by Casey Hall and Akash Sriram
(Reuters) – Alibaba on Thursday abandoned plans to spin off its cloud computing business, citing uncertainties created by U.S. restrictions on the export of artificial intelligence (AI) chips.
The Chinese group has also put on hold the IPO plan for its food distribution business Freshippo but is preparing an external fundraising for its international e-commerce entity.
Alibaba announced in March that it planned to divide its operations into six main units as part of its biggest restructuring in its 24-year history.
Alibaba shares listed on Wall Street fell 8.4% in pre-market trading.
“The recent expansion of U.S. restrictions on the export of advanced computer chips has created uncertainties for Cloud Intelligence Group’s prospects,” Alibaba said.
Daniel Zhang suddenly resigned as Alibaba’s chief executive in September just two months after deciding to focus on cloud computing.
The group then appointed Eddie Wu, one of its co-founders and long-time lieutenant of former boss Jack Ma, to head Alibaba and the “cloud” business.
In March, analysts estimated the cloud division could be worth between $41 billion and $60 billion but warned its listing could face scrutiny from Chinese and foreign regulators in because of the masses of data it manages.
Alibaba, which released its quarterly results on Thursday, reported second-quarter revenue of 224.79 billion yuan ($31.01 billion), almost in line with analysts’ expectations according to LSEG data. .
China’s economic recovery has been uneven: while the industrial and retail sectors have performed better than expected, crisis-hit real estate has weighed on consumer confidence.
(Reporting by Akash Sriram in Bangalore and Casey Hall in Shanghai; by Kate Entringer)
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