Alibaba showcase its AI technology application achievements from Alibaba Cloud at the World Artificial Intelligence Conference in Shanghai, China on July 26, 2025.
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Alibaba delivered better than expected revenue in its fiscal second quarter as sales in its key cloud computing division accelerated.
Alibaba’s New York-listed shares were around 4.3% higher in premarket trade as investors looked past a plunge in profitability.
Here’s how the company did in its fiscal second quarter ended Sept. 30 versus LSEG estimates:
- Revenue rose 5% to 247.8 billion Chinese yuan ($34.8 billion) versus 242.65 billion yuan the previous year.
Investors are focused on Alibaba’s cloud computing division which books its revenue related to artificial intelligence. Over the past few quarters, Alibaba’s cloud revenue growth has accelerated.
Alibaba reported a 34% year-on-year rise in cloud computing revenue to 39.8 billion yuan versus expectations of 37.9 billion yuan. That growth rate was faster than the 26% notched in the June quarter.
The Chinese tech giant said its investments in AI were helping its cloud unit.
“Robust AI demand further accelerated our Cloud Intelligence Group business, with revenue up 34% and AI-related product revenue achieving triple-digit year-over-year growth for the ninth consecutive quarter,” CEO Eddie Wu said in an earnings statement on Tuesday.
In September, the company said it plans to increase spending on AI models and infrastructure development, on top of the 380 billion yuan ($53 billion) over three years it announced in February. Alibaba said on Tuesday it has spent around 120 billion yuan in capital expenditure toward AI and cloud infrastructure over the past four quarters.
Earnings before interest, taxes, and amortization (EBITA), a measure of profitability, increased by 35% to 3.6 billion yuan for its cloud division.
Alibaba has emerged as one of China’s leading AI players. On Monday, Alibaba said its Qwen app, the Chinese giant’s rival to OpenAI’s ChatGPT, surpassed 10 million downloads within the first week of its public launch. The app is powered by Alibaba’s Qwen artificial intelligence models.
Investors look past profit drop
Meanwhile, the company has been investing heavily in the cut-throat instant commerce market. This a product offering from Alibaba and some of its Chinese e-commerce rivals that promises super-fast delivery on certain items.
Investment in this new segment has weighed on the profitability of Alibaba’s overall business even as cloud computing remains strong.
Overall adjusted EBITA, a profitability measure closely-watched by analysts, fell 78% year-on-year to 9.1 billion yuan, with Alibaba attributing this partly to its investments in quick commerce.
But investors appear to be looking past this because of the growth acceleration at the cloud computing business and Alibaba’s core China e-commerce division which houses revenue from its online shopping platforms Taobao and Tmall as well as the quick commerce initiative. China e-commerce revenue rose 16% year-on-year to 132.6 billion yuan, with growth coming in faster than the previous quarter.
Revenue from quick commerce surged 60% year-on-year in the quarter versus 12% in the quarter before.
“In our consumption business, quick commerce continued to scale with significant improvement in unit economics and drove rapid growth in monthly active consumers on the Taobao app,” Wu said.
