Alibaba reported amazing fiscal first quarter earnings propelled by revenue that hiked by 59%, superseding Wall Street estimates. While the announcement was mostly about the increase in e-commerce transactions on mobile, analysts also paid attention to Alibaba Cloud, reports Yahoo Finance.

Alibaba
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Strong growth for AliCloud

Alibaba Cloud, which was founded in 2009, has quickly evolved into the dominant cloud computing services provider in China. It offers a wide range of security, storage, and database management options to clients like Schneider Electric, marketing platform Blogmint and Dutch electronics giant Philips. The e-commerce giant reported that Alibaba Cloud revenues increased 156% year over year to $188 million in its first fiscal quarter. The service has more than 577,000 paid users.

Analysts who pay close attention to the e-commerce giant expect its cloud service to become an important growth driver in the medium- to long-term, the report says. In a July report, Oppenheimer analyst Jason Helfstein wrote that “AliCloud is massively underestimated,” in hisr view. He further wrote that the cloud industry of the most populous country in the world is on the verge of massive growth, and Alibaba Cloud is in the best position to reap the benefits.

The Oppenheimer analyst expects AliCloud revenues to grow 112% yearly, which is more than what Wall Street estimates (82%). One of the main advantages of AliCloud is its China roots. This has allowed it to grow fast locally in ways foreign competition such as Microsoft Azure and Amazon Web Services could not — all thanks to China’s cyber-security laws and data sovereignty.

Alibaba expanding cloud presence in the U.S.

Growing in a foreign land like the United States will be more challenging for the Chinese e-commerce giant, as in the U.S., Amazon Web Services in particular is virtually synonymous with “cloud computing.”

To address this, Alibaba has partnered with NVIDIA, a graphics chip making company, to use its silicon for faster processing. Also Alibaba has made deals with HTC to assist in powering the Taiwanese company’s VIVE virtual reality headset. The cloud services provider appointed ex-Microsoft scientist Jingren Zhou as chief scientist in July to spearhead research around artificial intelligence and big data.

Alibaba Chief Financial Officer Maggie Wu said on Thursday that the e-commerce company will spend heavily on its cloud expansion efforts and will be in the red until it amasses 1 million paid customers.

“One million is a pretty good point of customer base.” Wu said. “At that point, profitability will start to show.”