Alibaba unveiled Alibaba Cloud’s AI technology application results at the World Artificial Intelligence Conference to be held in Shanghai, China on July 26, 2025.
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alibaba The company delivered better-than-expected earnings in its fiscal second quarter, with sales accelerating in its key cloud computing division.
Alibaba’s New York-listed shares rose about 4.3% in premarket trading as investors said they believed a sharp decline in profitability could be avoided.
The company’s financial results and LSEG’s forecast for the second quarter of the fiscal year ending September 30 are as follows.
Sales increased 5% to 247.8 billion yuan ($34.8 billion) from 242.65 billion yuan a year ago.
Investors are focused on Alibaba’s cloud computing unit, which generates revenue related to artificial intelligence. Over the past few quarters, Alibaba’s cloud revenue growth has accelerated.
Alibaba reported that cloud computing revenue rose 34% year-on-year to 39.8 billion yuan, compared to expectations of 37.9 billion yuan. This growth rate was faster than the 26% in the June quarter.
The Chinese technology giant said its investments in AI are contributing to its cloud sector.
“Solid AI demand further accelerated our Cloud Intelligence Group’s business, with sales increasing 34% and AI-related product sales achieving triple-digit year-over-year growth for nine consecutive quarters,” CEO Eddie Wu said in Tuesday’s earnings call.
Wu said demand for Alibaba’s AI products is “accelerating.”
“We certainly see that customer demand for AI is and will continue to be very strong. In fact, we haven’t even been able to keep up with the increase in customer demand in terms of the pace at which we can deploy new servers,” Wu said.
In September, the company announced plans to increase spending on AI models and infrastructure development, in addition to the 380 billion yuan ($53 billion) it announced in February over three years. Alibaba said on Tuesday that it spent about 120 billion yuan in capital investment in AI and cloud infrastructure in the past four quarters.
Regarding capital investment figures, Wu said the initial target of 380 billion yuan “may be low.” He added that if demand remains strong, Alibaba “will not rule out further expansion of capital investment.”
Alibaba has emerged as one of China’s leading AI companies. Alibaba announced on Monday that the Qwen app, the Chinese giant’s rival to OpenAI’s ChatGPT, has surpassed 10 million downloads within a week of its launch. This app is powered by Alibaba’s Qwen artificial intelligence model.
Earnings before interest, taxes, amortization, and amortization (EBITA), a measure of profitability for the cloud division, rose 35% to 3.6 billion yuan.
Investors want to avoid a decline in profits
Meanwhile, the company is investing heavily in the cutthroat instant commerce market. It’s a product offered by Alibaba and some of its Chinese e-commerce rivals that promises super-fast delivery of certain items.
Even as cloud computing remains strong, investments in this new sector are weighing on Alibaba’s overall business profitability.
Overall adjusted EBITA, a profitability indicator closely watched by analysts, fell 78% year-on-year to 9.1 billion yuan, which Alibaba attributed in part to its investment in Quick Commerce.
But investors appear to be overlooking this situation due to accelerating growth in Alibaba’s core Chinese e-commerce unit, which has a cloud computing business, online shopping platforms Taobao and Tmall, and revenue from its QuickCommerce initiative. China’s e-commerce revenue rose 16% year-on-year to 132.6 billion yuan, growing faster than the previous quarter.
Revenue from Quick Commerce increased 60% year-over-year in the quarter compared to 12% in the prior quarter.
“In our consumption business, quick commerce continued to expand with significant improvement in unit economics, driving rapid growth in monthly active consumers on the Taobao app,” Wu said.
Jiang Huang, head of Alibaba’s e-commerce business group, called Quick Commerce a “strategic pillar” and said Alibaba aims to increase the total product value, or transaction value across the platform, to 1 trillion yuan within three years.
