Source: https://finance.yahoo.com/news/alibaba-67-profit-plunge-shows-100308190.html
Alibaba Group Holding Ltd.’s earnings plunged while revenue barely grew, underscoring the urgency behind the Chinese e-commerce leader’s drive to wring more profits out of a swathe of costly AI endeavors.
The company posted a 2% rise in sales to 284.8 billion yuan ($41.3 billion) for the three months ended December, just shy of the average projection. But net income plummeted 67% — 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 4% in pre-market trading.
The disappointing results show why the company is driving a major restructuring aimed at generating profit off its sprawling AI endeavors. The company this week launched an agentic AI service known as Wukong for company clients, and hiked prices for its cloud computing and storage services by as much as 34%. Alibaba is keen to monetize its growing AI portfolio in part to offset losses in its e-commerce business, which is grappling with fierce domestic competition.
Click here for a liveblog on Alibaba’s results.
The Hangzhou-based company — one of the world’s largest cloud service providers — is considered a frontrunner in China’s race toward artificial general intelligence. It’s also the most aggressive in terms of spending: Alibaba has pledged more than $53 billion of AI investment over several years, far surpassing its Chinese rivals though a fraction of the $650 billion that US hyperscalers intend to shell out in 2026.
Alibaba’s cloud unit has since become the group’s fastest-growing business, with the company recording triple-digit revenue growth from AI-related products over 10 consecutive quarters.
The company however is grappling with fundamental changes with the potential to reshape leadership of the world’s biggest internet arena.
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.
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 its consumer-facing agentic app. 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 major restructuring centered 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 Chief Executive Officer Eddie 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 commercialization of AI.”
What Bloomberg Intelligence Says:
Baidu’s decision to raise AI cloud product prices by as much as 30%, according to Bloomberg News, is a positive development that signals a shift toward monetization rather than price competition. Though higher prices can help firms stem operating losses, the fragmented sector’s long-term path to profit remains unclear. Baidu’s move mirrors similar steps by Tencent, Alibaba and Zhipu, catalyzed by surging demand for agentic AI following the launch of OpenClaw.
Alibaba -4% premarket as profit drops 67%, revenue rises 2%, cloud prices rise 34%, signaling urgent AI monetization push
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Posted by callsonreddit
18 Comments
China numba one?
The AI trend is high capex
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Funfact, baba now has a higher forward PE than Nvda.
Never thought i’d ever type those words out but here we are.
Meanwhile MU has the mother of all beats and is down 5%. Crazy times.
This year is going to be a bloodbath. I’m a distinguished engineer (as high as you can go) and we’re starting to see that AI comes with more costs outside of just money.
People are thinking less, atrophying in their skills, showing less care toward the domain they’re charged with bettering, fatigued over prompt engineering, and putting more strain on the reviewers of changes than on producers (i.e. code is harder to read than it is to write).
More and more, changes and complexity that shouldn’t be committed is slipping through the cracks. Its not because AI can’t be used effectively, its that human nature distills down to the least effort for the most benefit. Add to this that leaders are tracking AI usage and going so far as to tag that usage to peoples promotions, its bad.
Ask yourself: How many products / services that you love have gotten more / better features since Opus 4.5 or Codex? How many amazing startups are you seeing that actually move the needle?
Oh look a chat bot. Oh look a device with no screen that will presumably order coffee for you. Oh look a device with a camera that will watch everything you do and tell you where you left the keys. The fact of the matter is, people don’t enjoy giving up agency or privacy as much as companies would have investors believe. Which is funny because the investors are also presumably in the customer pool.
The CAPEX spend needs to move the value needle strongly in the other direction or its going to be nuclear. And so far, I don’t see it.
alibaba trying to make ai happen while their profits tank is giving major “rearranging deck chairs on the titanic” energy.
I will buy in when it hits rock bottom. Has great potential
I don’t get the cloud move personally, from Baba or many of these smaller players.
I know completion is good but it’s clear AWS, GCP, and Azure are dominating and will continue to dominate. Now even offering sovereign cloud solutions and such.
lol
Alibaba’s tanking hard—AI bets bleeding cash while e-comm crumbles, buckle up for the rebound or bust!
hey, had a quick idea for the company, sorry if this was already brought up but have we tried increasing profits?
I was plus nearly 100% at the $188 top. Now I’m barely up cause i bought more😊 Guess I wouldn’t be here if i wasn’t a bag holder.
There are no profits in AI outside of those selling ~~shovels~~ GPUs. The biggest name in the space is nowhere near profitable and is demanding $100 billion while the credit market is about to go tits up. 95% of the layoffs blamed on AI were just plain layoffs. You’ve been bamboozled.
I recommend listening to Ed Zitron’s rants on the subject.
Bro get XI out of there, railing companies on the daily.
We don’t need A.I. crap we need product pages with proper product descriptions.
Recession incoming
Mu blew out earnings and dipped harder. 😭