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Source: [https://finance.yahoo.com/news/alibaba-67-profit-plunge-shows-100308190.html](https://finance.yahoo.com/news/alibaba-67-profit-plunge-shows-100308190.html)
>Alibaba Group Holding Ltd.’s earnings plunged while revenue barely grew, underscoring the urgency behind the Chinese e-commerce leader’s drive to wring more profits out of a swathe of costly AI endeavors.
>The company posted a 2% rise in sales to 284.8 billion yuan ($41.3 billion) for the three months ended December, just shy of the average projection. But net income plummeted 67% — its worst performance since early 2024 — hurt in part by heavy spending on promotions to fend off rivals in commerce. Alibaba’s US-listed shares slid 4% in pre-market trading.
>The disappointing results show why the company is driving a major restructuring aimed at generating profit off its sprawling AI endeavors. The company this week launched an agentic AI service known as Wukong for company clients, and hiked prices for its cloud computing and storage services by as much as 34%. Alibaba is keen to monetize its growing AI portfolio in part to offset losses in its e-commerce business, which is grappling with fierce domestic competition.
>Click here for a liveblog on Alibaba’s results.
>The Hangzhou-based company — one of the world’s largest cloud service providers — is considered a frontrunner in China’s race toward artificial general intelligence. It’s also the most aggressive in terms of spending: Alibaba has pledged more than $53 billion of AI investment over several years, far surpassing its Chinese rivals though a fraction of the $650 billion that US hyperscalers intend to shell out in 2026.
>Alibaba’s cloud unit has since become the group’s fastest-growing business, with the company recording triple-digit revenue growth from AI-related products over 10 consecutive quarters.
>The company however is grappling with fundamental changes with the potential to reshape leadership of the world’s biggest internet arena.
>China’s newfound love affair with OpenClaw-style agentic AI has handed Tencent Holdings Ltd., with its all-encompassing WeChat ecosystem, an initial advantage. Alibaba’s rival is considered well-positioned to build agentic AI because it sits on a trove of user data and controls access to a universe of Chinese apps via WeChat.
>Alibaba’s AI efforts were further unsettled by the surprise departure of Junyang Lin, the top developer for Qwen models and one of the most influential figures behind Alibaba’s transition to AI. That sent ripples through the industry and raised questions about the company’s approach to cutting-edge research. The exact reasons for Lin’s exit remain unclear.
>Costs are rising on other fronts. Over last month’s week-long Lunar New Year holiday, Alibaba, Tencent, ByteDance Ltd. and Baidu Inc. gave out billions of yuan in coupons to acquire users for its consumer-facing agentic app. While competitors saw a sharp increase in adoption, Qwen’s usage remained well above pre-campaign levels, according to estimates by Morgan Stanley.
>Alibaba has since shifted its focus back to enterprise-facing products, launching a major restructuring centered on selling AI services mainly to businesses. With the creation of a new business group called Alibaba Token Hub, nearly all AI-related units now come under a single umbrella led by Chief Executive Officer Eddie Wu. The new business unit’s name refers to the units of computing (such as keywords) that serve as a benchmark for AI usage as well as a framework for charging those users.
>It “shows the explosive AI demand from strong token usage,” Morgan Stanley’s Gary Yu said in a research note this week. “The biggest implication is that it further strengthens commercialization of AI.”
>What Bloomberg Intelligence Says:
>Baidu’s decision to raise AI cloud product prices by as much as 30%, according to Bloomberg News, is a positive development that signals a shift toward monetization rather than price competition. Though higher prices can help firms stem operating losses, the fragmented sector’s long-term path to profit remains unclear. Baidu’s move mirrors similar steps by Tencent, Alibaba and Zhipu, catalyzed by surging demand for agentic AI following the launch of OpenClaw.
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