Alibaba Posts Strong Cloud Revenue Growth Fueled by AI Demand

Shanghai, China — Alibaba has reported better-than-expected revenue growth in its fiscal second quarter, driven by an acceleration in its cloud computing division.

For the quarter ending September 30, Alibaba’s revenue reached 247.8 billion Chinese yuan (approximately $34.8 billion), marking a 5% increase year-on-year and exceeding LSEG estimates of 242.65 billion yuan. Following this announcement, Alibaba’s shares listed in New York rose by 4% in premarket trading.

Investors have been particularly focused on Alibaba’s cloud computing sector, which has integrated significant AI-related revenue streams. The company announced a 34% year-on-year increase in cloud revenue, totaling 39.8 billion yuan, surpassing analyst expectations of 37.9 billion yuan. This growth rate outstripped the 26% reported in the previous June quarter.

CEO Eddie Wu highlighted the role of AI in this growth, stating, “Robust AI demand further accelerated our Cloud Intelligence Group business, with revenue up 34% and AI-related product revenue achieving triple-digit year-over-year growth for the ninth consecutive quarter.”

The company indicated plans to intensify its investment in AI models and infrastructure, with a commitment to spending an additional 380 billion yuan ($53 billion) over three years. So far, Alibaba has made approximately 120 billion yuan in capital expenditures focused on AI and cloud infrastructure in the last four quarters.

The earnings before interest, taxes, and amortization (EBITA) in Alibaba’s cloud division rose by 35%, reaching 3.6 billion yuan, underscoring the sector’s profitability.

Adding to its AI initiatives, Alibaba revealed that its Qwen app, which competes with OpenAI‘s ChatGPT, surpassed 10 million downloads within just its first week post-launch. This application is supported by Alibaba’s Qwen artificial intelligence models.

In addition to cloud computing, Alibaba is also making substantial investments in the instant commerce market, which seeks to provide ultra-fast delivery for select products. However, this expansion has influenced overall profitability, despite the strength of its cloud division.

As Alibaba forges ahead with its AI-driven strategies, industry observers are closely monitoring how these developments will impact the firm’s future performance.