Alibaba has announced it will be cutting 7% of the workforce in its cloud division as the company looks to take its cloud business public.

The move comes as total global investment in the cloud computing market saw a dramatic fall last year.

The Chinese e-commerce giant has reportedly started to inform employees of the impending layoffs, with those affected being offered severance packages, according to an anonymous source interviewed by CNBC

The move follows a March announcement that it would be divesting its cloud division into a separate, public traded company. 

Alibaba’s cloud department revenue fell 2% year-on-year in the first quarter of 2023, despite being hailed as a key part of the company’s future by CEO Daniel Zhang. 

In 2021, TikTok owner ByteDance decided to no longer operate from Alibaba’s cloud platform for its business outside of China. The departure left a large dent in the e-commerce giant’s cloud computing revenue. 

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Zhang blamed the recent cloud revenue decline on the company’s “proactive move to adjust our revenue structure and focus on high-quality growth,” on an earnings call last week. 

The CEO said it was also a result “of external changes in market environment and customer composition”.

The Chinese e-commerce giant will be splitting the company into six business groups. All of which will have its own CEO and have the ability to go public. 

As well as the Cloud Intelligence Group; the company will be split into the Taobao Group, Local Services Group, Caninao Smart Logistics Group, Global Digital Commerce Group, and the Digital Media and Entertainment Group. 

The employee cuts from Alibaba come as global capital raising investment in cloud computing fell last year.

According to data gathered by research firm GlobalData, the total amount of capital-raising investment in the cloud was just over $124bn.

This is a considerable fall from 2021 when capital-raising investment in the industry peaked at $183bn.

GlobalData is the parent company of Verdict and its sister publications.