Alibaba Group Holding Ltd.’s former chief Daniel Zhang has decided to quit just months after agreeing to lead its cloud division, introducing another layer of uncertainty to China’s largest e-commerce company just as it’s navigating a complicated breakup.

Zhang decided to step down as head of Alibaba’s cloud division, the company said in an internal memo seen by Bloomberg News. The executive assumed that post — regarded as pivotal within the organization — after ceding his dual roles of chief executive officer and chairman to Eddie Wu and Joseph Tsai, respectively. Wu and Tsai, close confidantes of Alibaba co-founder Jack Ma, formally took up their positions on Sunday.

Alibaba’s shares fell as much as 3.5%, their biggest fall in three weeks, as investors pondered the ramifications for the company’s ongoing restructuring and its biggest business after e-commerce.

Tsai and Wu are taking over from Zhang just as the Hangzhou-based company navigates a complicated overhaul that will break the Chinese internet leader into several standalone companies in sectors from cloud services to logistics and online shopping. The pair now shoulder the responsibility for turning around a $230 billion corporation that’s struggled to regain its footing since Beijing’s regulatory assault against the internet sector in 2021.

Zhang’s departure ends a storied eight-year tenure, during which Alibaba became China’s largest company and ventured into new arenas such as physical retail, which grew into one of the company’s fastest growing businesses. An Alibaba representative confirmed Zhang’s departure. The former CEO will now steer a $1 billion technology investment fund on Alibaba’s behalf.

“The cloud business leadership change announcement may come as a surprise to the market,” Goldman Sachs analysts including Ronald Keung wrote. “Investors will be focused on any further clarity/updates from the new management team on Alibaba Group’s latest organizational strategies and capital market plans of its respective subsidiaries.”

His exit coincides with signs the company’s overhaul is proceeding less smoothly than expected. Alibaba is putting a Hong Kong initial public offering of its Freshippo grocery chain on hold for now because it couldn’t get the valuation sought, Bloomberg News reported. The cloud division Zhang oversaw is separately seeking to raise as much as 20 billion yuan ($2.7 billion), including from Chinese state enterprises, ahead of its own debut.

Some analysts had expected Zhang to stay and steer the $11 billion cloud business, which provides internet services to companies globally and spearheads research into areas such as artificial intelligence.

His successors are business heavyweights credited with overseeing the technology and strategy that underpinned China’s erstwhile most valuable corporation, co-founded by Ma, Tsai and Wu in 1999 at the dawn of China’s internet industry. But around 2020, Alibaba found itself at the heart of Xi Jinping’s tech crackdown on the nation’s most powerful private firms, which obliterated growth across swaths of the industry and nixed once-aggressive expansion plans.

Apart from regulatory uncertainty, Alibaba, a proxy for Chinese consumption, has struggled with geopolitics and a weakening domestic economy. It’s also facing stiff competition from other e-commerce platforms such as PDD Holdings Inc. as well as short videos like those from ByteDance Ltd., which increasingly are pushing into online commerce too.

The new leadership’s task is to figure out how to follow through on a landmark restructuring aimed at galvanizing Alibaba’s separate businesses. With the overhaul, Alibaba has said it wants to operate as a true investment holding company, where individual units can seek funding and list separately.

Yale alumnus Tsai, a deal-maker well-liked among investors, is likely to play a significant role in handling markets and Alibaba’s most prominent backers. A former lacrosse athlete arguably best known in America as the owner of the Brooklyn Nets, Tsai understands the business intimately: he was right beside Ma at Alibaba’s inception in a Hangzhou lakeside apartment.

Wu, who was similarly with Ma from the very beginning, is a lesser-known quantity. The former computer science major is credited with helping develop the company’s ad platform and the PayPal-like Alipay, now part of the Ma-backed Ant Group Co. He went on to establish a venture capital firm that manages about a 10 billion yuan ($1.4 billion) portfolio encompassing autonomous driving and software.

With Zhang’s departure, Wu will serve as acting chairman and CEO of the cloud business.

—With assistance from Jeanny Yu.