Alibaba’s Cloud Growth Accelerates as Competitive Pressures Mount

China’s Alibaba Group reported a 34% surge in cloud revenue in the latest quarter, driven by accelerating demand for artificial intelligence. However, total revenue for the July–September period rose only 5% year-on-year to 247.8 billion yuan ($35 billion), while profit plunged 52% amid intense price competition across China’s e-commerce sector, including food delivery. Rival JD.com also saw its net profit shrink by 55% during the same quarter.

Originally rooted in e-commerce, Alibaba has increasingly prioritized cloud computing and AI. Earlier this year, it committed at least 380 billion yuan ($53 billion) over three years to enhance its cloud and AI infrastructure. CEO Eddie Wu noted that substantial AI-related investments had strengthened revenue momentum, with cloud growth accelerating from 26% in the previous quarter to 34%. The company said AI demand is rising rapidly and indicated it may exceed its initial investment pledge to keep pace with market needs. It also highlighted strong early adoption of its upgraded AI chatbot, Qwen, which reached 10 million downloads within a week of launch.

Alibaba’s shares climbed 2% in Hong Kong on Tuesday, and rose 2.4% in pre-market trading in New York. The stock has gained more than 90% this year, supported by confidence in its AI advancements.

Chinese companies have made notable strides in AI following disruptions introduced by startup DeepSeek, which has challenged the dominance of U.S. competitors. Recent earnings across major Chinese tech firms have varied: Tencent posted a solid 15% revenue increase for the quarter, while Baidu reported a 7% decline. Investor concerns about an overheated AI market persist, though Nvidia’s strong results last week provided some reassurance.