China’s Alibaba misses estimates, souring hopes of consumer revival

BEIJING – Alibaba Group’s quarterly revenue missed projections, reflecting a persistent Chinese consumer downturn as well as intense rivalry in the critical field of AI.

Revenue for the three months ended March rose 7 per cent to 236.5 billion yuan (S$42.6 billion), versus an average estimate of 237.9 billion yuan. Net income almost quadrupled to 12.4 billion yuan, in part because of gains from equity investments. Its shares fell more than 6 per cent in pre-market trading.

Alibaba, a barometer of the Chinese consumer economy because of its sprawl, had benefited from government subsidies intended to shield the world’s No. 2 economy from a global trade war. Alibaba had been counting on a bounce back in its online commerce business to support a post-DeepSeek pivot to AI.

CEO Eddie Wu and Chairman Joseph Tsai – two of co-founder Jack Ma’s most trusted lieutenants – took the helm in 2023 and are orchestrating Alibaba’s comeback from years of government scrutiny. They’ve refocused spending on building AI and e-commerce, while accelerating the unloading of non-core assets to bankroll AI investments and an international expansion. 

The company has pledged more than 380 billion yuan toward AI infrastructure such as data centres over the next three years. Mr Wu declared in February the company’s primary objective is now attaining artificial general intelligence – putting it on par with the likes of OpenAI. 

Alibaba has been releasing AI products at a frenetic pace since DeepSeek’s emergence on the global stage this year. Alibaba said its Qwen 3 flagship model, unveiled just last month, rivals DeepSeek’s performance on several fronts. On May 14, the company updated its video-generating model for the second time in a month.

But it is facing intense competition from Chinese AI rivals, including Baidu and Tencent.

Globally, Mr Tsai has warned of an AI bubble, cautioning that data centres are being built in the US without clear customers in mind.

The continued uplift from narrower local services losses and jump in cloud earnings should have more than offset international digital commerce’s shortfalls for a second straight quarter.

Profit from Taobao-Tmall group (TTG) probably also rose year-over-year as the firm’s push for higher gross merchandise value through the joint utilisation of tools within its ecosystem spurred higher customer management revenue. Yet cost hikes could have surpassed revenue gains to lower TTG’s fourth quarter adjusted Ebita margin from a year earlier.

The e-commerce business is also facing growing competition from ByteDance and PDD. In an effort to fend off JD.com and PDD, Alibaba said last week it will partner with China’s Instagram-like Xiaohongshu for Taobao and Tmall merchants to embed product links on the popular influencer platform.

For now, Beijing is helping keep the industry afloat, with incentives to buy everything from appliances to smartphones and cars. In May, policymakers announced a slew of stimulus measures, including monetary policy easing. BLOOMBERG