Alibaba's Strong December Quarter Fueled by AI and E-commerce Growth

Alibaba Group Holding Ltd. has reported its fastest revenue growth in over a year, signaling a strong turnaround in its commerce business and significant progress in artificial intelligence (AI), according to a Bloomberg report.

The company announced an 8% increase in sales to 280.2 billion yuan ($38.6 billion) for the December quarter, exceeding analysts' projections. This growth was driven by robust expansion in cloud services, which recorded its highest quarterly growth in approximately two years. The news sent Alibaba's shares soaring more than 6% in pre-market trading in the US.

Alibaba's resurgence follows a challenging period marked by a government crackdown that significantly impacted its internet business, once China's dominant online commerce platform. The company's turnaround began in 2024 under the leadership of Joe Tsai and Eddie Wu, two of co-founder Jack Ma's trusted lieutenants, who prioritized investment in AI and e-commerce.

The cloud division, which encompasses Alibaba's diverse AI projects and provides computing power to external clients, saw revenue climb 13% to $4.3 billion in the December quarter. International commerce sales, driven by overseas marketplaces such as AliExpress and Trendyol, surged 32% during the same period.

Alibaba has witnessed a significant surge in its market value, gaining approximately $100 billion in 2025, although it remains below its pre-crackdown peak. Ma's recent appearance at a televised summit convened by Xi Jinping this week, alongside prominent figures in Chinese technology and business, signifies Alibaba's return to favor after years of strained relations. The gathering featured entrepreneurs from various sectors, particularly those involved in AI.

Ma's presence at the summit is noteworthy given his previous status as a prominent casualty of Xi Jinping's crackdown on the internet and private sector in 2020, which also led to the cancellation of Alibaba-affiliate Ant Group Co.'s blockbuster initial public offering. This episode marked the beginning of a multi-year campaign to tighten state control over the economy, curb the influence of China's billionaire class, and shift resources towards Xi's priorities, including national security and technological self-sufficiency. Ma, once a vocal entrepreneur, had largely withdrawn from public view during this period.

However, authorities have adopted a less adversarial approach as China's economic growth slowed and companies aligned themselves with Xi's ambitions for leadership in areas like AI. Alibaba, operating one of the world's largest cloud services platforms, has impressed investors this year with its significant progress in AI during the post-ChatGPT era.

Alibaba has invested in several of China's most promising AI startups, including Moonshot and Zhipu, and has aggressively expanded its cloud business, slashing prices to attract back customers lost during the turbulent years. The company has also made substantial investments in AI, joining a race led by Baidu Inc. at the time.

Alibaba's Qwen AI model has performed well in official benchmark tests, highlighting the company's growing prominence in the field. Furthermore, Apple Inc. is incorporating Alibaba's AI technology into Chinese iPhones, demonstrating confidence in its capabilities.

Despite these positive developments, Bloomberg Intelligence analysts caution that lower earnings at Taobao-Tmall, driven by increased merchant and user benefits to bolster e-commerce market share in China, could pose a challenge. They also note that adjustments to international digital commerce unit AIDC and logistics business Cainiao amid the US-China trade war could negatively impact earnings, particularly in the first half of 2025.

The analysts also point out that Alibaba's efforts to boost revenue growth through increased use of its public cloud services and AI-related products at reduced prices might have negatively impacted margin gains from economies of scale.