Where Will Alibaba’s Cloud Computing Growth Come From In The Next Five Years?

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Alibaba (NYSE:BABA) has witnessed massive growth in its cloud computing and internet infrastructure business over the past few years. Its cloud computing revenues have grown from $50 million in 2010 to about $370 million in 2015, largely driven by increasing demand for cloud computing and Infrastructure-as-a-Service platforms in China. Cloud computing and internet infrastructure services could add about $700 million to Alibaba’s top line by 2020. According to our estimates, Alibaba’s Cloud Computing & Other division makes up just over 6% of Alibaba’s $207 billion valuation.

Cloud1According to research published by Bain & Company, the cloud computing market in China was worth $1.5 billion in 2013 and could become a $20 billion market by 2020. [1] We forecast Alibaba’s cloud computing revenue to grow at a CAGR of about 40% from 2013 through 2020, as shown in the table below. The company has already had a solid start to 2016, with 175% annual growth in cloud computing revenues in the March quarter to just over $170 million. Alibaba’s management attributed the growth to an increase in the number of paying customers, which more than doubled over the previous year quarter to 500,000. [2]

Cloud2Additionally, the company recently signed an agreement with Japanese telecommunications and Internet provider Softbank to expand cloud computing operations in Japan. [3] The Japanese cloud computing and Internet infrastructure market is expected to grow at aCAGR of about 10% over the next few years, according to an estimate by research firm Infiniti Research. [4]

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to  Our Full Analysis For Alibaba.

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Notes:
  1. Finding the Silver Lining in China’s Cloud Market, Bain & Company, July 2015 []
  2. Alibaba Q4 2016 Earnings Call Transcript, Seeking Alpha, May 2016 []
  3. Alibaba and SoftBank form SB Cloud, a cloud-computing joint venture in Japan, Venture Beat, May 2016 []
  4. Cloud Computing Market in Japan 2014-2018, Report Buyer, June 2014 []