Alibaba $BABA ( ▲ 0.45% ) is climbing in premarket trading after posting second-quarter results that showed China’s leading cloud provider is riding the AI wave harder than anyone expected.
Cloud Intelligence Group revenue hit 39.8 billion yuan (about $5.6 billion) for the quarter ending September 30, beating estimates of roughly 38 billion yuan. CEO Eddie Wu credited the spike to “robust AI demand,” noting that the cloud unit grew 34 percent with AI product revenue logging its ninth straight quarter of triple-digit growth.
Wall Street seems happy to look past the messy part of the report. Adjusted net income fell 72 percent from a year ago, but management made it clear they are choosing scale over short-term profits. CFO Toby Xu said the company is funneling profits and free cash flow into long-term AI and cloud bets, with about 120 billion yuan invested in the past four quarters.
It helps that the strategy is getting early signs of traction. Ahead of earnings, Alibaba said its relaunched Qwen AI app crossed 10 million downloads in a single week. And while the cloud unit stole the spotlight, Alibaba’s core domestic e-commerce business also beat expectations, even as its international commerce segment lagged.
Investors may not love the shrinking profit line, but for now, the market seems far more interested in Alibaba’s bid to dominate the region’s AI infrastructure.