Alibaba cloud, AI divisions see fastest growth since 2022

Alibaba Group’s cloud and AI division reported an 18% revenue increase for the March quarter, marking its fastest growth since 2022.

AI-related sales have seen triple-digit growth for seven straight quarters.

CEO Eddie Wu highlighted strong AI adoption in sectors like internet services, autonomous driving, financial services, and online education. Traditional industries, such as animal farming and manufacturing, are also integrating AI solutions.

Demand for AI inference services is rising, and Alibaba expects wider adoption soon.

However, the cloud unit’s adjusted EBITA margin dropped 2% quarter-on-quarter to 8%, due to seasonal factors. The company anticipates margin improvement next quarter.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Alibaba’s cloud growth reflects shifting business maturity stages

Alibaba’s current 18% cloud revenue growth represents a significant deceleration from its pandemic-era expansion when the unit grew by 50% in fiscal year 2021 and 52% in 2020, when it was the fastest-growing global cloud provider 1.

This pattern reflects the natural growth curve of cloud businesses as they expand from explosive early growth to more sustainable rates as market share stabilizes, similar to how AWS and Microsoft saw their growth rates moderate at comparable scale points.

The growth rate still outpaces many competitors, and the cloud unit’s adjusted EBITA margin of 8% 2 demonstrates Alibaba’s ongoing transition from a growth-at-all-costs model to a more balanced profitability approach.

This trajectory is particularly notable given Alibaba maintained its position as the third-largest global Infrastructure-as-a-Service provider 1, despite operating primarily in the competitive Chinese market.

2️⃣ Alibaba’s AI pivot represents a fundamental strategic transformation

Alibaba’s $53 billion three-year AI investment commitment 3 signals a significant business transformation for a company historically defined by e-commerce, reinforcing Chairman Joe Tsai’s recent statement that “AI will be the mainstay of Alibaba’s business in the next 3-5 years” 4.

This strategic shift has already produced tangible outcomes, with AI-related products delivering triple-digit growth for seven consecutive quarters and the development of the Qwen model family, which has spawned over 90,000 derivative models globally 5.

The company’s recent launch of Qwen3, featuring hybrid reasoning capabilities, demonstrates Alibaba’s determination to narrow the technological gap with US competitors 6.