Alibaba Group Holding Ltd's cloud division is implementing a series of workforce reductions, potentially leading to a 7 percent cut in its employee count, according to a report by Bloomberg.

This move forms part of a comprehensive restructuring strategy, designed to position the division, which was once known for its rapid growth, for an independent spinoff and eventual initial public offering (IPO), the report highlighted.

The largest cloud service provider in China has recently commenced the process of notifying impacted employees, as per individuals familiar with the matter, the report added.

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The company is providing the affected employees with the option of either accepting severance packages or transferring to other divisions within the Alibaba conglomerate. However, it should be noted that the transfer opportunities are not guaranteed for all employees.

The primary objective of these measures is to streamline the cloud service business, as Alibaba intends to establish it as a standalone entity within the span of a year.

As part of a six-way split of the parent company, Alibaba Cloud is poised to become one of the major entities. Alongside logistic divisions like Cainiao, Alibaba Cloud will undergo independent fundraising efforts and explore potential listings.

While specific staffing details for individual units are not disclosed by the group, it is worth noting that as of March, the parent company employed over 235,000 individuals.

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Last week, Chief Executive Officer Daniel Zhang unveiled the details of the historic shakeup within Alibaba.

Notably, Zhang disclosed a plan to completely divest control of Alibaba Cloud, a business that was once thriving and held the potential to revolutionise the company in a manner similar to how Amazon Web Services transformed Amazon.com Inc.

The decision to fully relinquish control of Alibaba Cloud demonstrates the company's strategic focus on reshaping its operations and capitalising on new growth opportunities.

According to certain analysts, the business known as Alibaba Cloud has been estimated to be valued at more than $30 billion, Bloomberg reported.

This valuation highlights the company's potential and its position as a significant beneficiary of the surge in demand for cloud resources, particularly for training advanced AI models in the post-ChatGPT era.

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(Edited by : Shoma Bhattacharjee)