Alibaba plans major AI investment as revenues rebound in third quarter

USA Today

20-02-2025

Alibaba plans major AI investment as revenues rebound in third quarter
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Apple will use Alibaba AI tech in iPhones
Apple Inc.'s iPhones will use Alibaba Group Holding Ltd.'s AI technology, the Chinese firm's chairman said, affirming reports the e-commerce pioneer had scored a coveted role in helping power the iPhone in the world's top mobile arena. Chairman and Co-founder Joe Tsai confirmed this during a panel at the World Governments Summit 2025 in Dubai.
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Alibaba 9988.HK on Thursday flagged plans to invest more in its "core businesses" of e-commerce and AI-powered cloud computing after reporting third-quarter revenues just above analysts' estimates on strong year-end sales.
U.S.-listed shares of the company BABA.N were up 11% in early morning trading.
Chief executive Eddie Wu, speaking to analysts, said AI was "the kind of opportunity for industry transformation that only comes around only once every few decades." He said Alibaba would invest more in AI and cloud computing over the next three years than it had in the past decade but did not put an exact figure on the investment amount.
The company's revenue was 280.15 billion yuan ($38.58 billion) for the three months ended December 31, compared with 279.34 billion yuan expected by 17 analysts polled by LSEG.
Chinese retailers such as Alibaba have cut prices and intensified promotional offers to revitalise consumer spending and drive sales at their core domestic e-commerce businesses.
Healthy demand from international markets and increased spending by customers towards the year-end helped the company boost sales.
China's annual Singles' Day sales event, a nationwide shopping festival in October and November, often viewed as a consumer sentiment barometer, ran longer than usual and led to a 26.6% rise in sales in major e-commerce platforms, according to data provider Syntun.
Alibaba's domestic e-commerce business Taobao and Tmall Group produced revenue growth of 5% for the quarter and company executives said the division would continue to focus on market share stabilisation in the near future.
'AI juggernaut'
Alibaba has kicked off 2025 as a winner in China's AI race, drawing in investors with strategic business deals. Its share price has risen more than 40% since the beginning of the year.
"When it comes to Alibaba's AI strategy ... we aim to continue to develop models that extend the boundaries of intelligence," Wu said, adding that AI could eventually "have significant influence on or even replace 50% of global GDP".
The inclusion of Alibaba co-founder Jack Ma in a meeting of private enterprise leaders chaired by China's President Xi Jinping this month, and photos of Ma shaking hands with Xi, has further raised investor confidence in Alibaba.
"Alibaba has bagged a seat on the AI juggernaut and is now reaping rewards ... it's what is going on under the bonnet in terms of AI which is really moving the dial," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
"Alibaba has carved out a significant niche in the rapidly expanding world of cloud computing, providing the backbone for AI operations," she added.
Alibaba said it is teaming up with Apple to power iPhones sold in China with its AI solutions, solidifying its foothold in a market where homegrown rival DeepSeek is making waves with cost-effective models.
Alibaba unveiled an upgraded version of its Qwen 2.5 AI model in late January, saying it outperforms DeepSeek-V3.
Alibaba's Cloud Intelligence Unit's revenue grew 13%.
The company's international e-commerce business, which includes cross-border player AliExpress, wholesale B2B site Alibaba.com and other regional platforms, remained one of its fastest growing, with 32% revenue growth in the quarter.
Alibaba last November announced the integration of its domestic Chinese and international e-commerce platforms into a single business unit, the Alibaba E-commerce Business Group, bringing together the Taobao and Tmall Group and the Alibaba International Digital Commerce Group.
In further steps to streamline its focus on core businesses e-commerce and cloud, Alibaba in recent months has shed assets, including offloading department store chain in time for a $1.3 billion loss in December.
($1 = 7.2613 Chinese yuan renminbi)
Reporting by Harshita Mary Varghese in Bengaluru and Casey Hall in Shanghai; Editing by Arun Koyyur and Jane Merriman