Spending on cloud infrastructure services in China rose 8 percent in the second quarter of 2024, reaching $9.4 billion, according to a recent report by Canalys.
The leading cloud vendors — Alibaba Cloud, Huawei Cloud, and Tencent Cloud — hold significant market shares, with Alibaba Cloud leading at 36 percent, followed by Huawei Cloud at 19 percent and Tencent Cloud at 16 percent.
This growth is largely attributed to businesses prioritizing digital transformation and integrating artificial intelligence (AI) into their operations.
Leading cloud providers are capitalizing on this trend, focusing on the integration of AI technologies with cloud computing to unlock new growth opportunities. Canalys Analyst Yi Zhang noted that the influence of AI on cloud consumption is emerging as a key driver of business expansion.
The customer base for AI platforms provided by major cloud service providers is expected to expand, further fueling growth in the latter half of the year.
Chinese cloud vendors are significantly increasing their AI investments, enhancing AI models, and developing tailored solutions for specific industries.
For instance, Huawei Cloud has implemented its foundation model, Pangu, across 30 industries and 400 different business scenarios, while Baidu AI Cloud has launched 20 new AI applications.
In a move to strengthen their ecosystems, cloud vendors are forming partnerships with third-party AI model developers. Alibaba Cloud, for example, announced a partnership with Moonshot AI to enhance the reading and interpretation capabilities of the Kimi chatbot.
Additionally, cloud providers are engaging channel partners to create tailored AI solutions for industry-specific needs. In Q2 2024, revenue generated through indirect channels accounted for 26 percent of total cloud revenue in China, with expectations for this figure to rise.
Alibaba Cloud: Leading the Charge
Alibaba Cloud’s growth has been bolstered by its public cloud segment, which saw double-digit growth in Q2 2024. The success of AI products has significantly contributed to this resurgence, with the company reporting a record increase in paying users — an impressive 200 percent quarterly growth. Revenue continues to expand at a triple-digit rate, underlining the demand for its services. In July 2024, Alibaba Cloud launched the XiaoYing AI assistant, designed to provide knowledge base and decision-making support.
Huawei Cloud: Solidifying Market Position
Huawei Cloud has maintained a strong presence in the market with a 19 percent share and a 13 percent growth rate. The company has made notable advancements in AI, introducing Pangu 5.0 in June 2024 to meet diverse training demands. Moreover, Huawei Cloud has launched a Partner Competency Program in collaboration with firms like TCL and EY, aiming to enhance partner capabilities. Currently, around 4,500 partners are involved in developing over 500 solutions.
Tencent Cloud: Innovating with Incentives
With a 16 percent market share, Tencent Cloud is making strides in AI integration. In June 2024, the company introduced a plan to entice new enterprise users by offering 100 million free tokens for its AI foundation model. At the Tencent Global Digital Ecosystem Summit in September, Tencent Cloud revealed a 150 percent increase in the number of partners generating over CNY1 million (US$142,000) in revenue. The company has launched various versions of its foundation AI model, Hunyuan, and implemented new incentive programs to enhance its channel partner ecosystem.
