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Report: ByteDance's TikTok Severs Ties With Alibaba Cloud Services Outside of China: What Companies Will Be Potential Beneficiaries?

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Report: ByteDance's TikTok Severs Ties With Alibaba Cloud Services Outside of China: What Companies Will Be Potential Beneficiaries?

Alibaba Group Holding Ltd.'s (NYSE: BABA) Cloud business has lost one of its key customers, impeding progress of this high-growth business.

What Happened: Short-video sharing social networking service TikTok, owned by ByteDance, has ceased using Alibaba Cloud services for the former's businesses outside Asia, Nikkei reported, citing Chinese media company Caixin.

Alibaba hinted in its March-quarter earnings report that its Cloud business suffered from the loss of a top cloud customer in the Internet industry, without actually naming the customer.

"This customer, which has a sizeable presence outside of China that used our overseas cloud services in the past, has decided to terminate the relationship with respect to their international business due to non-product related requirements," the company said in its earnings release.

Related Link: Ant Troubles Not Over? Jack Ma's Relations With Regulators Said To Be Under Beijing Scrutiny

Why It's Important: Alibaba's cloud computing business is among the company's fastest-growing. Despite growing 37% year-over-year to $2.56 billion in the March quarter, the segment's share of the total revenues in the March quarter dropped from 11% in 2020 to 9% in 2021.

Going forward, the company said it expects its cloud computing revenue to be further diversified across customers and industries.

The termination of the TikTok deal outside of China would cost Alibaba $800 million in revenues per year, Nikkei said.

Alibaba's loss could prove to be a gain for Amazon.com, Inc. (NASDAQ: AMZN) and Oracle Corporation (NYSE: ORCL), the report said. ByteDance is reportedly mulling to move part of the business to the cloud services of Amazon and Oracle.

ByteDance's decision may have been necessitated by increasing scrutiny in the U.S., with the former Trump administration eyeing a ban on the app in the U.S., citing the national security threat posed by the company's closeness to the Chinese government. ByteDance has maintained that it is not in the habit of sharing user data with the Chinese government.

BABA Price Action: Alibaba shares were rising 0.48% to $210.51 Monday at publication.

Related Link: Nio Opens Flagship Store For Lifestyle Products On Alibaba's Tmall: What You Need To Know

(Photo by Franck on Unsplash)

 

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