Alibaba to ramp up AI, cloud computing investments as quarterly profit surges 239%
By ltcinsuranceshopper
February 21, 2025
Chinese e-commerce giant Alibaba Group Holding saw profit surge 239 per cent cent in the December quarter to beat analysts’ estimates, as the company’s cloud computing services unit posted strong growth.
“This quarter’s results demonstrated substantial progress in our ‘user first, AI-driven’ strategies and the re-accelerated growth of our core businesses,” said Eddie Wu Yongming, chief executive of Alibaba, which owns the South China Morning Post.
In a conference call with analysts, Wu said Alibaba plans to “aggressively invest” in artificial intelligence (AI) and cloud computing infrastructure over the next three years, which is expected to exceed what the group has spent over the past decade in building its capabilities related to these technologies.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
“We are excited by the business opportunities being unlocked by this new technology cycle,” he said.
Alibaba’s shares in New York were up 11 per cent in pre-market trading after the company reported its latest financial results.
The Hangzhou-based tech conglomerate on Thursday reported that profit reached 48.9 billion yuan (US$6.7 billion) during the quarter, from 14.4 billion yuan a year ago, primarily on the back of “the increase in income from operations, mark-to-market changes from our equity investments, and the increase in share of results of equity method investees”, Alibaba said.
That was better than the 37.7 billion yuan quarterly profit expected by analysts surveyed by Bloomberg.
Total revenue rose 8 per cent to 280.2 billion yuan in the three months ended December 31, compared with the consensus estimate of 277.4 billion yuan from a Bloomberg survey of analysts. The company has maintained single-digit revenue growth for the sixth consecutive quarter.
Meanwhile, the company’s adjusted EBITA (earnings before interest, taxes and amortisation) – a measure under non-generally accepted accounting principles – rose 4 per cent year on year to 54.9 billion yuan, beating the consensus estimate of 53.6 billion yuan.
A woman walks past Alibaba Group Holding’s offices in Beijing on February 14, 2025. Photo: AFP alt=A woman walks past Alibaba Group Holding’s offices in Beijing on February 14, 2025. Photo: AFP>
Alibaba’s Hong Kong-listed shares, meanwhile, slid 2.6 per cent to close at HK$120.90, retreating from a three-year high before its earnings report. The firm added more than US$110 billion to its market value amid the euphoria surrounding Chinese start-upDeepSeek‘s recent AI breakthrough.
“Looking ahead, revenue growth at Cloud Intelligence Group driven by AI will continue to accelerate,” Wu said. “We will continue to execute against our strategic priorities in e-commerce and cloud computing, including further investment to drive long-term growth.”
The latest quarterly results reflect Alibaba’s efforts to sharpen the focus of its sprawling business empire towards e-commerce and AI, leveraging its status as China’s largest cloud services provider.
Cloud computing services enable companies to buy, sell, lease or distribute a range of software and other digital resources as an on-demand service over the internet, just like electricity from a power grid. These resources are managed inside data centres.
Revenue from the Cloud Intelligence Group, one of Alibaba’s key growth pillars, rose 13 per cent to 31.7 billion yuan, helped by the strong AI-related product revenue which achieved triple-digit growth for the sixth consecutive quarter.
Wu pointed out that Alibaba will soon release a deep-reasoning AI model built on its Qwen 2.5-Max model, in an apparent bid to challenge DeepSeek’s R1 model, while doubling down on research and development (R&D).
“AI foundation models are pivotal to transforming industry productivity.” he said. “We will substantially increase R&D investment in AI foundation models to maintain our technological leadership and drive the development of AI-native applications.”
Alibaba entered into a partnership with US consumer electronics giant Apple to develop AI features for iPhones in China on the strength of the firm’s Qwen family of AI models, according to a Post report last week, which cited people familiar with the matter.
Apple has reportedly picked Alibaba Group Holding, backed by its Qwen family of artificial intelligence models, as its China partner to bring AI features to iPhones on the mainland. Photo: Shutterstock alt=Apple has reportedly picked Alibaba Group Holding, backed by its Qwen family of artificial intelligence models, as its China partner to bring AI features to iPhones on the mainland. Photo: Shutterstock>
Wu said Alibaba’s primary focus is to develop artificial general intelligence (AGI), which he defines as the point when AI is able to achieve 80 per cent of human capabilities.
He expects AGI to have a tremendous impact on reshaping industries around the world, potentially accounting for half of global gross domestic product in the long run. That would justify Alibaba’s increased AI and cloud computing investments.
Taobao and Tmall Group, the domestic e-commerce unit of Alibaba, saw revenue increase 5 per cent to 136.1 billion yuan, driven by online gross merchandise volume growth and year-on-year improvement in so-called take-up rates.
Customer management revenue, a key measure of the unit’s monetisation drive, saw 9 per cent growth in the quarter from the same period last year.
Alibaba International Digital Commerce Group, meanwhile, pulled off a 32 per cent gain in the quarter to achieve sales of 37.8 billion yuan, primarily driven by the strong performance of its cross-border business.
Last November, the company’s e-commerce operations went through its largest adjustment since a restructuring of the tech giant into six distinct units in early 2023.
In Thursday’s conference call, Wu said that Alibaba’s international e-commerce operation is likely to post its first profitable quarter in the next financial year.
Alibaba slashed around 3,600 jobs in the past quarter, with total employee headcount at 194,320 by the year’s end.
February 21, 2025
