Alibaba revenue tops estimates with strong instant retail, AI push

The company’s results come against the backdrop of a costly battle in China’s ‘instant retail’ sector

Chinese e-commerce giant Alibaba beat analysts’ quarterly revenue estimates on Tuesday (Nov 25) as investments in one-hour delivery helped drive more users to its shopping apps, while its cloud division reported strong growth.

US-listed shares of the company opened up 2 per cent in choppy early trading.

The company reported revenue of 247.80 billion yuan (S$45.5 billion) in the second quarter, compared with estimates of 242.65 billion yuan, according to data compiled by LSEG, though adjusted profit of 4.36 yuan per American Depository Share missed estimates of 5.49 yuan.

Alibaba to keep investing ‘aggressively’ in AI

Alibaba’s results come against the backdrop of a costly battle in China’s “instant retail” sector, or “quick commerce”, where major players are pouring billions into one-hour delivery services to capture market share.

At the same time, Alibaba has been investing heavily in artificial intelligence, emerging as one of China’s leaders in the field.

In February, it said it would allocate 380 billion yuan over three years for AI and cloud investments, but on Tuesday CEO Eddie Wu told analysts that he was not ruling out further investment given supply chain challenges it faces while trying to keep up with customer demand.

“We will be investing in AI infrastructure aggressively, the 380 billion yuan investment we previously mentioned might be on the small side given the customer demand,” said Alibaba Group CEO Eddie Wu.

Net profit fell 53 per cent to 20.61 billion yuan, a fall attributed to investments, though still exceeded analysts’ forecasts.

“We believe these investments (in consumption and AI) will build long-term competitive advantages despite near-term margin pressures,” said CFRA analyst Angelo Zino.

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The instant retail price war, triggered by aggressive discounting and subsidies from Alibaba, JD.com and Meituan, has raised investor concerns about margins and led to heavy cash burn, which Nomura analysts estimate totalled over US$4 billion industry-wide in the second quarter alone.

Alibaba is less exposed than rivals with its diversified business and significant war chest, and sees long-term upside, projecting instant retail could add one trillion yuan in annualised gross merchandise value – a commonly used metric for e-commerce sales – over the next three years.

The firm said its instant retail business has improved unit economics in recent months, with cost per order falling by half since summer.

Heavy subsidies for Singles’ Day

China’s Singles’ Day sales period – the longest on record, stretching from early October to November 11 – also brought heavy subsidies and discounts offered by retailers to spur demand.

During that period, sales across major platforms reached 1.70 trillion yuan, up from 1.44 trillion yuan last year, according to data provider Syntun.

Alibaba has also recently stepped up efforts to expand into the consumer artificial intelligence market, where it has lagged rivals because of its greater focus on enterprise clients.

Recently it launched a free app built on the latest version of its Qwen large language model, which surpassed 10 million downloads within its first week – still far behind market leader ByteDance’s Doubao, which has 150 million users.

Alibaba’s consumer-facing shift comes amid an intensifying price war in China’s domestic AI market, sparked by DeepSeek’s focus on low-cost computing and app development – a strategy that has forced rivals to slash prices and follow suit. REUTERS

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