Alibaba Revenue Misses Estimates Despite AI Monetization Efforts
Alibaba Group Holding Ltd. reported weaker-than-expected sales, stoking concerns about its ability to convert substantial AI investments into a major growth driver.
Revenue rose 3% to 243.4 billion yuan ($35.8 billion), while analysts on average looked for 246.5 billion yuan. Net income roughly doubled to 25.5 billion yuan, thanks in part to equity investment gains.
The Hangzhou-based company raised prices for its AI and cloud services, pivoted to focus on proprietary models and restructured its teams this year to better profit from its AI capabilities. Chief Executive Officer Eddie Wu has said the company aims to quintuple cloud and AI revenue to $100 billion annually in five years. But its performance has been affected by competition with Meituan and JD.com Inc. over the past year.
Like their US peers, China’s top AI players including Alibaba are facing increasing pressure from investors to translate their AI expenditure into lucrative returns. Among major Chinese tech firms, Alibaba is one of the biggest spenders with a pledge to shell out some $53 billion on AI over a three-year span, while its cloud service unit has become its fastest-growing business.
As part of the Hangzhou company’s AI commercialization efforts, Wu helped set up and lead a new business group — Alibaba Token Hub — to streamline operations by bringing most research functions as well as consumer and enterprise products under one umbrella, a move that has earned positive reactions.
“We expect Alicloud growth momentum to remain intact, supported by a robust surge in token usage,” Morgan Stanley analysts led by Gary Yu said in a pre-earnings note.
The company now has an AI app integrated with shopping, navigation and payment tools, and offers an agentic tool dubbed WuKong targeting enterprise clients. It’s connected its Qwen AI app to its Taobao platform to drive e-commerce growth and raised its cloud service prices earlier this year, including hiking the cost of AI computing and storage products by as much as 34%.
Alibaba’s ambition goes beyond AI applications. Wu has said his company is committed to building all-stack AI capabilities including hardware. Alibaba is now planning to list its chipmaking unit T-Head to tap strong investor interest in Chinese alternatives to Nvidia Corp., after its semiconductor arm won mobile operator China Unicom as an external customer.
