According to Reuters, the company did not reveal a new alternative investment target for the plan it announced earlier last year, but it explained that its profits in the quarter ending in March were under pressure as a result of investments in artificial intelligence and cloud infrastructure, in addition to continued spending on the “fast commerce” sector, which includes delivery services within 60 minutes.
Adjusted earnings per American depositary share came in at 0.62 yuan, below analysts’ expectations of 5.79 yuan, pushing the company’s US-listed shares to decline by 2.3 percent in pre-market trading.
The company’s CEO, Eddie Wu, said during a call with analysts following the announcement of the results, that Alibaba’s goal is to maintain faster growth than the market average in order to expand its share and strengthen its leadership position, indicating that profit margins remain a secondary priority at the current stage. He also expects an improvement in gross margins for the Alibaba Cloud unit over the next quarter or two.
Alibaba, like major technology companies, is benefiting from the rising demand for artificial intelligence. Cloud Intelligence Group’s revenue rose 38 percent year-on-year to 41.63 billion yuan, or about $6.13 billion, in line with expectations.
In addition to its big bets on smart assistants, the company has enhanced the capabilities of the Qwen chatbot, which allows users to shop on the Taobao and Tmall platforms through a chat window, instead of navigating through long lists of products.
Earlier this year, Alibaba separated its artificial intelligence business from its cloud computing unit, and assigned Eddie Wu to lead the Alibaba Token Hub group, as part of its effort to make the artificial intelligence sector more profitable.
The company said that it aims to achieve more than $100 billion in combined external revenues from its artificial intelligence and cloud computing units over the next five years. She also explained that products related to artificial intelligence represent 30 percent of the revenues of external customers in the cloud division.
But these investments were strongly reflected in profits. Excluding one-time items, Alibaba’s net income in the quarter fell by 99.7 percent, and adjusted EBITA fell by 84 percent, which the company attributed to heavy investment in technology and rapid commerce businesses.
In China’s e-commerce business, which includes the highly competitive express commerce sector, Alibaba recorded revenues of 122.22 billion yuan, or about $18 billion, exceeding analysts’ expectations of 119.85 billion yuan.
The company’s executives affirmed their confidence that the economics of the express commerce unit will turn profitable by the end of fiscal year 2027. Alibaba indicated that its investments in this sector helped during the quarter to attract new customers, enhance user interaction, increase transactions, and improve the ability of e-commerce to generate revenues.
As for the company’s total revenue, it amounted to 243.38 billion yuan in the quarter ending March 31, a level that was slightly lower than LSEG’s average forecast of 247.22 billion yuan. (Reuters)
