Alibaba reported a strong performance in its cloud computing division, with revenue increasing by 34% year-on-year during its fiscal second quarter. This figure surpassed market expectations, largely fuelled by investments in artificial intelligence. The Chinese tech giant’s New York-listed shares saw a boost in premarket trade following the announcement. Alibaba is a multinational technology company specialising in e-commerce, retail, Internet, and technology. The company provides consumer-to-consumer, business-to-consumer, and business-to-business sales services via web portals.
CEO Eddie Wu indicated that Alibaba may increase spending on AI beyond initial projections if demand remains robust. This comes as the company’s Qwen app, an AI model similar to OpenAI’s ChatGPT, exceeded 10 million downloads in its first week. Despite an overall drop in profitability, investors are focusing on the accelerated growth in Alibaba’s cloud computing and core China e-commerce divisions.
Alibaba’s cloud computing revenue reached 39.8 billion yuan, exceeding the expected 37.9 billion yuan. This growth rate surpassed the 26% increase recorded in the previous quarter. The company attributed this success to its strategic investments in AI. Adjusted EBITA, a key profitability measure, experienced a 78% year-on-year decrease to 9.1 billion yuan, which Alibaba attributed to investments in quick commerce.
Despite the profitability dip, revenue from China e-commerce rose by 16% year-on-year to 132.6 billion yuan, with quick commerce revenue surging 60% year-on-year. Alibaba is targeting 1 trillion yuan of gross merchandise value within three years for its quick commerce initiative. Wu also addressed concerns about an AI bubble, suggesting that AI resources will remain undersupplied relative to demand for the next three years.
