Time for Cloud ETFs on Earnings Strength & Promising Growth?
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 17 2024
0mins
Should l Buy BABA?
Source: NASDAQ.COM
- Cloud Computing Market Growth: The global cloud computing market is projected to grow from $626.4 billion in 2023 to $1.27 trillion by 2028 at a CAGR of 15.1%, driven by remote work and e-commerce demands.
- Key Players in Cloud Computing: Microsoft, Google Cloud, and Amazon Web Services dominate the global cloud infrastructure market, collectively accounting for 67% of the $76 billion market in Q1 of 2024.
- Financial Performance of Cloud Leaders: Microsoft's Intelligent Cloud business generated $26.7 billion, AWS had revenues of over $25 billion, and Google Cloud reported sales of $9.6 billion in Q1 of 2024.
- Market Share and Growth Forecasts: AWS leads with a 31% market share, followed by Microsoft (25%) and Google (11%). Global end-user spending on public cloud services is expected to reach $678.8 billion in 2024.
- ETFs and Investment Opportunities: ETFs like Wisdomtree Cloud Computing Fund, Global X Cloud Computing ETF, and others have seen gains amid the cloud computing boom, offering investment opportunities in the sector.
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Analyst Views on BABA
Wall Street analysts forecast BABA stock price to rise
15 Analyst Rating
15 Buy
0 Hold
0 Sell
Strong Buy
Current: 125.480
Low
180.00
Averages
203.09
High
230.00
Current: 125.480
Low
180.00
Averages
203.09
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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- Ambitious Revenue Target: Management has set a goal to achieve over $100 billion in annual revenue from cloud and AI within the next five years, reflecting a strategic shift from a commerce-driven model to a technology platform, although achieving this target involves intense competition and execution risks.
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- Cloud Revenue Momentum: In its latest earnings report, Alibaba reported approximately 36% year-over-year growth in cloud revenue, primarily driven by AI-related workloads, demonstrating that AI demand is becoming a significant part of the company's business, with AI-related revenue growing at triple-digit rates for multiple consecutive quarters.
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- Investment and Risks: While Alibaba's $100 billion target is attractive, achieving it requires substantial investments in building data centers and scaling computing capacity, and the monetization of AI remains evolving, prompting investors to consider the company's long-term positioning and execution risks in the technology market.
See More
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- Significant Profit Decline: Alibaba's net income fell by approximately two-thirds year-over-year in Q4, a drop that would typically raise alarms; however, the company is intentionally investing heavily in cloud computing and AI, accepting short-term profit pressure for long-term gains.
- Strong Cloud Growth: The cloud intelligence segment achieved a 36% year-over-year revenue growth, making it Alibaba's fastest-growing major business, with AI-related workloads increasing at triple-digit rates for the tenth consecutive quarter, indicating a transformative impact on cloud economics.
- E-commerce Slowdown: While Alibaba's core e-commerce remains significant, its revenue growth in China was only 6%, with traditional platforms like Taobao and Tmall growing just 1%, reflecting the rise of quick commerce and intensified competition in the sector.
- Long-term Investment Strategy: Management outlined an ambition to generate over $100 billion in annual cloud and AI revenue within five years, signaling a strategic pivot towards these areas as central to Alibaba's future, rather than peripheral businesses.
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