Alibaba reported stronger-than-expected quarterly revenue on Tuesday, supported by rising demand for its one-hour delivery services and continued momentum in its cloud business. These rapid-delivery investments helped attract more users to the company’s shopping platforms, boosting overall performance.
U.S.-listed Alibaba shares rose 2% at the open during volatile early trading.
For the second quarter, Alibaba posted revenue of 247.80 billion yuan ($35 billion), surpassing analyst expectations of 242.65 billion yuan, according to LSEG data. However, adjusted profit of 4.36 yuan per American Depository Share fell short of forecasts of 5.49 yuan.
Alibaba’s results come amid an expensive battle in China’s fast-growing “instant retail” or “quick commerce” sector, where major competitors are spending aggressively on one-hour delivery to secure market share. At the same time, the company has been heavily investing in artificial intelligence, strengthening its position as a leading AI player in China.
Earlier this year, Alibaba announced plans to invest 380 billion yuan over the next three years in AI and cloud technology. CEO Eddie Wu noted on Tuesday that additional investment is likely, citing supply chain constraints and rising customer demand. He emphasized that the earlier figure “might be on the small side” given the pace of AI adoption.
Despite a 53% drop in net profit to 20.61 billion yuan, largely due to these investments, results still exceeded analyst expectations. Analysts say these spending commitments in consumption and AI could create significant long-term advantages, even as they pressure short-term margins.
China’s instant retail sector has also been hit by a fierce price war, driven by heavy discounting from Alibaba, JD.com, and Meituan. The intense competition has raised concerns about profitability, with Nomura estimating more than $4 billion in industry-wide cash burn during the second quarter alone.
Alibaba remains better positioned than many rivals due to its diversified business structure and strong cash reserves. The company sees major long-term potential in instant retail, forecasting that the segment could contribute 1 trillion yuan in annualized gross merchandise value within three years. Alibaba said recent improvements in its instant retail operations have sharply reduced costs, with the cost per order cut in half since the summer.
The extended Singles’ Day shopping season also saw increased subsidies as retailers tried to drive demand. Sales across major platforms reached 1.70 trillion yuan, up from 1.44 trillion yuan a year earlier, according to Syntun.
Alibaba is now pushing deeper into the consumer AI market, an area where it has historically trailed due to its enterprise-focused strategy. The company recently launched a free app based on the latest version of its Qwen large language model, surpassing 10 million downloads in its first week. However, it still lags behind ByteDance’s Doubao, which has 150 million users.
This shift comes as China’s domestic AI market faces a growing price war, fueled by DeepSeek’s low-cost development strategy, which has pressured competitors to lower prices and accelerate innovation.
