Despite recent earnings signaling a slowdown, Alibaba is taking the opposite approach by rapidly investing and restructuring extensively to fully commit its future to AI.
Alibaba reported results for the quarter ending 31 December 2025, with revenue of 284.8 billion yuan (about $41.4 billion), below analyst forecasts. Net profit fell over 66% year-on-year to 15.6 billion yuan (around $2.2 billion), reflecting pressure from e-commerce competition and significantly higher investment costs.
The underwhelming figures are not solely due to waning demand but stem from strategic decisions. The company noted that the main cause of the net profit decline was a 74% year-on-year drop in operating profit, impacted by ongoing investments in quick commerce to compete in delivery, user experience enhancements, especially AI and Cloud investments, which heavily reduced operating profit and dragged net profit down.
CEO Eddie Wu stated that AI will be one of Alibaba's main growth engines, announcing a clear target: within five years, Alibaba aims to generate $100 billion annually from AI and Cloud. This represents fivefold growth, averaging about 35% per year, a very ambitious target signaling AI as Alibaba’s new core pillar moving forward.
Currently, Alibaba's cloud business grows 36% annually, and AI product revenue has posted triple-digit growth for 10 consecutive quarters. In the latest quarter, the Cloud Intelligence segment grew 36% to 43.3 billion yuan (about $6.2 billion), driven mainly by Public Cloud and increased AI product usage.
Alibaba is one of the Chinese tech firms intensifying investments to catch up with U.S. companies in AI. Recently, Alibaba announced plans to invest tens of billions of dollars in AI and cloud infrastructure to transition from an e-commerce company to an AI leader.
In this new roadmap, Alibaba has undertaken a major organizational overhaul by establishing a new business unit that consolidates all AI-related work under one structure, reflecting a serious commitment to turning AI into revenue.
The new unit, called "Alibaba Token Hub" or ATH, brings together research teams, AI models, products, and related applications. CEO Eddie Wu oversees it directly. It encompasses the Qwen model development team (the company's main AI model), consumer apps business, key AI product DingTalk (an enterprise communication app similar to Slack), and devices under the Quark brand, such as smart glasses.
This centralization aims to accelerate collaboration among research, development, and design teams while pushing concrete AI revenue generation. The name Token Hub reflects a key concept in modern AI business—tokens are processing units used as the basis for service charges, showing Alibaba's clear focus on monetizing AI and making it a genuine revenue business.
This restructuring follows questions about Alibaba’s AI direction, especially after the sudden resignation of Junyang Lin, head of the Qwen development team. His departure caused a stir in the industry and raised concerns about continuity in cutting-edge research.
Analysts believe the Alibaba Token Hub will improve AI coordination, speed up product development, and potentially boost AI revenue efficiency, especially since Alibaba’s ecosystem spans both consumer and large enterprise sides, possibly providing a “structural advantage” over competitors.
Nevertheless, Alibaba still faces multiple pressures, particularly rising technology costs due to price wars in both AI and e-commerce sectors. Both must burn cash to attract users unfamiliar with paying subscriptions for software, making monetizing AI in this field even more difficult.
Additionally, fierce competitors like Tencent, advantaged by WeChat, and ByteDance with its Doubao app, are all competing with AI apps, while startups such as DeepSeek or MiniMax pursue open-source models, driving down prices across the market.
In the latest restructuring, Alibaba is refocusing more on enterprise customers, which have higher revenue potential. Recently, Alibaba launched an Agentic AI service for organizations called “Wukong,” designed specifically for enterprise clients, accessible via website or DingTalk, and integrated with Alibaba’s ecosystem like Taobao and Alipay, all expected to be new growth drivers.
This restructuring clearly signals Alibaba’s accelerated transition from an e-commerce firm to a Chinese AI company betting its future on AI, following a global big tech pattern of sacrificing short-term profits to secure long-term dominance.
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