Prime Highlight
- Alibaba’s shares climbed over 4% in premarket trading after reporting a sharp 34% year-on-year increase in cloud computing revenue, fueled by soaring AI demand.
- CEO Eddie Wu said AI demand is rising so rapidly that the company may need to exceed its planned 380 billion yuan, three-year investment in AI and infrastructure.
Key Facts
- Cloud revenue reached 39.8 billion yuan, while overall quarterly revenue rose 5% to 247.8 billion yuan, slightly above expectations.
- Despite a 78% drop in adjusted EBITA to 9.1 billion yuan, investors remained optimistic as China’s e-commerce revenue rose 16% to 132.6 billion yuan and quick commerce revenue jumped 60%.
Background
Alibaba’s shares rose more than 4% in premarket trade on Tuesday after the company reported a sharp jump in cloud computing revenue driven by strong demand for artificial intelligence services. The Chinese tech giant said cloud revenue rose 34% year-on-year to 39.8 billion yuan, beating market expectations and marking faster growth than the previous quarter.
CEO Eddie Wu said AI demand is rising so quickly that Alibaba is struggling to deploy servers fast enough. He added that the company’s planned 380 billion yuan investment in AI and infrastructure over three years may no longer be enough. Alibaba has already spent 120 billion yuan over the past four quarters on AI and cloud infrastructure.
Overall revenue for the quarter ended September 30 rose 5% to 247.8 billion yuan, slightly above estimates. The cloud division’s EBITA grew 35%, supported by triple-digit growth in AI-related product revenue for the ninth straight quarter.
Wu dismissed concerns of an “AI bubble,” saying demand will continue to outstrip supply over the next three years due to tight global capacity in data centers and semiconductors. He noted that even older GPUs remain fully utilized.
However, Alibaba’s overall profitability fell sharply as the company increased spending on its fast-growing quick commerce segment, which promises rapid delivery on selected products. Adjusted EBITA dropped 78% to 9.1 billion yuan.
Still, investors looked past the profit decline as China’s e-commerce revenue, including Taobao and Tmall, rose 16% to 132.6 billion yuan. Quick commerce revenue surged 60%, positioning the segment as a key growth driver.
