Alibaba Shares Jump as AI Fuels Cloud Growth

Alibaba reported stronger-than-expected Q2 revenue, driven by a 34% surge in cloud computing sales fueled by booming AI demand.

sarah

Nov 25, 2025 - 19:33

Alibaba Shares Jump as AI Fuels Cloud Growth

Alibaba reported better-than-expected revenue in its fiscal second quarter, driven by a surge in sales in its specialized cloud computing division.

Alibaba's New York-listed shares were up about 4.3% in premarket trading as investors ignored a decline in profit.

The company performed this way in its fiscal second quarter, which ended September 30, compared with LSEG estimates:

Revenue rose 5% to 247.8 billion Chinese yuan ($34.8 billion), compared to 242.65 billion yuan a year earlier.

Investors are focusing on Alibaba's cloud computing division, which generates revenue related to artificial intelligence. Over the past few quarters, Alibaba's cloud revenue has grown rapidly.

Alibaba reported a 34% year-over-year increase in cloud computing revenue to 39.8 billion yuan, compared to expectations of 37.9 billion yuan. This growth rate was faster than the 26% recorded in the June quarter.

The Chinese tech company said its investments in AI are helping its cloud unit.

CEO Eddie Wu said in an earnings statement on Tuesday, "Strong demand for AI has further accelerated our Cloud Intelligence Group business, with revenue growing 34%, and AI-related product revenue delivering triple-digit year-over-year growth for the ninth consecutive quarter."

Wu said that demand for Alibaba's AI products is "accelerating."

"Certainly, we see that customer demand for AI is very strong and continues to be strong. In fact, we are not even able to keep up with the growth in customer demand... in terms of the speed at which we can deploy new servers," Wu said.

In September, the company said it plans to increase spending on AI model and infrastructure development, in addition to the 380 billion yuan ($53 billion) announced in February. Alibaba said on Tuesday that it has spent about 120 billion yuan in capital expenditures on AI and cloud infrastructure over the past four quarters. Speaking about capex figures, Wu said the initial target of 380 billion yuan "may be slightly lower." He added that if demand remains strong, Alibaba "will not rule out further increasing capex investment."

Alibaba has emerged as one of China's leading AI players. On Monday, Alibaba said its Quan app, the Chinese giant's competitor to OpenAI's ChatGPT, surpassed 10 million downloads in its first week of public launch. The app is powered by Alibaba's Quan artificial intelligence model.

Earnings before interest, taxes, and amortization (EBITA) for its cloud division, a measure of profitability, rose 35% to 3.6 billion yuan.

Investors are ignoring the decline in profits.

Meanwhile, the company is investing heavily in the tough instant commerce market. This is a product offering from Alibaba and some of its Chinese e-commerce competitors that promises super-fast delivery on certain items.

Investments in this new segment have impacted Alibaba's overall business profit, even though cloud computing remains strong.

Overall adjusted EBITA, a measure of profit closely monitored by analysts, fell 78% year-over-year to 9.1 billion yuan, a decline Alibaba attributed in part to its investment in instant commerce.

But investors seem to be ignoring this, as growth is accelerating in the cloud computing business and Alibaba's main China e-commerce division, which generates revenue from its online shopping platforms Taobao and Tmall, as well as its instant commerce initiative. China's e-commerce revenue grew 16% year-on-year to 132.6 billion yuan, with growth accelerating compared to the previous quarter.

Revenue from Quick Commerce increased 60% year-on-year this quarter, compared to 12% in the previous quarter.

Wu said, "In our consumption business, Quick Commerce continued to scale with significantly improved unit economics and rapid growth in monthly active consumers on the Taobao app."

Jiang Fan, who runs Alibaba's e-commerce business group, called Quick Commerce a "strategic pillar" and said Alibaba aims to achieve 1 trillion yuan in gross merchandise value, or the value of transactions across the entire platform, within three years.