Alibaba's cloud division has initiated job cuts, potentially resulting in a workforce reduction of approximately 7%, according to a report from Bloomberg News. 

As the unit gears up for a spinoff in the coming year, the restructuring process has commenced to streamline the once rapidly expanding business. The possibility of an initial public offering (IPO) is also being considered.

According to Bloomberg, preliminary estimates value Alibaba Cloud at more than $30 billion, making it a top contender for an IPO due to its well-established business model.

During an analyst briefing, CEO Daniel Zhang expressed his belief that the cloud unit could eventually surpass Alibaba in terms of size. In 2022, the business segment achieved nearly $12 billion in sales.

According to analysts from Jefferies, the cloud business is distinct and operates independently from other consumer-facing businesses.

The ongoing restructuring process is expected to drive long-term value for shareholders, according to Susquehanna analysts. They mentioned that each company involved can enhance its operational metrics and concentrate on specific business and financing requirements.