The Beijing-based company has rapidly expanded Volcano Engine, its enterprise cloud business, by growing its sales force and offering lower prices than competitors in recent months, according to employees, customers and rivals.
ByteDance has been pitching corporate clients on AI-powered products that draw on its vast data and computing infrastructure, including bespoke AI agents built on its proprietary models. The approach is shaking up a sector long dominated by Alibaba, Tencent and Huawei.
AI Cloud: ByteDance’s Fastest-Growing Advantage
Volcano Engine is now China’s second-largest AI infrastructure and software provider, behind Alibaba, IDC data shows. ByteDance accounted for nearly 13% of China’s AI cloud services revenue, worth about $390 million in the first half of 2025, while Alibaba held 23%.
Although ByteDance’s share of the overall cloud market is around 3%, analysts say it is rapidly gaining ground in AI services — the market’s fastest-growing segment.
“ByteDance’s growth trajectory and AI-led strategy suggest it could become one of the dominant players as demand for AI accelerates,” said Charlie Dai, vice-president and principal analyst at Forrester.
“It has leveraged its wealth of data and large GPU infrastructure to develop AI tools for customers, combined with aggressive pricing and deep integration with its consumer ecosystem.”
Consumer Success, Enterprise Ambitions
ByteDance is best known for consumer products like TikTok, Douyin, CapCut and Toutiao. These platforms still generate the bulk of its revenue, which reached $50 billion in Q3 2025, according to investor figures.
Past enterprise efforts, such as the Slack-like app Lark, failed to become major revenue drivers. Now, ByteDance’s AI cloud strategy could strengthen its case for a long-awaited initial public offering, something investors have been pushing for years.
HiAgent and Heavy Hardware Spending
Volcano Engine’s growth is driven by its flagship product HiAgent, through which ByteDance builds custom AI agents for corporate clients, according to employees and prospective customers.
This push is backed by heavy investment in computing power. ByteDance is one of China’s largest buyers of AI hardware and was Nvidia’s biggest customer in China in 2024. The company is reportedly budgeting Rmb85 billion for AI processors this year, with plans to buy large quantities of Nvidia’s H200 chips if approved by Chinese regulators.
“ByteDance has strong software capabilities and sufficient hardware resources to gain market share,” said Edison Lee, head of China tech analysis at Jefferies.
“But it lacks deep industry expertise and experience serving enterprise customers in many different industries. It is playing catch-up and winning share from Tencent and Huawei.”
Opportunity as Rivals Retreat
ByteDance’s cloud momentum is aided by competitors’ strategic shifts. Tencent has prioritized internal GPU use rather than expanding cloud services, while Huawei has scaled back its AI cloud ambitions to focus on selling its Ascend chips directly.
Both companies saw their AI cloud market shares dip slightly in the first half of 2025, IDC data shows.
A Quiet AI Strategy
Despite becoming a major AI player in China, ByteDance has received less international attention than rivals such as DeepSeek and Alibaba. Those companies have released “open” models for public access and research, while ByteDance has kept its most advanced models proprietary, offering access only through Volcano Engine.
Alibaba, once a strong proponent of open-source models, has also kept some leading models closed in recent months.
ByteDance’s low-profile approach means its AI advances are less publicly scrutinized. One member of its LLM team said the company prefers to stay “low key,” focusing on product performance rather than open-source competition.