Alibaba said on Friday that artificial intelligence is now central to the growth of its cloud computing business, as the Chinese tech giant reported strong quarterly results in the segment even while overall revenue fell short of estimates.
U.S.-listed Alibaba shares rose 8% at the market open.
Cloud revenue surged 26% to 33.40 billion yuan ($4.67 billion), beating expectations for an 18.4% increase. However, weaker-than-expected growth in Alibaba’s core e-commerce unit offset this gain, leaving total revenue 2% below forecasts.
Alibaba has become one of the most aggressive investors in China’s AI sector, rolling out near-weekly product upgrades. Over the past year, the company has invested more than 100 billion yuan in AI infrastructure and product R&D, Group CEO Eddie Wu told analysts.
“Our investments in AI are starting to deliver tangible results,” Wu said. “We see a clear path for AI to fuel Alibaba’s long-term growth.”
Total revenue for the quarter ending June 30 reached 247.65 billion yuan, missing the 252.92 billion yuan consensus estimate compiled by LSEG.
This was also the first quarter Alibaba disclosed revenue from its China E-commerce Group, which includes Taobao, Tmall, Ele.me, Fliggy, and its new instant commerce business. The group grew 10% year-on-year.
Operating income fell 3% from a year earlier, while adjusted earnings before interest, tax, and amortisation (EBITA) dropped 14%, largely due to heavy investments in quick commerce.
Alibaba faces stiff competition from rivals PDD Holdings, JD.com, and Meituan, who are locked in a subsidy-driven battle for dominance in China’s fast-growing instant retail sector. Analysts warn that rising investment in user acquisition and technology is weighing on profitability across the industry.
Wu said Alibaba sees quick commerce as a key driver of future growth, with the potential to contribute 1 trillion yuan in annualised incremental gross merchandise volume (GMV) over the next three years, tapping into a 30 trillion yuan addressable market.
International commerce revenue rose 19%, supported by strong growth in Europe and the Middle East. Meanwhile, Alibaba also announced the repurchase of shares in its logistics arm Cainiao from Fosun International for $349.8 million.
