AWS only generated 13% of Amazon's revenue last quarter, but its operating profits rose 9% annually to $2.3 billion and accounted for 72% of its operating income.īaidu, which owns China's top search engine, ranks fourth in the cloud market with an 8% share. Despite those challenges, AWS could remain an appealing choice for bigger Chinese companies that want to expand overseas.ĪWS is consistently profitable, unlike Alibaba Cloud, and its profits subsidize the growth of its lower-margin marketplaces. The U.S.-China trade war could also make it tough for AWS to win bids in China. It also shuttered its domestic marketplace in China, which faced tough competition from Alibaba and JD.com ( NASDAQ:JD), to focus on the growth of AWS.Īmazon doesn't control a big tech ecosystem in China like Alibaba and Tencent, which limits AWS' reach with domestic companies. China remains a minor market for AWS, which grew its revenue 35% annually to $9 billion last quarter, but it's ramping up its efforts across the country.Īmazon recently appointed a new head of its AWS operations in China to focus on bolstering its sales and marketing efforts, as well as strengthening its ties with various channel partners and government departments. However, it mainly attributed that expansion to higher payment volumes and services on WeChat Pay, which suggests that its fintech unit is subsidizing the growth of its cloud unit.Īmazon's AWS (Amazon Web Services) ranks third in China's cloud market with a 9% share. Tencent stated that its entire " fintech and business services" unit, which includes Tencent Cloud, grew its gross margin 260 basis points annually to 27.7% last quarter. Tencent doesn't disclose the unit's profitability yet but admitted that its spending on cloud servers was rising. Like Alibaba, Tencent claims that its proprietary services - which are integrated with its popular WeChat, WeChat Pay, QQ, and gaming ecosystems - differentiate its platform from the competition. It claims that that consolidation expanded its client base with new contracts, boosted its revenue and scale, and improved its bundling opportunities. Tencent also recently consolidated its cloud and smart industries unit (which handles security, connected devices, and smart retail services) into the new "cloud and smart industries group" (CSIG). It attributed that growth to its customer expansion across the educational, financial, municipal, and retail sectors, as well as higher revenue from its existing customers. Its cloud revenue rose 80% annually to 4.7 billion yuan ($670 million) last quarter and accounted for about 5% of its top line. Tencent ranked second in the China cloud race with a 15% share.
Its operating loss widened from 1.17 billion yuan to 1.93 billion yuan ($270 million) during the quarter, but those losses were offset by the profits from its core commerce business. However, Alibaba's cloud business remains deeply unprofitable due to its ongoing investments in infrastructure and talent. This technology includes Internet of Things (IoT) and artificial intelligence (AI) services, tools for migrating data between the private and public clouds, first-party chips, and e-commerce solutions tethered to its core marketplaces. Zhang credited the cloud unit's growth to the development of "proprietary technology" that differentiates its platform from its competitors. Its total cloud revenue rose 64% annually to 9.29 billion yuan ($1.32 billion) last quarter and accounted for 8% of its top line.ĭuring its conference call with analysts, Alibaba CEO Daniel Zhang declared that the "adoption of cloud services in China will be driven by not only the need of lower IT costs, but also by digital transformation of business models and the processes." Alibaba controlled 47% of China's cloud IaaS market at the beginning of the year, according to Canalys.
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