Alibaba pledges 'aggressive' AI investment, reports fastest growth in a year

Alibaba will "aggressively" invest in AI, pursuing the goal of artificial general intelligence. Speaking at an investor conference to announce its Q4 results, Eddie Wu, CEO of Alibaba Group, said that investments in AI over the next three years would exceed those made over the last decade.

In an analyst’s call, a spokesperson for Alibaba said, “When it comes to Alibaba's AI strategy, our first and foremost goal is to pursue artificial general intelligence (AGI). We aim to continue to develop models that extend the boundaries of intelligence because all of the visible AI application scenarios today that we see around content creation, search, etc, have arisen precisely as a result of the ongoing extension of those boundaries. We want to keep pushing to create even more opportunities.”

The focus is reflected in Alibaba's quarterly results, which saw an 8% increase in revenue year on year to RMB 280.1 billion ($38.58 billion). The revenue increase was buoyed by growth in e-commerce (Tmall, Taobao, and Alibaba International Digital Commerce Group) and its cloud intelligence group.

Speaking about the results, Wu observed, “This quarter’s results demonstrated substantial progress in our ‘user first, AI-driven’ strategies and the reaccelerated growth of our core businesses.”

Doubling down on e-commerce

During this quarter, Alibaba increased its focus on its e-commerce business and streamlined operations, including divesting its interest in physical retail ventures. Hypermarket Sun Art was sold to PE firm DCP Capital for $1.6 billion, a significant discount from the $3.6 billion paid for the chain in 2020. Acquired in 2017 for $2.6 billion, Intime was sold for $1 billion.

Despite these divestments, Taobao and Tmall experienced strong growth, with revenue increasing 9% year-on-year to $13 billion, driven by gains in online GMV. The platform's premium 88VIP membership program expanded to 49 million users, reflecting growth in its high-spending customer base.

Alibaba attributes part of its revenue growth to the increased adoption of Quanzhantui, its AI-powered marketing tool. The tool has gained traction among small and medium-sized merchants due to its ease of use and ability to improve marketing performance.

The Alibaba International Digital Commerce Group (AIDC) reported a $678 million loss despite a 32% revenue increase to $5.1 billion. The losses stemmed from investments in user acquisition for Trendyol and AliExpress. However, improved monetisation and operating efficiency at Lazada, Alibaba's Southeast Asia e-commerce platform, partially offset these losses. According to Wu, AIDC anticipates achieving its first quarter of profitability in the next fiscal year. The company also plans to announce a joint venture with South Korean retailer Shinsegae to operate AliExpress Korea and Gmarket, targeting the South Korean market.

Alibaba’s Hong Kong-listed shares jumped 12.6% on Friday after the company said it would invest “aggressively” in artificial intelligence over the next three years.

Betting big on AI

While harnessing the power of generative AI has been a focus area at Alibaba for a while now, the Cloud Intelligence Group is back on track after a relatively modest revenue increase in Q2, reporting a 13% year-over-year revenue surge to $4.3 billion, driven by surging demand for its AI-powered public cloud offerings.

AI-related product revenue has also exploded, maintaining triple-digit year-over-year growth for the sixth consecutive quarter, confirming Alibaba's strategic bet on artificial intelligence.

Wu discussed the company's upcoming investment in cloud and AI infrastructure that will dwarf its total spending over the past decade. "AI technology presents powerful opportunities," Wu declared, adding that Alibaba will "increase investment in AI application, R&D, and computing power" to aggressively integrate AI across its businesses and seize new growth opportunities.

Youku ad revenue surge shrinks Alibaba's digital media losses

The digital media and entertainment group at Alibaba saw its revenue increase 8% year-over-year to $745 million. The losses incurred continued to narrow year over year. Increased ad revenue for streaming platform Youku and improved content investment efficiency helped bring down the loss, which stood at $42 million, a 40% year-over-year reduction. 

In 2023, the company first announced its plans to split into six separate business units and pursue independent IPOs against the backdrop of disappointing revenue growth in its full fiscal results.