Alibaba’s latest quarter showed how China’s biggest e-commerce and cloud services companies are trying to convert the AI boom into faster-growing revenue, even as the costs of expanding data and technology infrastructure continue to weigh on profits.
In its earnings report for the January-March period, the company said overall revenue rose 3% to 243 billion yuan, while its Cloud Intelligence Group—covering cloud computing and AI—accelerated growth to 38% year-over-year. The company reported that Cloud Intelligence Group revenue reached 41.6 billion yuan in the quarter.
Alibaba also highlighted a major profitability shift. The company reported an operating loss of 848 million yuan, a sharp decline from a 28.5 billion yuan operating gain in the same period last year, with the company citing rising expenses tied to growing technology investment.
Alibaba attributed the expense pressure to increased spending on technology as companies globally race to build infrastructure to support AI demand. The company, which is based in Hangzhou and has about 130,000 employees, previously pledged investments of at least 380 billion yuan over three years in cloud computing and AI infrastructure.
In an effort to push AI closer to everyday customer use, Alibaba said this week that it has fully connected its flagship Qwen AI app to its e-commerce platform Taobao. The company said the connection allows users to “browse, compare, place orders, and manage deliveries through natural conversation,” as it tries to drive demand on its main commerce platform.
Alibaba also said it launched its “agentic” AI tool Wukong in March as part of its efforts to expand commercial offerings. The company said it also raised prices for some AI services, which it framed as part of monetization progress.
During the earnings call, CEO Eddie Wu said in prepared remarks that “Alibaba’s AI has moved beyond the initial investment phase and progressed commercialization at scale.” Alibaba’s U.S.-traded shares rose more than 7% after the results announcement.
Outside the company, Jacob Cooke, CEO of Beijing-based consultancy WPIC Marketing + Technologies, said Alibaba should expect AI-related growth to accelerate further. In March, Alibaba also pledged a goal of surpassing $100 billion in annual AI and cloud revenue within the next five years.
Capital spending remains central to the near-term story. Chelsey Tam, an analyst at Morningstar, wrote in a recent research note that capital expenditure across Chinese AI companies is likely to stay elevated because the “investment phase is far from over,” adding that AI firms are increasingly shifting from user acquisition toward monetization.
The broader competitive backdrop includes Tencent, Alibaba’s AI rival. Tencent reported weaker-than-expected revenue for the January-March quarter, though its net profit rose 21%; some analysts said Tencent’s AI investments were also starting to return.