Alibaba scraps plan to spin off cloud intelligence unit
Alibaba (NYSE:BABA) has decided not to go ahead with a full spin-off of its key cloud unit, citing the impact of enhanced U.S. controls on exports of advanced computing chips and semiconductor manufacturing equipment to China.
“We believe that these new restrictions 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,” the Chinese e-commerce giant said in a statement.
U.S.-listed shares in Alibaba tumbled in premarket trading.
The move threatens to rupture a major pillar of Alibaba's long-stated plan to split into six separate entities in a bid to appease regulators in Beijing.
The cloud unit has also been at the heart of the firm’s attempts to develop a generative artificial intelligence, following a boom in the sector this year. Alibaba had earlier this month rolled out a major update for its Tongyi Qianwen AI model.
Thursday's announcement comes as the company reported second-quarter adjusted earnings before interest, tax, depreciation and amortization of 49.24 billion yuan, while revenue rose by 8.5% on an annual basis to 224.79B yuan.