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alibaba announced on Wednesday that its core profitability plunged in the March quarter due to heavy investments in technology and e-commerce.
The Chinese tech giant announced that its adjusted earnings before interest, taxes, amortization, and amortization (EBITA), a measure of its underlying profitability, totaled 5.1 billion Chinese yuan ($750.9 million), down 84% from a year ago.
This financial metric strips out one-time gains and losses in order to focus on a company’s core business.
Alibaba’s U.S.-listed shares initially rose in pre-market trading, but then turned negative. It has fallen by as much as 4%, and the last decline seen was around 1.3%.
Changes in Alibaba’s Hong Kong-listed stocks since the beginning of the year.
The tech giant has invested heavily in semiconductors for AI, data centers and the development of its own model family under the Qwen brand. This has paid off in the cloud computing sector.
Cloud has been a bright spot for Alibaba, driven by demand for AI in China, but investors are worried about the company’s continued investment in so-called quick and instant commerce. It’s a shopping service that allows users to enjoy super-fast delivery speeds of less than an hour, and has become something of a battleground for Chinese e-commerce giants.
Adjusted EBITA for Alibaba’s China e-commerce group in the March quarter fell 40% year-on-year on the back of these investments, despite a 1% increase in customer management revenue, the company’s biggest contributor.
However, Alibaba has seen solid growth with these investments, with QuickCommerce revenue increasing 57% year over year. Alibaba’s overall China e-commerce revenue rose 6% year-on-year in the March quarter.
Cloud growth accelerates
Alibaba’s technology investments appear to be paying off in its cloud computing division, where sales rose 38% year-on-year to 41.6 billion yuan in the March quarter. This growth rate was faster than the previous quarter. The segment’s adjusted EBITA increased by 57%.
“Our strategic investments continued to translate into business growth. Cloud Intelligence Group’s revenue continued to accelerate, and AI-related product revenue achieved triple-digit growth for the 11th consecutive quarter,” Alibaba CFO Toby Hsu said in a press release.
Alibaba announced that AI-related revenue reached 9 billion yuan.
Alibaba has established itself as one of China’s leading companies, developing chips for AI and selling services through its cloud computing division. The company’s Qwen AI model boasts world-class performance.
Headquartered in Hangzhou, the company is deploying AI across its business. The company announced this week that it will introduce an AI shopping assistant powered by Qwen on Taobao, China’s flagship e-commerce product.
