Alibaba Group Holding Ltd.’s quarterly revenue rose by a disappointing 7%, reflecting that the continued sluggishness of Chinese consumers may hamper the online commerce leader’s major shift towards artificial intelligence.
The company reported sales of 236.5 billion yuan (about 32.8 billion US dollars) for the March quarter, slightly below the average estimate of 237.9 billion yuan. Its net profit nearly tripled, but this was partly due to gains from equity investments. Its American Depositary Receipts (ADRs) fell as much as 7.8% in New York trading on Thursday after the opening.
Alibaba, due to its massive scale, serves as a barometer of China’s consumer economy. After the Chinese government rolled out a series of stimulus measures in response to US tariffs, the company’s domestic retail sales growth exceeded expectations. However, Alibaba’s overall performance fell short of expectations, standing out in contrast to its rivals Tencent Holdings Ltd. and JD.com Inc., which both reported their fastest revenue expansion in years. This has raised hopes for a recovery in China’s technology sector after years of stagnation.
Alibaba had been relying on a rebound in its e-commerce business to support its ambitious artificial intelligence strategy following DeepSeek. A worrying sign is that Alibaba Cloud, which leads its foray into generative AI, failed to meet profit expectations, further clouding an outlook already dimmed by the Trump administration’s restrictions on Nvidia’s sales of key chips to China.
Li Chengdong, the director of Beijing-based internet think tank Dolphin Research Institute, said, “The artificial intelligence business that everyone is focusing on, as well as Alibaba Cloud’s computing business, both fell short of expectations.”
CEO Wu Jihan and Chairman Joe Tsai – the two deputies most trusted by co-founder Jack Ma – took the helm of Alibaba in 2023 and are meticulously planning the company’s recovery from years of government scrutiny. They are refocusing spending on artificial intelligence and e-commerce while accelerating the sale of non-core assets to fund AI investments and international expansion.
The company has committed to investing over 380 billion yuan in artificial intelligence infrastructure such as data centers in the next three years. Wu Jihan announced in February this year that the company’s current top priority is to achieve general artificial intelligence – to be on par with companies like OpenAI.
Since DeepSeek made its global debut this year, Alibaba has been releasing AI products at an astonishing pace. Alibaba claims that its flagship model Qwen 3, which was just launched last month, can rival DeepSeek in multiple aspects. On Wednesday, the company updated its video generation model for the second time in a month.
However, the company is facing fierce competition from Chinese AI rivals such as Baidu and Tencent. Joe Tsai warned that there is an AI bubble globally and cautioned that the data centers being built in the US do not have a clear customer base.
Alibaba’s e-commerce business is also facing increasingly fierce competition from ByteDance Ltd. and Pinduoduo Holdings Ltd. To fend off the impact from JD.com and Pinduoduo, Alibaba said last week that it will cooperate with Xiaohongshu, a platform similar to Instagram, to allow Taobao and Tmall merchants to embed product links on this popular influencer platform.
To fend off competition from JD.com and Meituan in the instant retail sector, Alibaba has integrated its delivery services into its main platform, Taobao. Jiang Fan, the head of Alibaba’s e-commerce business, said that to maintain its market share, Alibaba will continue to subsidize users.
Alibaba’s international commerce division saw a 22% increase in revenue, excluding the Chinese market. However, the growth rate slowed down compared to the previous quarter and failed to meet analysts’ expectations.
