Alibaba Cloud Announces Layoffs as it Prepares for IPO

Alibaba Cloud Announces Layoffs Following IPO Announcement, Affects 7% of Workforce


Layoffs at Alibaba Cloud Set to Impact Workforce

Days after confirming its plans for an initial public offering (IPO), Alibaba Cloud, a leading cloud computing provider in China, has announced a round of layoffs that could result in a reduction of approximately 7% of its total workforce. Reports from anonymous Alibaba Cloud employees on the Chinese workplace social platform Maimai suggest that the layoffs have already commenced and will affect a significant portion of the company's personnel.

Departmental Optimization or Layoffs?

Contrary to the claims made on Maimai, Alibaba Cloud has stated that the layoffs are part of its annual optimization and streamlining process, rather than outright job cuts. Sources within the company have confirmed that approximately 7% of employees will be let go as part of this optimization initiative. Chinese financial news outlet, citing its own sources from Alibaba Cloud, echoed the company's assertion that these actions are not to be considered as layoffs.

Earnings Fall Short of Expectations

Alibaba reported its earnings for the first quarter of 2023, ending on March 31, with revenue amounting to 208.2 billion yuan ($29.6 billion). While this represented a 2% year-on-year increase, it fell short of market expectations, which had predicted revenue of 210.2 billion yuan. Within the cloud intelligence group, which encompasses Alibaba Cloud and DingTalk, revenue stood at 18.58 billion yuan, reflecting a 2% decline compared to the previous year.

Confirmed IPO Plans by Alibaba's CEO

In a press release accompanying the earnings report, Daniel Zhang, Chairman and CEO of Alibaba, confirmed the company's plan to pursue an IPO for its cloud computing unit. Zhang announced that the board has approved the complete spinoff of the Cloud Intelligence Group, intending to distribute stock dividends to shareholders and establish it as an independent publicly listed company. This move demonstrates Alibaba's commitment to further unlocking the potential of its cloud business.

Fierce Competition in China's Cloud Market

As the growth of cloud spending in China begins to slow down, cloud service providers are actively seeking ways to stimulate demand. To this end, Alibaba Cloud initiated a large-scale price reduction on its infrastructure services in late April. Following suit, Tencent Cloud also announced its own price cuts for various cloud services. These measures are aimed at attracting more customers and remaining competitive within the rapidly evolving cloud market in China.

China's Cloud Market Experiences Decelerated Growth

According to a recent report from market research firm IDC, China's public cloud market, primarily comprising infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) offerings, witnessed a 19.0% year-on-year growth rate in the second half of 2022. However, this growth rate represents a significant deceleration when compared to the 42.9% growth observed during the same period in the previous year. This slowdown highlights the need for cloud providers to adapt and find innovative ways to stay ahead in an increasingly competitive landscape.

Members of LevelFields received the alert of this event on May 23, 8:00 AM ET

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