Alibaba's cloud base doubled in just 12 months (BABA)

Alibaba’s Q2 2017 (ended June 30) results showed better-than-expected growth, in part driven by its cloud business.

The number of paying customers for Alibaba’s cloud business nearly doubled from the year prior, to surpass 1 million during the quarter, up from 557,000 in Q2 2016. While the e-commerce giant reported robust growth across its business segments, cloud computing was a particularly bright spot:

The company’s cloud growth — both in customer acquisitions and revenue — is in part a result of Alibaba doubling down on growing its global footprint, particularly in the Asia-Pacific market; it opened two new data centers in India and Indonesia. The company also noted a boost in usage of its database services and content delivery network, as evidenced by the growth in average revenue per paying customer.

Expanding cloud offerings not only helps to diversify revenue sources, but it also allows Alibaba to capitalize on the growing XaaS (Anything-as-a-Service) market. For example, the IaaS (Infrastructure-as-a-Service) market experienced a 38% YoY growth from 2015 to 2016. Additionally, spending on total cloud infrastructure (public and private), is projected to grow annually at a 13% CAGR to reach $60 billion by 2020, according to the IDC.

Cloud computing — on-demand, internet-based computing services — has been successfully applied to many computing functions in recent years. From consumer-facing, web-based productivity apps like Google Docs to enterprise database management suites, the tools businesses rely on are increasingly moving to the cloud.

But developing a cloud strategy is no easy task. Public cloud solutions will likely come to dominate the market over the next decade, but business constraints, such as security concerns and the limitations of existing infrastructure, make it difficult for companies to fully adopt the public cloud right now.

That means that hybrid clouds,in which multiple cloud implementations (including public and private) are connected,will remain popular for the time being, at least until these constraints are addressed. The tech giants that dominate the IaaS market — Amazon, IBM, Microsoft, and Google — are constantly expanding their offerings to address current business constraints as they compete for market share.

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Alibaba's cloud base doubled in just 12 months (BABA)

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