Strong cloud momentum lifts investor sentiment
Alibaba shares rose more than 4 percent in premarket trading on Tuesday as markets shifted their attention away from the group’s profit pressures and toward the rapid expansion of its cloud and artificial intelligence businesses. The company reported a 5 percent increase in total revenue to 247.8 billion yuan, while its cloud division delivered another quarter of accelerating performance.
Cloud revenue jumped 34 percent year over year to 39.8 billion yuan, outpacing expectations and improving on the previous quarter’s 26 percent growth. Alibaba said AI investments were directly fueling this momentum, with AI-related products recording triple digit growth for nine consecutive quarters.
AI demand overwhelms capacity and may drive higher capex
CEO Eddie Wu told analysts that demand for Alibaba’s AI models continues to outrun the company’s ability to deploy new servers. Over the past four quarters, Alibaba has committed around 120 billion yuan to AI and cloud infrastructure as part of its multi-year plan to enhance computing power.
Wu indicated that the previously announced 380 billion yuan capital expenditure target could soon be revised upward if customers continue to scale their AI workloads. He said the company “wouldn’t rule out” increasing this figure given the tight supply chains in data centers, memory chips and advanced semiconductors. GPUs, he added, are operating at full capacity — including units that are already several years old.
Despite industry debate over overheating valuations, Wu pushed back on fears of an AI bubble, arguing that supply constraints will keep resources scarce and demand high for at least the next three years.
New AI products gain momentum
Alibaba has emerged as one of China’s most prominent AI players, supported by the rapid adoption of its Qwen language models. The company said its newly launched Qwen app surpassed 10 million downloads in its first week, reflecting strong consumer interest in ChatGPT-style products built on its proprietary AI systems.
Profitability within the cloud business also improved, with EBITA rising 35 percent to 3.6 billion yuan.
Quick commerce weighs on margins but strengthens user activity
While cloud performance was strong, Alibaba’s broader earnings were pressured by heavy investment in instant delivery services. Group adjusted EBITA fell 78 percent to 9.1 billion yuan, reflecting the cost of building out the company’s fast-growing quick commerce segment.
Even with the drag on earnings, investors appeared encouraged by the rebound in core China e-commerce operations. Revenue from Taobao, Tmall and the quick commerce business rose 16 percent year over year to 132.6 billion yuan, a faster pace than the previous quarter. Quick commerce alone surged 60 percent, up sharply from 12 percent growth in the prior period.
Jiang Fan, who oversees Alibaba’s e-commerce division, called quick commerce a “strategic pillar” and said the group aims to reach 1 trillion yuan in gross merchandise value within three years as the segment continues to scale.
