Chinese tech majors Huawei Technologies Co and Tencent Holdings Ltd (OTC: TCEHY) have lost cloud services market share in the third quarter amid formidable competition from market leader Alibaba Group Holding Ltd (NYSE: BABA) and foreign players, SCMP reports.

• China's digital transformation offered the cloud infrastructure services market a significant boost, with Q3 revenues growing 43% year on year to $7.2 billion.

• However, the growth rate was the slowest since Q2 of 2019 and well below the rapid pace of 2020 as the pandemic fueled cloud spending migrated to online amid lockdowns.

• The cloud units of Alibaba, Huawei, Tencent, and Baidu Inc (NASDAQ: BIDU) held a combined 80% of the China market in Q3.

• However, the second most significant player Huawei Cloud's market share, contracted 230 bps to 17% Q/Q. The third-largest player Tencent Cloud's market share declined to 220 bps to 16.6% Q/Q.

• Alibaba Cloud's market share expanded 450 bps to 38.3%. Baidu AI, Cloud's market share, expanded 40 bps to 8.2%.

• Baidu grew 64.7% in Q3, thanks to its more significant customer base across different sectors and industrial internet projects.

• Alibaba grew 33.3%, driven by the internet, financial services, and retail sectors. Both Huawei and Tencent grew ~50%.

• The demand for cloud computing accelerated after the pandemic forced activities like work, shopping, and entertainment to migrate online. The Chinese government also introduced its "Digital China" initiative to drive economic growth.

• Domestic cloud players face increasing competition from international rivals seeking to boost their presence in the Chinese market.

• Earlier this year, Microsoft Corp (NASDAQ: MSFT) Azure announced that it would double its cloud capacity with local partner 21Vianet.

• "The uptick in interest from the US-based hyper scalers mostly comes from the fact that mainland China is the world's second-largest market," said Canalys analyst Blake Murray. "This coupled with its status as one of the fastest-growing markets in the world due to its rapidly digitalizing economy," he said.

• Price Action: BABA shares traded lower by 1.11% at $123.67 premarket on the last check Monday.

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