Alibaba Cloud Revenue Surges as AI Investment Squeezes Profits

Alibaba Group reported a 3% increase in total revenue to approximately 243 billion yuan for the January-March quarter, driven by a 38% surge in its Cloud Intelligence Group revenue to 41.6 billion yuan. AI products now account for 30% of external cloud revenue, a figure the company projects will exceed 50% within one year. To sustain this momentum, the company announced it will exceed its original 380 billion yuan three-year AI investment plan and set a goal to surpass $100 billion in annual AI and cloud revenue within five years.

Despite the revenue growth, heavy spending on AI infrastructure and competitive pressures in quick commerce led to an operational loss of 848 million yuan. Adjusted earnings per share fell to 0.62 yuan, significantly missing the estimated 5.79 yuan, while quarterly net income excluding one-time items plummeted 99.7%.

CEO Eddie Wu has prioritized market share over margins, projecting profitability improvements within two quarters. As part of a strategic shift, the company decoupled its AI operations from the cloud unit, placing Wu in charge of the new Alibaba Token Hub. Meanwhile, rival Tencent reported a 9% revenue increase to 196.5 billion yuan, which missed analyst expectations, though Tencent pledged to more than double its own AI spending this year.