Alibaba: committed to investing consumption and AI+ cloud

Alibaba: committed to investing consumption and AI+ cloud

Alibaba's cloud division, a key driver of the company's AI ambitions, is experiencing slowing growth, according to recent financial projections. The company's cloud revenue is projected to grow by just 4.3% in the June quarter, signaling a deceleration in momentum despite significant investments in artificial intelligence (AI) [1].

The primary challenge for Alibaba lies in monetizing its AI investments. Chinese consumers have shown resistance to subscription-based AI models, pushing the company to pivot towards enterprise API services and open-source strategies. This cultural resistance is a notable barrier, as seen with Baidu's Ernie chatbot, which was discontinued after four months due to poor adoption [1].

Price wars in the AI sector are also putting pressure on Alibaba's revenue potential. The company recently slashed the cost of its Qwen-Long large language model API by 97%, but competitors have followed suit, creating a deflationary environment where user acquisition and market share are prioritized over profitability [1].

Beyond AI, Alibaba is consolidating its services with Ant Group and investing in worker welfare amid intense competition. The company launched a unified membership program with Ant Group, covering services across 22 platforms, and has pledged to improve working conditions for delivery riders [1].

Alibaba Cloud is set to spotlight artificial intelligence in its upcoming quarterly earnings, but the numbers suggest a more cautious outlook for its cloud division. Revenue for the June quarter is forecast to reach 252.9 billion yuan (US$34.7 billion), representing a 4% year-on-year increase. Meanwhile, Alibaba Cloud's revenue is projected to grow just 4.3% quarter-on-quarter to 31.4 billion yuan (US$4.4 billion) [1].

While the figures show stability, they also reflect slowing momentum in a segment once seen as the centerpiece of Alibaba's global technology expansion. The company's broader business context includes structural shifts, such as the launch of a unified membership program with Ant Group and improvements in worker welfare [1].

Alibaba's slowing cloud momentum comes as the company pursues broader structural shifts. The firm launched a unified membership program with Ant Group, covering services across 22 platforms, and has pledged to improve working conditions for delivery riders [1].

References:
[1] https://coolest-gadgets.com/alibabas-cloud-growth-slows-as-ai-strategy-faces-profitability-test/
[2] https://www.alibabacloud.com/blog/what-ai-companies-do---and-how-to-choose-the-right-one-for-your-business_602496?spm=a2c65.11461433.0.0.7ff95355RzWUqp