Assessing Alibaba’s Cloud Computing Opportunity – Market Realist – Market Realist

Alibaba's Post-Earnings Update: Cloud, Mobile Users, Brand Rights PART 5 OF 16

In Alibabas (BABA) fiscal 1Q18 earnings, you can see that its Cloud Computing business only supplied 5.0% of the companys total revenues. Despite the tiny contribution to the companys top line, its Cloud Computing revenues grew 96% year-over-year, making it one of Alibabas fastest-growing businesses.

Alibaba identified the top priority in its Cloud Computing business as market expansion. The company is adding more cloud capacity and rolling out new cloud products and services to support themarket share expansionthat it seeks.

According to estimates by Synergy Research Group, Alibaba is subdued by Amazon (AMZN), Microsoft (MSFT), Alphabets (GOOGL) Google, and IBM (IBM) in terms of worldwide cloud computing market share.The chart above shows the rankings of various cloud providers by market share.

In the cloud computing industry, Alibaba has thrown its hat in the ring for a multi-billion-dollar prize. According to Gartner, the worldwide public cloud services market could grow 18% to reach $246.8 billion in 2017 before expanding to $383.4 billion by 2020. The market was worth ~$209.2 billion in 2016.

Cloud computing has the potential to transform Alibabas financial profile if the company can succeed in this sector. Alibabas overall revenues in fiscal 2017 totaled $23 billion, up 56%. Cloud revenues for that year reached $968 million, up 121%, and represented about 4.2% of the companys total revenues.

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Assessing Alibaba's Cloud Computing Opportunity - Market Realist - Market Realist

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