AI CLOUD
ByteDance isn’t just dancing anymore
ByteDance is making a serious move into China’s cloud computing market, using its AI capabilities to grow beyond the consumer apps that built the business.
The owner of TikTok has rapidly expanded Volcano Engine, its enterprise cloud platform, by scaling its sales team and cutting prices to compete with established players.
The company is pitching businesses on AI services built on its data and computing infrastructure, including custom AI agents created using its own models.
This strategy is starting to disrupt a market long dominated by Alibaba, Tencent, and Huawei.
Volcano Engine is now China’s second-largest provider of AI infrastructure and software.
ByteDance took nearly 13% of AI cloud services revenue in the first half of 2025, around $390m, behind only Alibaba.
Its overall cloud market share remains small, but analysts say it is gaining ground fastest in AI services, the sector’s fastest-growing area.
Consumer apps still generate most of ByteDance’s revenue, which reached $50bn in Q3 2025.
Earlier attempts to grow enterprise software lines failed to scale, but the company’s AI strategy is now seen as a more credible path to long-term diversification and a potential future IPO.
The expansion is driven by Volcano Engine’s HiAgent product, which builds custom AI agents for businesses, and by heavy investment in computing power.
ByteDance is one of China’s biggest buyers of AI hardware and has been a major Nvidia customer, with large-scale spending planned for AI processors.
Here’s what you should know:
ByteDance is using AI and aggressive pricing to push into enterprise cloud services
Volcano Engine has become a major AI infrastructure provider despite a small overall cloud share
Heavy investment in GPUs and proprietary models is driving its enterprise strategy
Follow the GPUs
Rivals’ shifts are also creating space.
Tencent has redirected GPU capacity to internal use, while Huawei has reduced its AI cloud focus to prioritise chip sales, slightly weakening both in the AI cloud segment.
Unlike competitors promoting open AI models, ByteDance has kept many of its most advanced systems closed and only accessible through its cloud platform.
This has limited public visibility of its AI progress, but insiders say the focus is on product performance rather than public research exposure.
The AI wars continue - China is quietly simmering - MV