Alibaba shares initially fell more than 2.5% in premarket trading on Wednesday after the company reported mixed fiscal fourth-quarter results. While overall revenue rose 3% to 243.38 billion yuan ($35.3 billion), adjusted earnings missed analyst estimates sharply, with adjusted net income plunging nearly 100% year-over-year to just 86 million yuan. The profit slump was largely attributed to heavy investments in AI infrastructure and its quick commerce unit.
However, sentiment reversed dramatically the following day as investors focused on the explosive growth of the Cloud Intelligence Group. The stock rebounded with an 8% surge after the company disclosed that external cloud revenue jumped 40% year-over-year to 41.63 billion yuan ($6.1 billion). AI-related products now account for around 30% of external cloud revenue, signaling that AI monetization is becoming a core growth driver rather than a speculative add-on.
The Cloud division’s strong performance was underpinned by surging enterprise demand for AI tools and public cloud services. Alibaba has integrated AI capabilities across its ecosystem, including an upgraded Qwen chatbot that enables conversational shopping on Taobao and Tmall. The company also separated its AI businesses into a new “Alibaba Token Hub” group under CEO Eddie Wu, aiming to generate over $100 billion in combined external revenue from AI and cloud over the next five years.
Additionally, Alibaba’s domestic chip strategy through its T-Head unit is gaining momentum, with hundreds of thousands of Zhenwu processors deployed across Alibaba Cloud clusters. This dual-track approach balances reliance on global chip suppliers with a push toward self-sufficiency, aligning with China’s broader AI ecosystem shift. While retail pressures remain, the cloud and AI segments are now central to Alibaba’s long-term narrative, and the stock’s rebound reflects growing confidence in that pivot.
