Alibaba reported stronger-than-expected quarterly revenue on Tuesday, driven by rising demand for one-hour delivery services and solid growth in its cloud division. The performance helped attract more users to its shopping platforms and reinforced the company’s momentum in fast retail and artificial intelligence.
U.S.-listed Alibaba shares opened 2% higher in volatile early trading.
For the second quarter, the company posted revenue of 247.80 billion yuan ($35 billion), surpassing expectations of 242.65 billion yuan, according to LSEG data. However, adjusted profit came in at 4.36 yuan per ADS, below forecasts of 5.49 yuan.
Heavy investment in instant retail and AI
Alibaba’s results reflect the intense competition in China’s expanding instant retail or quick commerce sector, where major platforms are investing heavily in one-hour delivery to win market share.
At the same time, the company has been pouring resources into artificial intelligence, positioning itself as one of China’s leading AI players.
In February, Alibaba announced plans to spend 380 billion yuan over three years on AI and cloud infrastructure. However, CEO Eddie Wu said on Tuesday that additional investment may be required because of supply chain constraints and rising customer demand.
“We will be investing in AI infrastructure aggressively… the 380 billion yuan investment we previously announced may be on the small side,” Wu told analysts.
Alibaba’s net profit dropped 53% to 20.61 billion yuan, a decline linked to its heavy spending strategy, although the figure still beat analyst expectations.
CFRA analyst Angelo Zino said these investments in consumption and AI will likely strengthen Alibaba’s long-term competitive position despite short-term pressure on margins.
Instant retail price war impacts margins
China’s instant retail market has been hit by aggressive discounting and subsidies from Alibaba, JD.com and Meituan. This price war has fueled concerns about profitability and led to substantial cash burn—estimated by Nomura analysts to exceed $4 billion industry-wide in the second quarter alone.
Alibaba, however, is better positioned than its rivals due to its diversified business and large cash reserves. The company expects substantial long-term growth, projecting that instant retail could add 1 trillion yuan in annualized GMV within the next three years.
The firm said unit economics are improving, with cost per order cut in half since the summer.
Singles’ Day drives major discounts
This year’s Singles’ Day sales period—running from early October to November 11, the longest on record—also featured heavy subsidies and discounts as retailers attempted to stimulate demand.
Total sales across major platforms reached 1.70 trillion yuan, up from 1.44 trillion yuan last year, according to Syntun.
Push into consumer AI intensifies
Alibaba has also accelerated efforts to expand in consumer-facing AI, an area where it has trailed competitors due to its stronger focus on enterprise clients.
The company recently launched a free AI app built on its newest Qwen large language model. The app surpassed 10 million downloads in its first week, although it still lags ByteDance’s Doubao, which has 150 million users.
Alibaba’s move comes as China’s domestic AI market enters a fierce price war, led by DeepSeek’s low-cost computing strategy—a shift that has forced competitors to rapidly cut prices.
