China’s market for AI cloud services reached 56.7 billion yuan in 2025, and Alibaba Cloud took the largest share of it, according to a report published Tuesday by the research firm Omdia. Alibaba Cloud ranked first in both AI infrastructure-as-a-service and AI model-as-a-service, and its overall share rose to 38.1% from 35.8% in the first half of the year.
The report, titled “China AI Cloud Market Share 2025,” puts numbers on a race that has reshaped China’s technology industry over the past two years. Volcanic Engine, the cloud arm of ByteDance, ranked second with a 20.4% share, followed by Baidu Cloud, Tencent Cloud, and Tianyi Cloud, the cloud business of China Telecom, in third through fifth place.
Alibaba’s lead reflects an aggressive strategy that began in early 2023, when the company’s e-commerce growth stalled and its leadership decided to bet heavily on AI. The company has since poured tens of billions of yuan into data centers and accelerators, and it has released a steady stream of open-weights models under the Qwen brand. That openness has made Qwen the default starting point for many Chinese developers, and much of that usage flows back to Alibaba’s cloud as paid computing capacity.
The business model is straightforward: give away the model, sell the compute. Omdia’s data suggests the approach is working. Alibaba’s share gain of more than two percentage points in the second half of 2025 came even as ByteDance, Tencent, and the state-backed carriers were all expanding capacity at record pace.
Volcanic Engine’s second-place finish is the other headline. ByteDance built the cloud service to support its Doubao chatbot and its recommendation systems, then opened it to outside customers. Its share of more than a fifth of the market makes it the fastest-rising player, a reminder of how quickly ByteDance’s parent, the maker of TikTok’s Chinese counterpart, has moved into enterprise technology.
The competitive pressure shows up in prices. Chinese cloud providers have cut AI computing prices repeatedly over the past year, and several rounds of cuts have squeezed margins across the industry. Alibaba’s finance chief said in the fall that the company expected AI-related revenue to keep growing faster than overall cloud revenue, even as price competition continued.
The state carriers complicate the picture. Tianyi Cloud and China Mobile’s cloud arm have won large government and state-enterprise contracts, where data-residency rules favor domestic providers. Those orders tend to be less profitable but provide a stable base, and Omdia’s ranking shows the carriers holding their positions behind the top two private players.
Analysts said the market structure now resembles a two-tier game. Alibaba and ByteDance compete for developers and commercial workloads, while the carriers absorb the public-sector demand. Baidu and Tencent, both investing heavily in their own models, are betting that their AI applications will pull customers into their clouds, a strategy that has yet to show up clearly in the market-share numbers.
The trajectory matters beyond China. Alibaba’s cloud business is one of the few Chinese technology franchises with meaningful international ambitions, and its AI growth has helped lift the company’s shares in Hong Kong over the past year. The Omdia numbers give investors a benchmark against which to judge the company’s quarterly disclosures, which report cloud revenue but not AI-specific splits.
For Alibaba, the report lands at a moment of confidence. The company’s model line, its data-center expansion, and its early bet on open weights have combined to make it the default supplier of AI computing to a large part of China’s developer community. Keeping that position will require matching ByteDance’s spending and defending prices at the same time.
The spending behind those numbers has been enormous. Alibaba said earlier this year that it planned to invest more than 380 billion yuan in cloud and AI infrastructure over the next three years, one of the largest capital commitments ever made by a Chinese technology company. ByteDance’s cloud arm has been spending at a similar pace, and Tencent has doubled down on its own models after a period of hesitation. The result is a supply build-out that has no precedent in China’s internet industry.
Omdia’s share figures measure revenue, not capacity, and the gap between the two explains the price war. With so much accelerator capacity coming online at once, providers are fighting for workloads, and the discounts have been steepest for inference, the category growing fastest as Chinese consumers and businesses adopt AI assistants. For customers, the competition has made AI computing strikingly cheap by global standards. For the providers, it has turned the market into a test of who can fund losses longest.
The industry’s next act, analysts said, will be decided by inference demand, the computing needed to run models rather than train them. China’s model prices have fallen so far that some providers are giving away basic usage, hoping to monetize the services built on top. In that game, the leader with the deepest pockets, Alibaba, starts with an advantage.
