Alibaba's Stock Soars After Chinese Tech Giant's Quarterly Profit Doubles

(Yicai) May 14 -- Shares of Alibaba Group Holding surged after the Chinese tech giant reported its net profit doubled in its fiscal fourth quarter, mainly thanks to mark-to-market gains from equity investments and the year-earlier losses from the disposal of Sun Art and Intime.

Alibaba [HKG: 9988] rose 5.3 percent to HKD139.80 (USD17.85) a share as of 11.30 a.m. in Hong Kong today. Its New York-listed stock [NYSE: BABA] closed 8.2 percent higher at USD145.81 yesterday.

Net income attributable to ordinary shareholders jumped 106 percent to CNY25.5 billion (USD3.7 billion) in the three months ended March 31 from a year ago, the Hangzhou-based firm said in an earnings report released yesterday. Based on non-generally accepted accounting principles, the net profit stood at CNY86 million (USD12 million), compared with CNY29.8 billion a year earlier.

Revenue rose 3 percent to CNY243.4 billion (USD35.3 billion), with that from Cloud Intelligence Group surging 38 percent to CNY41.6 billion and from external customers 40 percent, fueled by enterprise adoption of artificial intelligence services.

Alibaba is at "a pivotal inflection point in the evolution from conversational chatbots to autonomous AI agents, which is directly driving explosive growth across three core workload categories: training, inference, and agent orchestration," Chief Executive Eddie Wu told analysts. Supply is struggling to keep pace, with not a "single card on our servers that is idle," he noted.

AI-related products income, which has an annualized run rate of CNY35.8 billion, saw a triple-digit growth for the eleventh consecutive quarter and made up 30 percent of external cloud revenue. The customer base for Alibaba's one-stop model service platform Model Studio grew eightfold.

Management guided for AI model and application services annualized recurring revenue to exceed CNY10 billion this quarter and CNY30 billion by the end of the year, with AI-related revenue expected to account for over 50 percent of total external cloud income within about one year.

E-Commerce

Revenue from Alibaba's China e-commerce business rose 6 percent to CNY122.2 billion, but relevant earnings before interest, taxes, and amortization dropped 40 percent to CNY24 billion. Customer management income climbed just 1 percent, but 8 percent on a like-for-like basis, excluding the accounting impact of a revamped merchant subsidy program.

Excluding losses from quick commerce, Alibaba's China e-commerce EBITA would have been stable year over year, noted Chief Financial Officer Toby Xu.

Quick commerce revenue surged 57 percent to CNY20 billion, with orders jumping 2.7 times.

Alibaba E-commerce has achieved "a very fundamental shift" in market position, Jiang Fan, CEO of the segment, told analysts. Unit economics will turn positive by the end of fiscal year 2027, Jiang said, adding that 88VIP membership numbers surpassed 62 million, continuing double-digit year-over-year growth.

The international digital commerce segment's adjusted EBITA loss narrowed to CNY138 million from CNY3.6 billion, driven by logistics optimization and efficiency gains at AliExpress. The business is expected to turn profitable over the next two years, Xu pointed out.

AI Investment

The negative free cash flow, which swung to an outflow of CNY17.3 billion last quarter from an inflow of CNY3.7 billion a year earlier, was "primarily due to the very significant investments we've been making in AI over the past year," Xu said. "We've been extremely resolute in making those investments precisely because we've seen the historic opportunity of AI."

Alibaba's future investment in AI infrastructure will far exceed CNY380 billion over the next five years, while the firm may also collaborate with service providers to jointly build data centers by selling AI servers developed by its unit T-Head Semiconductor, according to Wu.

"What we're doing today is investing capital to build two factories: an AI training factory and an inferencing factory," Wu noted. "The ROI on this investment in the next three- to five-year period is extremely clear."

Dividends

Alibaba will pay about USD2.5 billion in annual cash dividends, or USD1.05 per American depositary share.

Editor: Martin Kadiev