Alibaba, the well-known Chinese e-commerce company, is facing challenges in delivering on its big promises about artificial intelligence (AI). CEO Eddie Wu had spoken positively about AI’s future, but recent results have disappointed investors.
The company’s shares dropped nearly 8% in New York after it reported weaker-than-expected quarterly earnings. Although Alibaba’s total revenue for the January–March period rose by 7% compared to last year—reaching about 236 billion yuan ($32.8 billion)—profits in key areas were lower than expected.
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Sales from its main Chinese shopping platforms grew by 12%, and international e-commerce, local services, digital media, and cloud computing also saw double-digit growth. However, profits (using Alibaba’s preferred measure) did not meet analyst expectations for most business units.
For example, the local services business, which includes food delivery, lost 2.3 billion yuan—more than double what experts had predicted. This was likely due to intense price competition with rivals Meituan and JD.com.
The biggest concern, though, is in Alibaba’s AI and cloud computing segment. Even though China has made impressive advancements in AI recently, Alibaba’s cloud division reported a drop in both revenue and profit compared to the previous quarter. CEO Eddie Wu blamed the Chinese New Year holiday for the slowdown but admitted the results weren’t ideal.
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Also worrying is the decline in Alibaba’s capital spending, which may be due to problems getting AI chips—a key part of developing AI technology. While competitor Tencent says it has enough AI chips to avoid U.S. export issues, Alibaba only said that it won’t be affected by short-term supply problems.
Even though Alibaba said its AI product revenue has continued to grow strongly for seven straight quarters, the overall picture suggests that turning China’s AI breakthroughs into big profits may take much longer than hoped.
