Alibaba Cancels Cloud Spinoff, Blames US Chip Sanctions

Alibaba is canceling the scheduled IPO of its cloud division due to the impact of the U.S. government's CPU export bans to China. The Register reports: The Chinese e-commerce giant reported the move alongside its calendar Q3 earnings, otherwise a generally positive quarter, with the group reporting an income from operations of $4.6 billion, up 34 percent year-on-year, and revenue of $30.8 billion, up 9 percent. Alibaba also said US export restrictions could affect its business more generally by making it harder for the company to upgrade its existing hardware. It's worth noting that the Cloud Intelligence Group brought in $3.789 billion in revenue but earnings before income tax and amortization was $193 million, up 44 percent on the same period a year earlier. Cloud sales growth has stalled in 2023 as customers weigh up their spending.
'We believe that these new restrictions [referring to expanded restrictions announced in October] may materially and adversely affect Cloud Intelligence Group's ability to offer products and services and to perform under existing contracts, thereby negatively affecting our results of operations and financial condition,' Alibaba said. 'We believe that a full spin-off of Cloud Intelligence Group may not achieve the intended effect of shareholder value enhancement,' the company added. 'Accordingly, we have decided to not proceed with a full spin-off, and instead we will focus on developing a sustainable growth model for Cloud Intelligence Group (CIG) under the fluid circumstances.'

'The US needs to stop politicizing and weaponizing trade and tech issues and stop destabilizing global industrial and supply chains,' Chinese Foreign Ministry spokesperson Mao Ning said in response to the US's new restrictions.

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