By Keerthi Ramesh
ByteDance, the Chinese technology company best known globally as the owner of TikTok, is quietly mounting one of its most ambitious challenges yet by taking on Alibaba in China’s fast-growing cloud and artificial intelligence (AI) market.
The Beijing-based company has significantly expanded Volcano Engine, its enterprise cloud business, leaning heavily on its AI capabilities and vast computing resources. Industry analysts and company insiders say ByteDance has increased its sales force and cut prices in recent months, positioning itself as a serious contender in a sector long dominated by Alibaba, along with Tencent and Huawei.
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At the heart of ByteDance’s strategy is artificial intelligence tailored for corporate clients. Through Volcano Engine, the company is pitching customized AI agents built on its proprietary models, offering businesses tools developed from the same data infrastructure that powers apps such as TikTok, Douyin and CapCut.
The approach appears to be gaining traction. Research firm IDC estimates ByteDance now controls nearly 13% of China’s AI cloud services revenue, making it the country’s second-largest provider in that segment behind Alibaba. While ByteDance’s share of the broader cloud market remains modest at about 3%, analysts say its strength in AI, the fastest-growing slice of the industry, gives it a strategic edge.
“ByteDance’s growth trajectory suggests it could become a dominant player as AI demand accelerates,” said Charlie Dai, a vice president at Forrester. He cited the company’s access to massive datasets, large-scale GPU infrastructure and aggressive pricing as key advantages.
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ByteDance’s cloud ambitions come as it looks to diversify beyond consumer apps, which still generate the bulk of its revenue. The company reported about $50 billion in revenue in the third quarter of 2025, largely from advertising and digital services tied to its popular platforms. Previous attempts to build enterprise software businesses, including its workplace collaboration tool Lark, failed to gain lasting momentum.
This time, heavy investment is backing the effort. ByteDance is among China’s largest buyers of AI hardware and was Nvidia’s biggest customer in the country in 2024. The company has budgeted tens of billions of yuan for AI processors this year, underscoring how central cloud computing has become to its long-term plans.
Shifts among competitors may also be creating an opening. Tencent has said it is prioritizing internal AI needs over expanding cloud services, while Huawei has scaled back some cloud ambitions to focus on selling its own chips. Both moves have slightly reduced their AI cloud market shares, according to IDC.
Unlike rivals that promote open-source AI models, ByteDance has largely kept its most advanced systems closed, making them accessible only through its cloud platform. The company has remained relatively quiet about its technical progress, a strategy one employee described as deliberately “low key.” The Financial Times reported that ByteDance declined to comment on this matter.