Alibaba Cancels Cloud Group Spinoff, Blames U.S. Chip Export Restrictions

Alibaba Group has nixed plans to spin off its Cloud Intelligence Group as a separate company, citing recently expanded U.S. export controls designed to “further restrict the export to China of advanced computing chips and semiconductor manufacturing equipment,” according to a statement discussing Alibaba’s Q3 financial results. Alibaba had announced its plans to divide the company into six operating groups in March 2023.

“We believe that a full spin-off of Cloud Intelligence Group may not achieve the intended effect of shareholder value enhancement,” according to the statement. “Accordingly, we have decided to not proceed with a full spin-off, and instead we will focus on developing a sustainable growth model for Cloud Intelligence Group under the fluid circumstances.”

There had been previous indications that the cloud unit’s future was uncertain. In September 2023 former Alibaba CEO Daniel Zhang, who had been overseeing the unit since June, left this post — and the company — after eight years. At the same time, the company delayed the planned IPO for its Freshippo supermarket division.

For Q3, the cloud intelligence unit generated 27.6 million RMB ($3.8 million), a 2% year-over-year increase. During the quarter, Alibaba introduced an upgraded version of its proprietary large language model, which have become essential elements in generative AI.

Alibaba as a whole generated 224.8 million RMB ($30.8 million) in Q3, a 9% YoY increase compared to the same period in 2022. Income from operations increased even more dramatically, by 34% YoY, rising to 33.6 million RMB ($4.6 million).