ByteDance Challenges Alibaba in Cloud Market, AI Cloud Revenue Hits $390 Million
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 20 2026
0mins
Should l Buy BABA?
Source: Benzinga
- Market Challenge: ByteDance is rapidly expanding its enterprise cloud unit, Volcano Engine, to challenge Alibaba's dominance in China's cloud market, with AI cloud service revenue projected to reach $390 million in the first half of 2025, capturing nearly 13% of the market.
- AI-Driven Strategy: Leveraging its extensive data reserves and custom-built AI agents, ByteDance is offering AI-driven cloud services to enterprises, reshaping a market historically dominated by Alibaba and Tencent, and demonstrating strong growth momentum.
- Alibaba Cloud Growth: Alibaba Cloud reported a 34% revenue increase to $5.59 billion in the fiscal second quarter of 2023, driven by public cloud demand and rapid AI adoption, indicating its continued strong performance in the cloud market.
- Investor Confidence: With over 700 million downloads of its Qwen models, Alibaba's stock surged by 94%, reflecting strong market demand for its cloud services, despite a recent slight decline of 1.87% in share price.
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Analyst Views on BABA
Wall Street analysts forecast BABA stock price to rise
14 Analyst Rating
13 Buy
1 Hold
0 Sell
Strong Buy
Current: 158.730
Low
172.00
Averages
203.66
High
230.00
Current: 158.730
Low
172.00
Averages
203.66
High
230.00
About BABA
Alibaba Group Holding Ltd is an investment holding company mainly engaged in the provision of technology infrastructure and marketing platforms. The Company operates its business through nine segments. The China Commerce Retail segment is engaged in the China commerce retail business. The China Commerce Wholesale segment is mainly engaged in the operation of 1688.com. The Cloud Intelligence segment provides cloud services. The International Commerce Retail segment provides customer management services, sales of goods and logistics services. The International Commerce Wholesale segment is mainly engaged in the operation of Alibaba.com. The Cainiao Represents Logistics Services segment provides fulfilment services. The Local Services segment’s revenue includes platform commissions, logistics services revenue. The Digital Media and Entertainment segment engages in the operation of Youku and Alibaba. The All Others segment is mainly engaged in the Sun Art, Freshippo and other business.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Regulatory Compliance Demand: China's State Administration for Market Regulation summoned leading internet platforms like Alibaba, Baidu, and JD.com, mandating strict adherence to anti-unfair competition laws, e-commerce laws, consumer rights protection laws, and pricing laws to ensure fair market competition.
- Warning Against Cutthroat Competition: The regulator urged companies to eliminate 'involution-style competition,' which refers to cutthroat rivalry, and called for collaboration to maintain a healthy market environment, promoting sustainable development and industry stability.
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- Impact on Market Environment: This regulatory action may have profound implications for internet companies' operational models, prompting them to prioritize compliance and cooperation in their competitive strategies, thereby influencing the future market landscape.
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- ByteDance's Seedance 2.0: The Seedance 2.0 model can generate realistic videos from user text prompts, demonstrating significant advancements in controllability, speed, and production efficiency, although it faces challenges due to issues with voice generation.
- Kuaishou's Kling 3.0: Kuaishou's Kling 3.0 video generation model features major upgrades in consistency and photorealistic output, with video durations of up to 15 seconds and native audio generation, likely boosting user growth and market share.
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- ByteDance's Seedance 2.0: ByteDance's Seedance 2.0 can generate realistic videos from user text prompts, and despite facing issues with its voice generation feature, its significant improvements in controllability and production efficiency mark a major advancement in video generation technology.
- Kuaishou's Kling 3.0 Release: Kuaishou launched Kling 3.0, featuring major upgrades in consistency, photorealistic output, and multilingual audio generation, which has contributed to a more than 50% rise in its stock price over the past year, despite being available only to paying subscribers for now.
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See More
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- Escalating US-China Tensions: The addition of Alibaba and BYD to the 'Chinese Military Companies' list is likely to escalate trade tensions ahead of the Trump-Xi summit, potentially impacting future economic cooperation and policy directions between the two nations.
- Reputational Risks: While being placed on the list does not carry immediate legal consequences, it poses reputational risks for the companies, which could lead to future punitive measures from the US, affecting investor confidence and market performance.
- National Security Concerns: US intelligence agencies expressed concerns about Alibaba's potential national security threat, leading to its designation three months ago, reflecting increased scrutiny on Chinese tech firms that may impact their international operations.
- BYD's Legal Battle: BYD's advancements in battery technology have solidified its position in the EV market, while the company has filed a lawsuit against the Trump administration over 100% tariffs on Chinese electric vehicles, demonstrating its resistance in a challenging policy environment.
See More
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- Stock Recovery: Alibaba's stock has surged approximately 45% over the past year, primarily due to Jack Ma's return and easing geopolitical concerns, although most gains occurred between late August and early October, indicating market anticipation for upcoming earnings.
- Earnings Expectations: Alibaba is set to announce its earnings for the December quarter of 2025 around February 19, presenting investors with a tough decision on whether to buy shares before the report, especially given the company's history of missing earnings estimates in three of the last four quarters.
- Revenue Growth and Challenges: In the first half of fiscal 2025, Alibaba's cloud revenue rose by 30% year-over-year, while its e-commerce segments grew by 12% and 14%, respectively; however, a 27% decline in its smaller business revenue resulted in only a 3% overall revenue increase to nearly $70 billion, highlighting uneven growth.
- Valuation Comparison: With a P/E ratio of 22, Alibaba trades below Amazon's 28 and Southeast Asian peer Sea Limited's 47, although its current valuation appears less attractive compared to last summer's 12, prompting investors to carefully weigh the risks of buying before earnings.
See More
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- Weak Revenue Growth: In the first half of fiscal 2025 (ended September 30), Alibaba's cloud revenue rose by 30% year-over-year, while its e-commerce segments grew by 12% and 14%, respectively; however, a 27% decline in smaller business revenue resulted in only a 3% overall revenue increase to nearly $70 billion, highlighting structural vulnerabilities.
- P/E Ratio Comparison: Alibaba's P/E ratio stands at 22, significantly lower than Amazon's 28 and Southeast Asian peer Sea Limited's 47; although this is an increase from last summer's 12, the stock's attractiveness has diminished in the current market context.
- Investor Confidence Fluctuations: While Jack Ma's return has bolstered investor confidence, Alibaba has missed earnings estimates in three of the last four quarters, and the upcoming earnings report could impact stock performance, necessitating caution among investors.
- Intensifying Market Competition: Despite easing geopolitical risks, Alibaba faces a challenging competitive landscape, and given Amazon's stability, investors may prefer to consider other more attractive investment options.
See More
