How China’s AI race is transforming Alibaba’s business model

Alibaba’s latest financial results highlight its aggressive push into artificial intelligence, raising investor optimism but also concerns over transparency. The company’s Cloud Intelligence Group, which includes cloud computing and AI operations, reported a 38% year-on-year revenue increase to approximately $6 billion for the quarter. Adjusted EBITA profits in this division rose over 50% compared to the same period last year, signaling improving profitability. However, Alibaba’s financial disclosures obscure key AI costs, making it difficult for investors to evaluate the true profitability of its AI ambitions. Many AI-related expenses are lumped into a vague category called 'All Others,' which also includes logistics, mapping services, video games, and supermarkets. This segment reported massive losses in the recent quarter, complicating efforts to isolate AI-specific financial performance. CEO Eddie Wu has set an ambitious goal of generating $100 billion in annual AI-related revenue within five years. Alibaba is heavily investing in cloud infrastructure, AI model training, generative AI systems, and enterprise AI services. Its Qwen large language model platform has emerged as a major domestic alternative to Western AI technologies, aligning with Beijing’s push for self-sufficiency in AI development. The company faces stiff competition from both domestic rivals and global AI leaders, forcing it to balance rapid expansion with financial clarity. While cloud and AI operations show strong growth, the lack of detailed cost breakdowns leaves investors uncertain about long-term sustainability. Analysts suggest Alibaba must improve transparency to build confidence in its AI strategy as it seeks to dominate China’s tech sector.