Key Takeaways
- The stock rose 7.5 percent despite an 84 percent profit decline.
- The cloud revenue grew 38% driven by AI demand.
- The AI revenue reached 9 billion yuan during the quarter.
- The e-commerce EBITA declined 40 percent due to investments.
- The quick commerce revenue increased 57 percent year on year.
Alibaba Group reported a sharp decline in core profitability for the March quarter while signaling continued expansion in artificial intelligence and cloud computing. Despite weaker earnings, Alibaba shares rise as investors responded to long-term growth expectations tied to AI investments.
AI Investments Drive Growth Across Cloud And Services
The company reported adjusted EBITA of 5.1 billion yuan, marking an 84 percent decline from the previous year. This decline reflects continued spending on technology, infrastructure, and e-commerce operations. However, revenue growth in key segments indicates increasing demand for AI services.
Alibaba’s cloud computing division recorded revenue of 41.6 billion yuan, representing a 38 percent increase compared to the same period last year. The segment also delivered a 57 percent rise in adjusted EBITA, supported by strong adoption of AI services.
AI revenue reached 9 billion yuan during the quarter. The company expects annual recurring revenue from AI models and applications to exceed 10 billion yuan in the June quarter and reach 30 billion yuan by the end of the year. These projections highlight the scale of demand for AI infrastructure and services as Alibaba shares rise on stronger AI growth expectations.
The company continues to invest in data centers, semiconductors, and its Qwen family of AI models. These investments support both internal operations and external customer offerings through its cloud platform.
E-Commerce Margins Decline Amid Expansion Strategy
Alibaba’s core e-commerce segment experienced margin pressure as investments increased. Adjusted EBITA for the China e-commerce division declined 40 percent year on year. At the same time, customer management revenue grew by 1 percent, indicating stable core activity.
The company is expanding its quick commerce services, which focus on rapid delivery. Revenue from this segment increased 57 percent compared to the previous year. Overall, China e-commerce revenue rose 6 percent during the quarter, helping support investor confidence as Alibaba shares rise despite pressure on short-term profitability.
These investments are contributing to higher operating costs, affecting profitability in the near term. However, they are also driving growth in emerging service areas that are gaining traction among users.
Alibaba indicated that future spending on computing infrastructure could exceed its previous 380 billion yuan projection over three years. Some of this demand may be met through operating expenses rather than direct capital investment.
The company also highlighted its development of in-house AI chips. These chips are integrated into its cloud services, enabling training and inference capabilities for customers. This internal supply of computing resources supports scalability and service delivery.
Alibaba is also integrating AI into its consumer platforms. The company plans to introduce an AI-powered shopping assistant within its Taobao platform, expanding the use of AI across its ecosystem.
The overall performance reflects a transition phase where increased investment is impacting short-term profitability while supporting growth in AI and cloud-driven business segments. Investors remain focused on long-term expansion plans as Alibaba shares rise on expectations of stronger AI-related revenue growth.
