Alibaba (NYSE:BABA) reported stronger-than-expected second-quarter revenue, driven by a solid performance from its cloud division, which has been increasingly enhanced by artificial intelligence capabilities.
The company has been aggressively investing in AI to accelerate growth across both its cloud and consumer businesses, committing billions of yuan to new models and infrastructure as it seeks to capitalize on the emerging technology.
Over the past year, Alibaba has poured roughly 120 billion yuan into AI- and cloud-related capital expenditures, CFO Toby Xu said in a statement.
During the quarter ended September 30, revenue for Alibaba’s cloud intelligence unit reached 39.82 billion yuan, topping market expectations of 37.99 billion yuan. Xu noted that AI-related revenue now makes up an “expanding share” of business coming from “external customers,” adding that Alibaba is reinvesting profits and free cash flow “for the future,” even though “near-term profitability is expected to fluctuate.”
Investments in rapid one-hour delivery offerings also helped draw more users to the company’s e-commerce platforms, where retailers are increasingly offering aggressive discounts amid intense competition in China’s online marketplace.
“In our consumption business, quick commerce continued to scale with significant improvement in unit economics and drove rapid growth in monthly active consumers,” Alibaba Group CEO Eddie Wu said.
Government incentives encouraging shoppers to trade in old appliances for new ones have also supported demand, though the policy expires December 31.
Across the broader company, adjusted earnings per American depositary receipt were 4.36 yuan, while total revenue came in at 247.80 billion yuan. Analysts surveyed by Bloomberg had expected earnings of 6.34 yuan and revenue of 245.2 billion yuan.
Alibaba’s U.S.-listed shares rose 3.9% in Tuesday’s premarket trading.