Alibaba’s US-listed shares jumped over 8% after Chief Executive Officer Eddie Wu informed analysts that the company anticipates annual recurring revenue from AI-related models and services to triple by year-end. Wu indicated that Alibaba is focusing on long-term AI growth over short-term profits, suggesting a much larger investment in AI than initially planned.
The firm forecasts that annual recurring revenue from AI products and services will hit 10 billion yuan ($1.5 billion) by June and exceed 30 billion yuan by the end of the year, according to Wu. Investors appeared optimistic about the quick growth trajectory despite Alibaba posting its first operating loss since 2021, partly due to substantial investments in AI infrastructure, research, and cloud expansion.
Tencent’s US-traded shares rose nearly 5% after reporting revenue growth that slowed to its lowest rate in over a year. Nonetheless, the company outperformed Alibaba, supported by robust gaming and advertising sectors.
The earnings reports underscored the diverging strategies developing among China’s technology giants as they vie for dominance in AI amid increasing investor scrutiny regarding returns from billions spent on data centers, computing infrastructure, and AI talent.
Alibaba continues to be one of China’s most committed AI investors, pledging around 380 billion yuan ($56 billion) on AI initiatives over three years. The company has accelerated its efforts to monetize its AI ecosystem through cloud services, enterprise software, AI agents, and e-commerce integration.
Wu reaffirmed Alibaba’s goal of creating a comprehensive AI ecosystem that includes software, models, and hardware. The firm has integrated its Qwen AI application with the Taobao shopping platform and has launched enterprise-oriented AI agent tools under the WuKong brand. Earlier this year, Alibaba also increased prices for several cloud and AI-computing products, with some services seeing price hikes of up to 34%.
In line with its commercialization strategy, Alibaba restructured operations under a new business group named Alibaba Token Hub, consolidating AI research and product teams to enhance development and monetization efforts.
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The company is preparing to list its chip-making subsidiary, T-Head, as interest grows among investors for Chinese alternatives to Nvidia amid ongoing geopolitical and supply-chain challenges. T-Head has recently secured China Unicom as an external customer.
Alibaba Chief Financial Officer Toby Xu stated that the company will continue to invest heavily in AI and cloud computing to bolster its competitive position.
Tencent has also worked to enhance its AI portfolio with upgrades to its Hunyuan foundational model, following a restructuring led by former OpenAI researcher Yao Shunyu. Executives noted that the latest iteration of Hunyuan has gained traction among developers via the OpenRouter distribution platform.
In contrast to some domestic competitors, Tencent has adopted third-party AI systems, including models from DeepSeek, to enhance its chatbot services.
The two Chinese internet giants are increasingly competing with newer AI-centric firms like Moonshot AI, MiniMax, and Zhipu AI, which have quickly attracted investor interest and rising valuations this year.
Analysts indicated that the earnings results reflect a broader shift in investor priorities, with markets placing greater importance on potential future AI revenues over short-term profits. Citigroup analysts noted that Alibaba’s profit challenges demonstrate a calculated strategy focused on long-term opportunities in AI and cloud computing.
(Edited by : Juviraj Anchil)
