Alibaba Cloud and AI business growth expected to accelerate in March quarter

Alibaba Group Holding’s cloud and artificial intelligence unit is expected to remain a prime engine for the March quarter, with the growth rate forecast to accelerate as the company steps up AI monetisation and reshuffles its AI businesses, according to analysts.

Cloud revenue growth was projected to increase to around 40 per cent during the period, up from 36 per cent in the December quarter, analysts said.

The growth momentum was expected to be supported by “a robust surge in token usage”, according to a research note by Morgan Stanley analysts on Wednesday.

The company’s recent cloud price increase is also seen as a driver of short-term growth.

As part of a broader trend by major cloud service providers globally to increase fees amid surging AI demand, Alibaba Cloud last month said it would raise prices for services running on its AI chips by between 5 and 34 per cent from April 18, while the price of its Cloud Parallel File Storage service would go up by 30 per cent.

Price increases, expansion among Chinese enterprises, and support from in-house chips were expected to collectively boost long-term cloud margins, HSBC analysts said on Thursday.