(March 19): Alibaba Group Holding Ltd aims to quintuple cloud and AI revenue to US$100 billion ($128.06 billion) annually in five years, setting a high bar for its artificial intelligence (AI) endeavours to offset the plateauing of a once pre-eminent e-commerce empire.
Chief executive officer Eddie Wu proclaimed that goal after his company reported a 67% plunge in quarterly earnings and meagre revenue growth, underscoring the urgency behind Alibaba’s drive to wring more cash out of costly AI endeavours. Wu didn’t offer specifics on how his company would hit that objective, which suggests at least 35% growth a year — about matching the pace that the cloud division managed in the December quarter.
The picture across most other units appeared bleaker. The company posted a 2% rise in sales to CNY284.8 billion (US$41.3 billion or $53.1 billion) for the three months ended December, just shy of the average projection. Net income plummeted — its worst performance since early 2024 — hurt in part by heavy spending on promotions to fend off rivals in commerce. Alibaba’s US-listed shares slid as much as 9.9%, the biggest intraday drop since April 2025.
The disappointing results show why the company is driving a major restructuring aimed at generating profit off its sprawling AI effort. The company this week launched an agentic AI service known as Wukong for company clients, and hiked prices for its cloud and storage services by as much as 34%. Alibaba is keen to monetise its growing AI portfolio in part to counter weakness in its e-commerce business, which is grappling with fierce domestic competition.
“The business goal of Alibaba’s AI strategy is very clear. Over the next five years, our goal is to surpass US$100 billion in combined cloud and AI external revenue,” Wu told analysts on a conference call.
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The Hangzhou-based company — one of the world’s largest cloud service providers — is considered a front runner in China’s race towards artificial general intelligence. It’s also the most aggressive in terms of spending: Alibaba has pledged more than US$53 billion of AI investment over several years, far surpassing its Chinese rivals though a fraction of the US$650 billion that US hyperscalers intend to shell out in 2026.
Alibaba’s cloud unit has since become the group’s fastest-growing cash cow, with the company recording triple-digit revenue growth from AI-related products over 10 consecutive quarters. And quick commerce should turn profitable in the fiscal year ending March 2029, executives said.
The company however is grappling with fundamental changes that have the potential to reshape leadership of the world’s biggest internet arena.
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China’s newfound love affair with OpenClaw-style agentic AI has handed Tencent Holdings Ltd, with its all-encompassing WeChat ecosystem, an initial advantage. Alibaba’s rival is considered well-positioned to build agentic AI because it sits on a trove of user data and controls access to a universe of Chinese apps via WeChat.
There’s also a flock of aggressive competitors in China challenging the giants, including DeepSeek, Moonshot AI, Minimax Group Inc and Knowledge Atlas Technology JSC Ltd, known as Zhipu. They tend to offer open-source AI models, which are inexpensive to use, keeping a tight lid on profitability for the whole industry.
Alibaba’s AI efforts were further unsettled by the surprise departure of Junyang Lin, the top developer for Qwen models and one of the most influential figures behind Alibaba’s transition to AI. That sent ripples through the industry and raised questions about the company’s approach to cutting-edge research. The exact reasons for Lin’s exit remain unclear.
Costs are rising on other fronts. Over last month’s week-long Lunar New Year holiday, Alibaba, Tencent, ByteDance Ltd and Baidu Inc gave out billions of yuan in coupons to acquire users for their consumer-facing agentic apps. While competitors saw a sharp increase in adoption, Qwen’s usage remained well above pre-campaign levels, according to estimates by Morgan Stanley.
Alibaba has since shifted its focus back to enterprise-facing products, launching a restructuring centred on selling AI services mainly to businesses. With the creation of a new business group called Alibaba Token Hub, nearly all AI-related units now come under a single umbrella led by CEO Wu. The new business unit’s name refers to the units of computing (such as keywords) that serve as a benchmark for AI usage as well as a framework for charging those users.
It “shows the explosive AI demand from strong token usage,” Morgan Stanley’s Gary Yu said in a research note this week. “The biggest implication is that it further strengthens commercialisation of AI.”
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Wu has detailed a plan to build full-stack AI technology, including hardware. The company’s chip unit, T-Head, made headway in acquiring major customers and Alibaba is preparing for a separate listing of the business to tap into investors’ interest on companies providing alternatives to Nvidia Corp.
In the meantime, Alibaba is still deeply involved in an instant delivery price war with Meituan and JD.com Inc — a battle that’s raged for more than a year and drawn regulatory scrutiny. The company last year offered subsidies worth as much as CNY50 billion to defend its turf.
E-commerce chief Jiang Fan said in November Alibaba planned for “sustained long-term investment” in instant commerce, though he said losses have begun to narrow.
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