On January 20, according to the Financial Times, ByteDance is aggressively entering the Chinese cloud market, seeking to use the company's technological progress in the field of AI to promote business diversification, no longer limited to the consumer applications that support its rise.


ByteDance competes with Alibaba and Tencent for the cloud market

According to ByteDance employees, customers and competitors,ByteDance has rapidly expanded its enterprise cloud product, Volcano Engine, in recent months by expanding its sales team and driving down prices to undercut rivals.These people said ByteDance is promoting products to enterprise customers that rely on its huge data reserves and computing infrastructure, such as customized AI agents built using its own models.

The strategy is roiling China's multibillion-dollar cloud computing industry, which has long been dominated by Alibaba, Tencent and Huawei.

Data from research firm IDC shows that Volcano Engine has become China's second-largest AI infrastructure and software provider, behind Alibaba. In the first half of 2025, ByteDance's revenue in China's AI cloud service market reached US$390 million, accounting for nearly 13%, second only to Alibaba, which accounted for 23%.

AI advantages

Although ByteDance has only about 3% of China's overall cloud market, analysts say it isThe field of AI services is gaining advantage, and AI services are the fastest growing segment in the cloud market.

"ByteDance's growth trajectory and its AI-centric strategy indicate that it may become one of the dominant players in the market as demand for AI accelerates," said Charlie Dai, vice president and chief analyst at research firm Forrester. "It uses its rich data resources and massive GPU infrastructure to develop AI tools for customers, while at the same time matching aggressive pricing strategies and deeply integrating with its consumer ecosystem."

ByteDance has outstanding achievements in the field of consumer technology. Its products include TikTok and Douyin, video editing application Jianying, and news aggregation platform Jinri Toutiao. According to financial data disclosed to investors by ByteDance, consumer product sales and advertising still account for the majority of the company's revenue. In the third quarter of 2025, ByteDance’s total revenue reached US$50 billion.


volcano engine

ByteDance’s previous attempts to enter the enterprise software field, including the launch of the Slack-like product “Feishu”, failed to expand this business segment. Now, ByteDance's AI-focused growth strategy could help fuel its potential future initial public offering, which investors have been anticipating for years.

ByteDance is actively promoting the commercialization of its AI capabilities through Volcano Engine. According to employees and potential customers, the company is currently focused on selling its flagship product HiAgent, a platform that can customize AI agents based on the needs of enterprise customers.

This strategy is supported by huge investment in computing power. ByteDance has become one of China's largest buyers of AI hardware and will become Nvidia's largest customer in China in 2024. The Financial Times previously reported that ByteDance has provided a budget of 85 billion yuan for the purchase of AI processors this year.

"Bytedance has strong software capabilities and sufficient hardware resources, and has the ability to seize market share," said Edison Lee, head of China technology industry analysis at Jefferies Group. "But it lacks deep industry expertise and experience in serving enterprise customers in various industries. At present, it is still catching up and competing for market share from Tencent and Huawei."

Huawei and Tencent shrink

Big Chinese tech companies are creating opportunities for ByteDance to further capture market share. Tencent has stated that it will prioritize using GPU resources for internal needs rather than expanding cloud services for external customers.

Huawei, meanwhile, has scaled back its AI cloud ambitions over the past year, focusing instead on selling its Ascend chips directly to customers. According to IDC data, both companies experienced a slight decline in their AI cloud market share in the first half of 2025.

Compared with companies such as DeepSeek and Alibaba, ByteDance's rise to become one of China's AI giants has received less international attention. These competitors have successfully launched freely accessible “open” models and published research on their training methods.

closed source model

ByteDance, by contrast, keeps some of its most advanced models as proprietary technology, meaning enterprises can only use them through its cloud business. Alibaba, as an active advocate of China's open source strategy, has also kept some leading models as "closed source" in recent months.

This strategy has prevented ByteDance’s progress in large language models from being widely publicized, because the performance of open source models is more likely to attract developers’ attention.

A member of ByteDance’s large language model team described the company’s approach as intentionally keeping a “low profile.” "We focus on training the best models for our products and customers, rather than participating in open source competitions," the member said.

As of press time, ByteDance has not commented on this.