Alibaba Profit Margins Pressured by Aggressive AI Spending

Chinese technology giant Alibaba Group has reported a 3% rise in fourth-quarter revenue, though profits were pressured by growing investments in AI and cloud infrastructure, as well as continued spending on its quick-commerce segment, which promises deliveries within 60 minutes, Deborah Mary Sophia and Casey Hall reported for Reuters.

Revenue from Alibaba’s Cloud Intelligence Group rose 38% year over year to 41.63 billion yuan ($6.13 billion). (Photo: N509FZ)

Like other major tech firms, Alibaba has benefited from surging business demand for artificial intelligence.

Revenue from Alibaba’s Cloud Intelligence Group rose 38% year over year to 41.63 billion yuan ($6.13 billion), broadly in line with analyst estimates.

In addition to expanding investments in AI assistants, Alibaba has upgraded its chatbot Qwen, which now allows users to shop on its Taobao and Tmall marketplaces directly through the chatbot interface instead of browsing traditional product listings.

Earlier this year, Alibaba separated its AI businesses from its cloud-computing arm and tasked CEO Eddie Wu with leading the newly formed “Alibaba Token Hub” group as the company races to make its AI investments profitable.

Alibaba said it aims to generate more than $100 billion in combined external revenue from its AI and cloud divisions over the next five years.

The company added that AI-related products now account for 30% of external customer revenue within its cloud division, suggesting growing commercial returns despite heavy spending.