Alibaba Cloud Bets Big on AI, Targets $100 Billion Revenue Amidst Profit Dip

Hong Kong – Chinese tech giant Alibaba Group announced on Thursday a strategic goal to exceed $100 billion in revenue from its artificial intelligence and cloud computing businesses within the next five years. This ambitious target comes as the company navigates a 67% decrease in profits for the most recent quarter, despite continued strong growth in its cloud sector.

Cloud Business Remains a Bright Spot

Despite the overall profit decline, Alibaba’s cloud business demonstrated robust performance. In the October-December quarter, revenue from cloud services surged 36% year-over-year, reaching 43.3 billion yuan ($6.2 billion) Alibaba Cloud.

AI as a Key Growth Driver

CEO Eddie Wu emphasized the company’s confidence in capitalizing on the expanding AI market. Alibaba has been actively developing and enhancing its Qwen AI application and consumer chatbot, alongside providing cloud computing and storage solutions for businesses. Wu stated that there is “huge and sustained growth momentum in the AI market.”

Strategic Investments and New Products

To bolster its AI capabilities and profitability, Alibaba announced plans to increase prices for certain AI services by up to 34%. The company also launched Wukong, an agentive AI tool designed for commercial customers. Previously, Alibaba pledged to invest at least 380 billion yuan ($53 billion) over three years to advance its cloud computing and AI infrastructure Alibaba Group.

Leadership Transition in AI Division

Alibaba’s AI ambitions have faced recent challenges, including the departure of Lin Junyang, head of its Qwen AI modeling division.

Competitive Landscape and Industry Trends

Chinese technology companies are increasingly focused on strengthening their competitiveness against U.S. Rivals and expanding their market dominance, particularly in the wake of advancements from AI startups like DeepSeek. Alibaba Cloud, also known as Aliyun, is currently the largest cloud computing company in China and Asia Pacific according to Gartner.

Financial Performance and Market Reaction

The company’s total revenue for the October-December quarter rose 2% year-on-year to 284.8 billion yuan ($41.4 billion), falling short of analyst expectations. Profit for the quarter reached 16.3 billion yuan ($2.4 billion), a decrease from 48.9 billion yuan in the same quarter last year, attributed in part to increased sales and marketing expenses. Alibaba’s U.S.-listed shares experienced a decline of over 7% in midday trading following the release of these results.

This story was translated from English by an AP editor using a generative artificial intelligence tool.