Alibaba Plans to Raise $3.2 Billion to Expand Cloud Services

Post by : Monika

Photo: Reuters

Alibaba, one of China’s largest technology and e-commerce companies, announced that it will raise $3.2 billion by issuing a zero-coupon convertible bond. This is the largest convertible bond deal of 2025, surpassing DoorDash’s $2.75 billion bond earlier this year.

Alibaba plans to use this capital primarily to expand its cloud computing business, upgrade its technology, and continue its international growth. The announcement is part of Alibaba’s broader strategy to invest in technology, especially artificial intelligence (AI), and strengthen its global market position.

Convertible bonds are a popular way for companies to raise money without immediately increasing debt or paying high interest. For investors, they offer the option to convert bonds into shares at a later date, potentially benefiting from stock price growth.

Understanding Convertible Bonds

A convertible bond is a financial tool that combines features of debt and equity. When a company issues a convertible bond, investors lend money to the company. Over time, instead of receiving interest payments or repayment in cash alone, investors may convert the bond into company shares at a predetermined price.

• Alibaba’s bond is a zero-coupon convertible bond, which means:
• No interest is paid during the bond’s life.
• Investors can convert the bond into shares later, usually at a higher price than the current stock value.
• The bond has a maturity date, in this case, September 15, 2032, when it will need to be repaid if not converted.

For Alibaba, the bond’s conversion price is set 27.5% to 32.5% above the current share price. This structure helps the company raise funds without immediately diluting existing shareholders’ equity while offering investors the potential for profit if Alibaba’s stock performs well.

How Alibaba Will Use the Funds

• Alibaba plans to use about 80% of the $3.2 billion for its cloud computing business. This includes:
• Building new data centers: Alibaba will construct more facilities to store and process data. This is crucial as cloud demand grows worldwide.
• Upgrading technology: The company plans to improve hardware, software, and network infrastructure to enhance performance and reliability.
• Expanding cloud services: Alibaba wants to offer better and more advanced services for domestic and international clients.

The remaining 20% of funds will be used to:

• Boost e-commerce platforms: Alibaba will enhance its online shopping services, improving logistics, user experience, and product offerings.
• Increase operational efficiency: Investment in technology and processes will make the company more productive and capable of handling more customers.

Alibaba’s Investment in AI

Alibaba has been heavily investing in artificial intelligence (AI) to drive growth. The company has pledged 380 billion yuan (around $53.37 billion) over three years for AI research and development.

• AI plays a significant role in:
• Improving cloud computing efficiency
• Enhancing data processing and analysis
• Strengthening online shopping recommendations and personalization
• Supporting logistics and supply chain management

Alibaba’s CEO Eddie Wu has emphasized that AI will make Alibaba’s cloud services more competitive, which can lead to stronger revenue growth despite challenges in other parts of the business.

• Market Reaction to the Bond Announcement
• After the announcement, Alibaba’s stock experienced mixed reactions:
• Hong Kong-listed shares fell as much as 2.6%, reaching HK$139.10, but later recovered to HK$146.10, up 2.3% from the previous close.
• New York-listed shares dropped 2.2% in response to the news.
• Despite short-term fluctuations, Alibaba’s stock has performed strongly over the past year:
• Hong Kong-listed stock is up 71.6% year-to-date
• U.S.-listed stock has risen 71.1% year-to-date

This shows that investors remain optimistic about Alibaba’s long-term growth prospects, particularly in cloud computing and international markets.

• Previous Fundraising Efforts
• Alibaba has a history of raising funds through bonds to support growth:
• In July 2025, Alibaba raised $1.5 billion through exchangeable bonds linked to Alibaba Health Technology shares.
• In November 2024, the company raised $5 billion through a dual-currency bond deal, the largest in the Asia-Pacific region for that year.

These fundraising activities demonstrate Alibaba’s strategic approach to securing capital for technological investment and expansion without overly burdening the company with traditional debt.

Alibaba’s Cloud Business Growth

• Alibaba Cloud has become a major contributor to the company’s revenue. While e-commerce remains Alibaba’s flagship business, cloud computing has shown:
• Strong revenue growth, even when other sectors missed expectations
• High demand from global clients, including businesses and governments
• Increasing competition with international cloud providers, like Amazon Web Services and Microsoft Azure
• The company’s investment in AI and technology is intended to maintain Alibaba Cloud’s competitive edge and drive long-term growth in the global market.

Benefits of the Convertible Bond

The zero-coupon convertible bond offers several advantages:

For Alibaba:

• Raises large amounts of capital without immediate interest payments
• Supports strategic investments in cloud technology and AI
• Minimizes dilution of existing shareholders’ equity initially

For Investors:

• Provides an opportunity to convert bonds into shares at a premium price in the future
• Allows participation in Alibaba’s growth potential
• Offers security, as bonds are backed by the company, reducing risk compared to buying shares directly
• This dual benefit is one reason why Alibaba chose a convertible bond rather than other fundraising methods.

Global Expansion Strategy

• Alibaba aims to expand internationally, particularly in cloud computing services. The raised funds will support:
• Setting up data centers overseas
• Entering new markets in Southeast Asia, Europe, and the Americas
• Strengthening partnerships with global businesses
• Increasing Alibaba Cloud’s brand recognition worldwide

International growth is key for Alibaba because China’s domestic market is competitive, and expanding globally allows the company to tap into new revenue streams and diversify its business.

Risks and Challenges

• While the bond and investments are strategic, Alibaba faces several challenges:
• Global competition: Companies like Amazon, Microsoft, and Google dominate cloud services. Alibaba must innovate to remain competitive.
• Regulatory risks: Technology and e-commerce sectors in China are closely monitored by regulators, and changes could impact operations.
• Market volatility: Stock prices may fluctuate, affecting investor confidence and bond conversion potential.
• Execution risk: Expanding cloud services internationally requires careful planning and infrastructure development.
• Despite these risks, Alibaba’s strong performance and strategic investments suggest it is well-positioned for long-term growth.

Alibaba’s $3.2 billion convertible bond offering is a major step in funding its cloud computing expansion and global growth ambitions. By investing in AI, upgrading data centers, and improving technology, the company aims to meet growing demand and maintain a competitive edge.

While the bond caused some short-term stock fluctuations, Alibaba’s overall stock performance remains strong. The company’s careful financial planning and previous successful fundraising efforts demonstrate a strategic approach to growth.

With a clear focus on cloud computing, AI innovation, and international expansion, Alibaba is positioning itself as a global technology leader, ready to capitalize on opportunities in both domestic and international markets.

The bond also reflects Alibaba’s commitment to using modern financial tools to support long-term growth without placing excessive pressure on its balance sheet. Investors and analysts are watching closely, as the company’s success in implementing these plans could further solidify its position in the technology and cloud sectors globally.

Alibaba