China’s e-commerce leader this year cemented its status as a global AI player
[BEIJING] Alibaba Group Holding reported a 9 per cent jump in revenue, after a boom in Chinese AI development propelled demand for the computing capacity its cloud arm provides.
Revenue for the quarter ended June reached almost 269 billion yuan (US$40 billion), broadly in line with the average analyst estimate. But net income dived more than 75 per cent to 10.5 billion yuan. Its US shares fell more than 2 per cent.
China’s e-commerce leader this year cemented its status as a global AI player, after its flagship Qwen offering became the world’s most popular AI model family and the company spent tens of billions of dollars on everything from chips to data centres and agentic AI. But the Hangzhou-based company’s effort to challenge Anthropic PBC and OpenAI is eroding margins, while anemic Chinese consumption dogs its mainstay online retail business.
Under chief executive officer Eddie Wu, Alibaba is increasingly betting on its AI and cloud businesses to drive future growth. The company has merged most of AI-related research and product teams under Alibaba Token Hub, a new business unit directly led by Wu. It has also been divesting non-core assets in the past two years, including selling its gaming unit Lingxi Games earlier this month.
The pivot has led Alibaba to become one of China’s biggest spenders on AI infrastructure. Wu has said his company will prioritise AI growth over short-term bottom-line considerations. He’ll steer investment in AI well beyond a previously disclosed budget of 380 billion yuan over three years – in the hope of quintupling cloud and AI revenue to $100 billion over five years.
Yet Chinese AI powerhouses have faced growing pressure from investors to translate AI expenditure into returns, while still mostly offering models for free or very low fees compared with US peers. Alibaba seemed to intensify its own monetisation efforts earlier this year, but it’s back to a race for users over profit by making its latest flagship model, the Qwen 3.8 Max, open-weight. That marks the first time it’s released weights – values that help AI systems make decisions – for its largest model class.
Alibaba is seeking to boost monetisation by targeting paying subscribers with its coding and agentic platforms, hoping to chip away at a burgeoning market dominated by rivals such as Tencent Holdings and ByteDance.
ByteDance’s Doubao, currently China’s most popular AI app, introduced a subscription plan this year. Alibaba also operates the Qwen app, an all-in-one AI assistant handling daily tasks like shopping and payments. It’ll go head to head with a new AI agent on Tencent’s WeChat platform in coming quarters. BLOOMBERG
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