Alibaba shares surge 6% as CEO pledges AI dominance despite earnings miss
Chinese tech giant redirects profits to Qwen model user acquisition, with spending run rate projected through fiscal 2027.
Alibaba Group Holding Ltd shares climbed 6% on Wednesday following the release of its fourth-quarter earnings report, reversing early negative sentiment in pre-market trading. The stock’s recovery came despite the company reporting a 3% increase in fourth-quarter revenue, a figure that fell short of analyst expectations. The earnings were weighed down by heightened expenditure on artificial intelligence initiatives, cloud infrastructure expansion, and its rapid-delivery business, which aims to fulfil orders within an hour.
CEO Eddie Wu highlighted that cloud revenue surged 38% annually to $6.13 billion, a result that aligned roughly with Wall Street estimates. Wu projected that more than half of Alibaba’s cloud revenue will be derived from artificial intelligence within a year, signalling a strategic pivot towards monetising its AI capabilities. Executives confirmed during the earnings call that the company plans to increase spending on AI beyond previously announced figures.
The company has been actively restructuring its operations to support this shift. Earlier this year, Alibaba split its artificial intelligence operations from its cloud computing division and established the “Alibaba Token Hub” unit, with CEO Eddie Wu appointed to head it. This move underscores the firm’s intent to turn its substantial AI investments into a profitable business unit.
Bloomberg Intelligence analyst Catherine Lim noted that Alibaba has been redirecting significant profits towards AI user acquisition, specifically for its Qwen model. Lim observed that the company effectively redeployed more than 90% of its March-quarter China e-commerce profit into Qwen user acquisition and adoption. This spending run rate is projected to persist into fiscal 2027, indicating a long-term commitment to capturing market share in the generative AI space.
The market’s positive reaction to the earnings report suggests investors are prioritising the company’s growth trajectory in cloud and AI over short-term earnings misses. The 6% gain during morning trading hours reflects confidence in Wu’s strategy to leverage Alibaba’s infrastructure and capital to dominate the emerging AI economy, despite the immediate impact of heavy investment on current profitability metrics.
