Alibaba Shares Tumble 5% as Revenue Misses Expectations Despite Cloud and AI Surge

Alibaba has recently announced its fourth-quarter and full-year financial results for the fiscal year ending March 31, 2025. The group reported a quarterly revenue of RMB 2364.54 billion, reflecting a 7% growth from the previous year, though slightly below market expectations of RMB 2379.1 billion. Adjusted EBITA increased by 36% to RMB 326.16 billion, while non-GAAP net profit grew 22% to RMB 298.47 billion.

Over the entire fiscal year, revenues reached RMB 9963.47 billion, marking a 6% year-over-year growth. Despite mild gains, the revenue fell below market anticipations, which led to a drop in Alibaba's stock price, declining over 5% in pre-market trading on the announcement day.

On a business segment level, China's retail commerce revenue increased by 8%, reversing previous slowdown trends. Alibaba's e-commerce arm saw a revival as investments in user experience and commercialization begin yielding results. Active engagement on platforms such as Taobao and partnerships with Ele.me for food delivery subsidies are part of Alibaba's strategy to boost immediate retail presence.

The Cloud Intelligence Group showed remarkable performance with a revenue hike of 18%, the fastest pace in three years, driven by the increased adoption of AI-related products. The commitment to AI was highlighted by CEO Daniel Zhang, focusing on AI as a fundamentally transformative force that could redefine user access points beyond e-commerce.

However, Alibaba's substantial investment in AI and cloud infrastructure has led to a 10% decrease in operating cash flow and a notable 53% drop in free cash flow. The company plans to invest RMB 3800 billion over the next three years to expand AI-related cloud infrastructure, emphasizing long-term growth prospects.

In non-core sectors, Alibaba reported modest profits in digital entertainment due to improved operational efficiency at Youku, but faced losses in various divisions, including its local services group and logistics arm, Cainiao. Streamlining efforts continue, reflected by a notable reduction in employee count, primarily due to strategic disposals such as the sale of Sun Art Retail Group.

As Alibaba continues reshaping its operational focus towards AI-enhanced services and refining its portfolio through divestments, the company demonstrates adaptability in securing growth despite prevailing market challenges.