For internet cloud providers, the uniqueness of 2024 lies not in growth and profitability, but in the increasingly clear path of "AI+cloud" based on market and customer feedback. This path is not only aimed at external clients but also at internal operations, becoming a more certain direction for future development.

Author|DouDou

Editor|PiYe

Produced by|Industry Expert

2024 is a special year. A subtle change that ordinary people can perceive is: once, we accepted the authenticity of photos and videos almost unthinkingly, but now, we remain vigilant and skeptical at all times.

AI seems to be everywhere.

With the rapid development and popularization of artificial intelligence technology, it has begun to take root in various industries and scenarios, profoundly affecting our work and life.

Tracing back to the front end of technology, we find that in addition to those AI technology service providers with "ample ammunition", there are also internet cloud providers that are "returning to growth". The changes brought about by AI technology seem to have found an excellent new outlet for big tech companies to "sell cloud services".

Recently, internet cloud providers have successively released their third-quarter financial reports, which not only contain astonishing amounts of AI, but also reveal some new signals:

Big tech cloud growth rates are evident, and profitability seems to be the main label for cloud services in 2024.

AI seems to be reshaping the competitive landscape of internet cloud providers, and even the phenomenon of "latecomers overtaking" has emerged.

Central state-owned enterprises exhibit "super purchasing power", suspected to be leading the charge for the AI technology revolution.

Cloud providers have collectively "transformed" based on AI, and new business models have emerged.

China's internet cloud providers seem to be moving towards a healthy development path with the support of AI cloud transformation, being integrated, public clouds, and heavily self-developed products (such as databases, storage products, etc.).

1. Overall growth trend is evident, and profitability is improving.

In 2024, some internet cloud providers gradually shed the label of "loss-making".

Alibaba's Q3 2024 financial report shows that Alibaba Cloud (Cloud Intelligence Group) recorded revenue of 29.61 billion yuan, a year-on-year increase of 7%. Compared with the previous quarter's 26.549 billion yuan, there was a quarter-on-quarter increase of 11.5%, marking the fourth consecutive quarter of accelerated growth for Alibaba Cloud. In this quarter, Alibaba Cloud's adjusted EBITA profit reached 2.661 billion yuan, a year-on-year increase of 89%, exceeding analysts' expectations of 2.493 billion yuan.

In addition, from the perspective of total revenue share, Alibaba Cloud's total revenue share increased from 12.3% in 2023 to 12.5% in 2024. It can be seen that Alibaba Cloud's total revenue share has increased slightly, and the proportion of cloud computing business in the group has increased, indicating that its cloud business is continuously expanding.

Looking at Tencent Cloud, according to Tencent's Q3 2024 financial report, Tencent's total revenue for the quarter was 167.2 billion yuan, a year-on-year increase of 8%. Tencent's ToB business (FinTech and Enterprise Services) revenue increased by 2% year-on-year to 53.1 billion yuan, accounting for 32% of Tencent's total revenue.

Overall, Tencent's cloud business revenue remains relatively stable. One highlight is that in Q3 2024, Tencent's ToB business gross profit increased by 19% year-on-year to 25.4 billion yuan, and the gross profit margin increased from 41% in the same period last year to 48%, making it the fastest-growing business among Tencent's three major businesses.

Compared to Alibaba and Tencent, JD.com did not separately disclose detailed performance data for JD Cloud in its financial report. This is mainly because starting from the first quarter of 2024, JD.com's reported performance segments have undergone new adjustments, namely JD Retail, JD Logistics, and New Business. JD Retail (including components such as JD Health and JD Industrial) is primarily engaged in China's self-operated business, platform business, and advertising services. JD Logistics includes internal and external logistics businesses. New Business mainly includes Dada, JD.com Property & Development, Jingxi, and overseas business.

Therefore, the specific performance of JD Cloud is relatively vague.

However, the development trend of JD Cloud can also be glimpsed from JD.com Group's overall financial report.

In terms of research and development expenses, JD.com increased from 3.8 billion yuan in the third quarter of 2023 by 15.9% to 4.4 billion yuan in the third quarter of 2024. The percentage of research and development expenses in revenue increased from 1.5% in 2023 to 1.7% in 2024.

In addition, the financial report shows that in the third quarter of 2024, JD.com Group's revenue reached 260.4 billion yuan, an increase of 5.1% over the same period last year; operating profit was 12 billion yuan, an increase of 29.5% over the third quarter of 2023; net profit attributable to ordinary shareholders of the company was 11.7 billion yuan, an increase of 47.8% over the same period last year.

The overall trend is upward, and JD Cloud, as the technological foundation of JD.com, also plays an important role in this growth.

In addition, beyond the previous few companies, Baidu Intelligent Cloud's growth trend in the first half of this year was actually more pronounced. The quarterly report shows that Baidu's core revenue in Q3 2024 was 26.5 billion yuan, basically the same as last year; online marketing revenue was 18.8 billion yuan, a decrease of 4% year-on-year, and non-online marketing revenue was 7.7 billion yuan, an increase of 12% year-on-year, mainly driven by the intelligent cloud business.

This shows its strong growth momentum and rapid business expansion.

When it comes to internet cloud providers, ByteDance's Volcano Engine cannot be overlooked. Unlike other internet giants, Volcano Engine entered the market later but has performed impressively.

According to the latest IDC report "China's Smart Computing Service Market (Second Half of 2023) Tracker", Volcano Engine has become the cloud provider with the largest market share in the GenAIIaaS field.

A very obvious phenomenon is that the growth of domestic internet cloud providers tends to be stable, and some cloud providers are beginning to turn profitable. More importantly, the competitive landscape of internet cloud providers is also undergoing subtle changes, and in some aspects, there have been instances of latecomers overtaking.

2. Financial reports are packed with "AI content", becoming a new competitive point for big tech clouds.

"Revenue from AI-related products has achieved triple-digit year-on-year growth for five consecutive quarters", "The tangible benefits brought about by the continuous deployment of AI in products and operations are becoming increasingly apparent", "Our online marketing business continues to be weak, but it is offset by the growth of the intelligent cloud business"...

In various performance reports, Alibaba Cloud, Tencent, Baidu Intelligent Cloud, etc., respectively pointed to AI as the reason for the current growth and profitability changes in their cloud businesses.

The landing projects of internet cloud providers also indirectly confirm this point.

From January to August 2024, the number of domestic large model-related bid-winning projects recorded reached 475, approximately five times the number of large model bid-winning projects recorded for the entire year of 2023. The disclosed bid-winning amount reached 1.535 billion yuan, approximately double the disclosed amount of large model bid-winning projects for the entire year of 2023.

Changes in business models and interaction methods brought about by the integration of generative AI and business have allowed enterprises to see new growth methods and future development directions.

Many enterprises believe that AI will bring unprecedented efficiency and productivity improvements, so they are investing substantial funds in AI solutions provided by large-scale cloud service providers. This investment drives the growth of cloud service providers as enterprises need more cloud resources to support the development and deployment of AI applications.

Government affairs, finance, and central state-owned enterprises, as pioneers in digital transformation, have become the first to take the lead, beginning to densely deploy data centers, cloud service infrastructure, etc.

According to Qichacha's bidding information, as of November 19, 2024, Alibaba Cloud had 18 bid-winning projects exceeding 10 million yuan, with the most intensive bid-winning information in September.

The "super purchasing power" of government affairs, finance, and central state-owned enterprises is also reflected in other internet cloud providers.

As of November 19, 2024, Tencent Cloud had 20 bid-winning projects exceeding 10 million yuan; Baidu Netcom had 8; and Volcano Engine had 3.

However, by closely examining the bid-winning project information, it can be found that each cloud provider has different focuses. For example, Alibaba Cloud's customer base is mostly central state-owned enterprises, and large project types are mainly in the construction and services of data and computing power centers.

Baidu Intelligent Cloud's large projects, in addition to those in central state-owned enterprises, are also more evident in the fields of smart transportation and education. Among them, the "Beijing Advanced Autonomous Driving Demonstration Zone 3.0 Expansion Project" won in 2024 with a bid amount of up to 250 million yuan. Currently, according to information available on Qichacha, it is the project with the highest bid amount this year.

However, narrowing down the bid amount, more bid-winning information for Baidu Intelligent Cloud is still concentrated in education and financial scenarios.

Looking at Tencent Cloud, compared with other cloud providers, it has significantly more projects in broadcasting and radio and television units. In fact, in addition to Tencent Cloud's strong audio and video technology capabilities, this has a lot to do with Tencent's rich content ecosystem, including platforms such as Tencent Video and Tencent Music. These platforms can deeply integrate with the content of broadcasting and radio and television units, providing a wider range of communication channels.

Volcano Engine and JD Cloud have publicly disclosed fewer bid-winning projects exceeding 10 million yuan, making it difficult to see their key customer groups. However, from all bid-winning information, Volcano Engine has more bid-winning projects in financial scenarios. It is worth noting that from the bid-winning information in the past month, it seems that its projects related to intelligent agent development are increasing.

JD Cloud's bid-winning information is mainly concentrated in government affairs scenarios. Looking at a longer timeline, its bid-winning information also involves the agriculture and energy fields. This is inseparable from its logistics business and integrated supply chain capabilities.

In fact, internet cloud providers have always been building differentiation based on their own advantages, and the gradual maturity of AI technology is also accelerating this process. It can be seen that whether it is Alibaba Cloud's advantage in infrastructure construction, Baidu Intelligent Cloud's advantage in smart transportation and cities, Tencent Cloud's advantage in social media and cultural entertainment, or JD Cloud's advantage in the supply chain, they are all combining with AI to amplify these unique advantages.

Through various performance reports and public data, it is clear that "AI+cloud" is indeed helping internet cloud providers embark on a healthier development path.

3. Cloud providers collectively "transform": Reconstructing business based on AI

In today's surging wave of digitization, internet cloud providers are promoting the deep penetration and integration of AI technology at an unprecedented speed. This is not only a technological innovation but also a subversion and reshaping of traditional business models.

Cloud providers such as Alibaba Cloud, Baidu Intelligent Cloud, JD Cloud, Tencent Cloud, and Volcano Engine have undergone real transformations based on AI in multiple aspects, including cloud computing infrastructure, big data platforms, AI application products, and internal operations and management.

Cloud computing, as the cornerstone of the digital economy, has its computing power optimization as the primary battlefield for AI transformation.

Cloud providers are no longer satisfied with simple resource stacking but instead use AI algorithms for precise resource scheduling and allocation, achieving dynamic balance and efficient utilization of computing power resources. The introduction of intelligent operation and maintenance further shifts operation and maintenance work from cumbersome labor-intensive tasks to intelligent automation. Through machine learning to predict system anomalies, intervene in advance, ensure service continuity and stability, and make the "cloud" more reliable and intelligent.

In Alibaba Cloud's Q3 2024 financial report, emphasis was placed on the comprehensive upgrade of AI infrastructure and the upgrade of the Tongyi Qianwen large model family; Tencent Cloud focused on intelligent operation and maintenance, using AI algorithms to monitor and predict system operating status in real-time; Volcano Engine launched the "Template Mall" to help enterprises quickly implement AI capabilities, reducing development and learning costs.

With the support of AI, big data platforms have also completed a gorgeous transformation from data storage to data intelligence. Data is no longer just a cold pile of numbers but has become a valuable asset for insight into the market, predicting trends, and guiding decision-making.

For example, Baidu Intelligent Cloud created the first water affairs brain for Quanzhou, realizing intelligent analysis and management of data through AI technology, improving the efficiency and intelligence level of water affairs management; JD Cloud deeply applies AI technology in the retail field, providing businesses with precise marketing strategy recommendations through intelligent analysis of consumer behavior data, promoting intelligent transformation in the retail industry.

The innovation and expansion of AI application products are powerful tools for cloud providers to deeply penetrate the industry. In the past year, internet cloud providers have seen the emergence of numerous "AI+industry" solutions, ranging from financial risk control to medical imaging, from intelligent manufacturing to smart cities.

Alibaba Cloud assisted State Grid Xinjiang Electric Power in achieving intelligent upgrades; Baidu Intelligent Cloud cooperated with State Grid Hunan Electric Power; JD Cloud achieved remarkable results in intelligent retail; Volcano Engine optimized the entire process from fine-tuning sample production to scenario reasoning generation through a generic scenario generation solution, providing innovative AI technology application solutions for the pan-entertainment industry.

In terms of internal operations and management, cloud providers have not stopped the pace of AI adoption.

JD Cloud uses AI technology for intelligent warehousing and logistics management, improving logistics efficiency and accuracy; Tencent Cloud widely applies AI technology in internal management systems, such as intelligent meeting arrangements and intelligent document management, improving employee efficiency and satisfaction; Volcano Engine uses templates such as intelligent teaching assistants, freeing up teachers' time, improving teaching quality, and providing intelligent solutions for the education industry.

And in this business reconstruction based on AI, new business models have emerged. These new business models correspond to new demands, and under these new demands, there has been a surge in the adoption of AI-related products, thereby driving up cloud usage and bringing new growth to the cloud business.

From a broader perspective, for internet cloud providers, the uniqueness of 2024 lies not in growth and profitability but in the increasingly clear path of "AI+cloud" based on market and customer feedback. This path is not only aimed at external clients but also at internal operations, becoming a more certain direction for future development.