Alibaba Misses Revenue Target, But Cloud Growth Driven by AI Offers Relief

Beijing, August 29, 2025 – Alibaba Group Holding Ltd. reported quarterly revenue below Wall Street estimates, highlighting ongoing pressures on China’s consumer economy, but its fast-growing cloud division helped offset some of the weakness.

The company posted revenue of 247.65 billion yuan ($34.1 billion) for the quarter ending June, falling short of analysts’ forecast of 252.92 billion yuan. Sluggish consumer spending, heightened competition, and deep discounts across online platforms weighed on performance, reflecting broader economic challenges linked to the property slowdown, low wage growth, and global trade headwinds.

In contrast, cloud computing was a standout performer. Revenue surged 26% year-on-year to 33.4 billion yuan, far outpacing expectations of an 18% rise. This growth was driven largely by demand for artificial intelligence services, with CEO Eddie Wu noting that AI-related products have become a significant contributor to customer revenue.

For the first time, Alibaba disclosed the results of its China E-commerce Group—which includes Taobao, Tmall, Ele.me, and Fliggy—reporting 10% revenue growth. Its international commerce business also showed resilience, rising 20% to 6.5 billion yuan.

Despite strong topline growth in certain segments, profitability slipped. Operating income fell 3%, while adjusted EBITA dropped 14%, as the company increased investment in its instant commerce operations to stay competitive in an aggressive market.

Investor reaction, however, was cautiously optimistic. Alibaba’s U.S.-listed shares rose by as much as 2% in premarket trading, suggesting confidence in the company’s cloud and AI strategy as a driver of long-term growth.

While Alibaba continues to face headwinds in retail, the surge in AI-driven cloud revenue signals a possible pivot point for the tech giant, underscoring how strategic diversification may help counterbalance weaknesses in traditional e-commerce.