Alibaba (BABA) To Expand In Asia With 2 New Data Facilities

China's biggest e-commerce company Alibaba Group Holding Limited (NYSE:BABA) is making continuous efforts to diversify from its core business line and expand overseas. The company is now expanding its cloud presence in Asia.

In its latest move toward international expansion, Alibaba Cloud, the cloud computing arm of Alibaba Group, has announced its plans of opening two new data facilities in India and Indonesia. The company expects the data centers to be operational by the current fiscal year, ending March 31, 2018.

Details

The new data centers will be located in Mumbai, India and Jakarta, Indonesia. These new facilities will allow small and medium enterprises (SMEs) to build their entire IT infrastructure for business on Alibaba Cloud, thus expanding Alibaba cloud offerings.

To expand in India, Alibaba Cloud has partnered with Global Cloud Xchange (GCX), a subsidiary of Reliance Communications and Tata Communications to launch its services. The deal will help customers to directly access Alibaba Cloud Express Connect via GCX’s CLOUD X Fusion. The new facility is expected to cater to increasing demand for cloud computing services in India.

Additionally, Alibaba Cloud plans to open a new cloud data center in Indonesia. This will enhance the country’s local IT infrastructure on the back of Alibaba Cloud’s global data center network.

These new facilities will take Alibaba Cloud’s presence worldwide to 17 locations, covering mainland China, Australia, Germany, Japan, Hong Kong, Singapore, the United Arab Emirates and the U.S.

Why This Move?

Lately, Asia has been witnessing strong demand for cloud-based services. Talking particularly about India, there has been an exponential growth in the country’s cloud infrastructure.

According to the Internet and Mobile Association of India, the country’s data centre infrastructure market, currently valued at $2.2 billion, is expected to grow to $4.5 billion by 2018.

Hence, Alibaba’s decision to set up data centers in Asia is the right move.

Senior Vice President of Alibaba Group and President of Alibaba Cloud, Simon Hu, said “Establishing data centers in India and Indonesia will further strengthen our position in the region and across the globe”.

Stock Performance Overview

Shares of Alibaba have outperformed the broader Zacks Electronic Commerce industry in the last one year. While the stock generated a positive return of 84.7%, the industry returned 53.4%.

This outperformance can largely be attributed to the company’s near monopoly in the Chinese e-commerce market, growing cloud computing services and strengthening efforts to diversify its business beyond it.

Summing Up

As Alibaba focuses on international expansion, its efforts are directed worldwide, including South East Asia, Europe, Middle East and the U.S.

The recently opened data center will expand the company’s footprint across the Asia Pacific and address the rising demand for cloud services in the region.

In the last reported fiscal fourth quarter, the company’s cloud computing business segment reported revenues of RMB2.16 billion (US$314 million), up 103% year over year. The increase was driven by an increase in the number of paying customers and higher-than-usual spending by them, reflecting increased usage of services.

Given the growing position of Alibaba’s cloud business in China and aggressive international expansion strategies, we believe that cloud computing will be one of its major growth drivers in the long run.

Zacks Rank & Stocks to Consider

Currently, Alibaba has a Zacks Rank #3 (Hold). Other better-ranked stocks in the industry are Autobytel Inc. (NASDAQ:ABTL) , Mercadolibre, Inc. (NASDAQ:MELI) and PetMed Express, Inc. (NASDAQ:PETS) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Autobytel Inc. delivered a positive earnings surprise of 41.98%, on average, in the trailing four quarters.

Mercadolibre, Inc. delivered a positive earnings surprise of 26.74%, on average, in the trailing four quarters.

PetMed Express, Inc. delivered a positive earnings surprise of 9.32%, on average, in the trailing four quarters.

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