Alibaba to lay off 7% of workforce in its cloud division ahead of the unit IPO

Chinese tech giant Alibaba becomes the latest in a string of tech companies announcing layoffs in the month of May. Alibaba said today it is cutting 7% of the workforce in its cloud computing unit. The move comes as the unit prepares for an upcoming initial public offering (IPO).

The news also comes two months after Alibaba announced it plans to restructure the company into six separate business units, each headed by its own CEO and board of directors. In addition, just last week, Alibaba made headlines after it unveiled plans for a complete spin-off of its cloud computing unit. The e-commerce giant expressed its desire for the division to operate as an independent entity and go public as a separate publicly listed company.

Alibaba’s CEO Daniel Zhang has the long-held belief that cloud computing is a key part of the company’s future but the unit currently accounts for just 9% of the group’s total revenue. In the company’s earnings call last week, Zhang said that this was “partially due to our proactive move to adjust our revenue structure and focus on high-quality growth, and also a result of external changes in market environment and customer composition.”

In February, Alibaba also announced it was developing its own ChatGPT-style artificial intelligence (AI) tool and that it was currently in internal testing. The announcement came just a few days after the 21st Century Herald newspaper reported that Jack Ma’s founded e-commerce giant is developing a ChatGPT-like dialogue robot which is currently open to employees for testing.

Alibaba is one of the many tech companies that have implemented cost-cutting measures in recent months as concerns grow over the global economic slowdown, the possibility of a looming recession, and the impact of generative AI. Early this month, video game developer Unity Software also announced it was laying off 600 employees, about 8% of its workforce, according to a filing with the Securities and Exchange Commission (SEC).

In early May,  IBM announced it plans to suspend hiring for approximately 7,800 jobs that will be replaced by Artificial Intelligence (AI) in the coming years. Lyft also laid off 1,072 workers or 26% of its workforce, just a month after the founders stepped down.

Tech giants like Meta, Google’s Alphabet, and Nvidia have all taken measures to rein in spending. Other companies like Coinbase, Shopify, Netflix, and Twilio have also announced layoffs. In March, Facebook-parent company Meta announced it would cut 10,000 jobs, just four months after it let go of 11,000 employees, making the social giant the first Big Tech company to announce a second round of mass layoffs.

The global economic downturn that started in the second quarter of 2022 is beginning to have a major impact on tech companies. About 700 tech companies have let go of 197,985 workers, according to Layoffs.FYI, a site that has been tracking all tech layoffs using data compiled from public reports.

Alibaba was founded in April 1999 by Jack Ma. The former English teacher stepped down on his 55th birthday after amassing a $41.8 billion fortune — a trove surpassed in Asia only by India’s Mukesh Ambani, according to the Bloomberg Billionaires Index. The resilient Ma overcame many obstacles and challenges to become one of China’s richest men after he received more than a dozen rejections — including from KFC — before being hired as an English teacher. Ma applied ten times to Harvard Business School (HBS) and got rejected.