Strong profits despite lower-than-expected revenue
Alibaba beat profit expectations in its June quarter, posting a net income of 43.11 billion yuan ($5.95 billion), significantly above the 28.5 billion yuan forecast. However, total revenue of 247.65 billion yuan ($34.6 billion) fell short of the 252.9 billion yuan anticipated by analysts. This disconnect reflects a challenging balancing act between investing in growth and meeting market expectations.
Revenue rose just 2% year-on-year, but net income surged 78% thanks to equity investment gains and the sale of Turkish platform Trendyol. Adjusting for those one-time effects, profits would have declined 18%, highlighting ongoing pressure from fierce competition in China’s rapid-delivery market.
Cloud computing drives tech momentum
Alibaba’s cloud computing division emerged as a highlight, delivering 33.4 billion yuan in revenue — a 26% increase from last year, and well above the prior quarter’s 18% growth rate. AI-related product revenue from external customers continued triple-digit growth for the eighth straight quarter.
The company’s CEO Eddie Wu emphasized that strong AI demand is fueling this momentum, making the cloud division a critical engine for monetizing artificial intelligence. Adjusted EBITA in the segment rose 26% year-on-year. Additionally, news of Alibaba’s new AI chip development, as reported by the Wall Street Journal, contributed to a 12% boost in share price on Friday.
E-commerce faces headwinds amid quick commerce push
Alibaba’s core e-commerce unit, still responsible for over half of its revenue, saw revenue grow 10% year-on-year to 19.6 billion yuan. Customer management revenue, which includes marketing services sold to merchants, also rose 10%. Yet, adjusted earnings for the division dropped 21%, as the company ramped up investments in “quick commerce.”
Quick commerce — offering delivery within an hour via Taobao — brought in more than 14.8 billion yuan in revenue, up 12% year-on-year. The strategy is Alibaba’s response to rivals like Meituan and JD.com, who are fiercely competing in the same space. Management believes this model will add 1 trillion yuan in annualized gross merchandise value (GMV) within three years, despite limited immediate revenue gains.
Global business shows promise
While domestic competition remains fierce, Alibaba’s international e-commerce segment, including AliExpress, reported a 19% increase in revenue for the quarter, with narrowing losses. This growth reflects the company’s strategy to diversify beyond China and strengthen its global digital commerce footprint.
Overall, investors seem satisfied with Alibaba’s results and strategic direction. Its U.S.-listed shares are up 40% in 2025 so far, fueled by optimism about cloud growth, AI monetization, and a more disciplined approach to global expansion.
