss for the quarter was RMB 910 million ($129.9m), while adjusted EBITA was RMB 385 ($56 mn).
The company said the decrease in revenue ‘reflected delays in delivery of hybrid cloud projects given the Covid-19 resurgence in January, normalization of CDN demand compared to the same period last year, as well as the impact from a top customer phasing out using our overseas cloud services for its international business due to non-product related reasons.’
For the 12 months up to March 2023, the cloud unit posted revenue of RMB 77 billion ($11.2bn, up four percent year-on-year), an income loss of RMB 5.1bn ($728m, largely flat from the 12 months prior), and Adjusted EBITA of RMB 1.4bn ($207m).
Alibaba announced earlier this year that it was planning a cloud data center for Ankara, Turkey. In total, the company operates a network of 28 cloud regions and 86 availability zones globally.