China’s Alibaba said on Wednesday that fourth-quarter sales rose 3%, but profits were weighed down by increased investments in AI and cloud infrastructure, as well as continued spending on its quick commerce division, which delivers within 60 minutes.
Adjusted earnings per American Depositary Receipt share were 0.62 yuan, well below analysts’ expectations of 5.79 yuan, and the company’s U.S.-listed shares fell 2.3% in pre-market trading.
Like other tech giants, Alibaba has benefited from the surge in business demand for artificial intelligence. Alibaba’s Cloud Intelligence Group’s revenue rose 38% year-on-year to 41.63 billion yuan ($6.13 billion), in line with expectations.
In addition to its big bet on AI assistants, Alibaba has also improved its chatbot Qwen. Instead of navigating through various product listings, users can now talk to agents through a Qwen chat window and shop on the company’s online Taobao and Tmall marketplaces.
Earlier this year, the company separated its AI business from its cloud computing division and tasked CEO Eddie Wu with leading the newly formed Alibaba TokenHub group as it rushes to make its AI efforts more profitable.
The company said it aims to generate more than $100 billion in combined external revenue from its AI and cloud divisions over the next five years.
Alibaba says AI-related products account for 30% of its cloud division’s revenue from external customers, showing that the company is benefiting from its AI efforts, but the benefits come at a price.
Excluding one-time items, Alibaba’s net profit for the quarter fell 99.7% and adjusted EBITA fell 84%, which the company blamed on investments in its technology business and instant retail (which it calls “quick commerce”).
Alibaba reported sales of 122.22 billion yuan ($18 billion) for its China e-commerce business, which includes its highly competitive Quick Commerce division, beating expectations of 119.85 billion yuan.
Total revenue for the quarter ended March 31 was 243.38 billion yuan, below the LSEG consensus estimate of 247.22 billion yuan due to a slow start in the company’s international e-commerce business.
(Reporting by Deborah Sofia in Bangalore and Casey Hall in Shanghai; Editing by Edwina Gibbs, Arun Koyur, Keith Weir and Louise Heavens)
