Alibaba Group Holding Limited (NYSE:BABA) CEO Eddie Wu Yongming said the company may exceed its planned AI capital spending as the Chinese tech giant pushes deeper into a “full-stack” artificial intelligence strategy, betting heavily on chips, cloud infrastructure, models and applications to drive its next phase of growth.
Expands AI Investments, Monetization
Alibaba said annualized recurring revenue from AI models and applications could reach 30 billion yuan ($4.42 billion) by the end of the year as the company deepens investments in AI infrastructure and cloud services.
Wu said Alibaba may exceed its previously announced 380 billion yuan capital expenditure target due to rising demand for AI data centers and cloud computing capacity, SCMP reported on Wednesday.
He also said AI-related products now account for 30% of Cloud Intelligence Group’s external customer revenue and could contribute more than half of cloud-computing revenue within the next year.
Wu said Alibaba’s AI business has moved beyond the early investment stage into scaled commercialization, with model and application services becoming key growth drivers for cloud profitability.
Alibaba Cloud Growth Explodes
Alibaba reported mixed fiscal fourth-quarter 2026 results as aggressive investments in AI and cloud infrastructure pressured profitability despite solid revenue growth.
Revenue rose 3% year over year to $35.28 billion, while adjusted earnings per ADS missed expectations and adjusted EBITA fell 84% as the company ramped spending on AI initiatives, cloud expansion and e-commerce upgrades.
Alibaba’s Cloud Intelligence Group delivered 38% revenue growth driven by surging AI demand, marking the eleventh straight quarter of triple-digit growth in AI-related product revenue.
The company also expanded its Qwen AI ecosystem, launched new merchant automation tools and continued scaling AI-powered shopping features across Taobao and Tmall.
Analysts See AI Becoming Alibaba’s Next Major Growth Driver
Analysts said Alibaba Group Holding is increasingly transforming into an AI-driven growth story, even as its core e-commerce business faces slower momentum.
Citi analyst Alicia Yap projected Alibaba’s AI revenue could grow at a 90% compound annual growth rate from fiscal 2026 to 2031 and eventually contribute 70% of total cloud revenue.
Alibaba’s core commerce segment remained soft, with revenue slipping 1%, although management said growth would have been stronger without merchant incentives and subsidies.
The company said it remains focused on gaining market share while continuing heavy investments in AI and cloud infrastructure.
Barclays Says Underlying Results Were Stronger
Barclays analyst Jiong Shao told CNBC both Alibaba and Tencent Holding Ltd (OTC:TCEHY) posted stronger underlying results than headline numbers suggested.
He noted Alibaba’s China e-commerce business delivered adjusted growth of about 8% year over year, while Tencent’s gaming growth was temporarily affected by holiday timing shifts.
Shao emphasized that AI spending has become the key battleground between Chinese and U.S. tech giants. He highlighted Alibaba’s plan to spend roughly 380 billion yuan on capital expenditures over three years, with the possibility of even higher spending ahead.
He also said Alibaba’s cloud business has sustained 30%-40% annual growth for nearly three years and estimated the company’s AI-related recurring revenue at around 10 billion yuan annually.
NVIDIA Chip Restrictions Remain A Challenge
At the same time, Shao warned that China’s biggest AI challenge remains limited access to advanced computing power due to restrictions on high-end chips from NVIDIA Corporation (NASDAQ:NVDA).
He said Alibaba’s large AI infrastructure investments are pressuring margins in the short term but position the company as one of China’s few true hyperscale cloud and AI competitors globally.
Alibaba Price Action
BABA Price Action: Alibaba shares were down 3.05% at $141.36 during premarket trading on Thursday, according to Benzinga Pro data.
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