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(Sharecast News) - Alibaba Group reported modest revenue growth but a sharp drop in profits for its December quarter on Thursday, as heavy investment in artificial intelligence and intensifying competition in its core e-commerce business weighed on earnings while underpinning its long-term strategy.
The Chinese technology giant posted revenue of CNY 284.8bn (27.24bn) for the three months ended 31 December, up 2% year-on-year, or 9% on a like-for-like basis excluding divestments.
Net income fell 66% to CNY 15.6bn, while operating income dropped 74%, reflecting a steep decline in adjusted earnings as the company increased spending on quick commerce, user acquisition and AI infrastructure.
Chief executive Eddie Wu said artificial intelligence remained central to Alibaba's growth ambitions, with its Cloud Intelligence Group delivering 36% revenue growth and AI-related products recording triple-digit gains for a tenth consecutive quarter.
The company said it was targeting more than $100bn in combined cloud and AI revenue over the next five years, underscoring a strategic shift toward monetising its expanding AI capabilities.
The results highlighted the cost of that transition.
Free cash flow declined 71% to CNY 11.3bn, largely due to continued investment in instant delivery and commerce initiatives, where Alibaba remained locked in a price war with rivals.
Its domestic e-commerce division saw customer management revenue rise just 1%, reflecting weaker transaction activity and competitive pressures in China's sluggish consumer environment.
At the same time, Alibaba said it was pushing to integrate AI across its ecosystem.
Its Qwen AI platform, which surpassed 300 million monthly active users, had been embedded into services including Taobao and food delivery, enabling automated tasks such as shopping, travel booking and logistics.
The company said around 140 million users engaged with AI-driven commerce features during a recent promotional campaign.
Cloud and AI had emerged as the fastest-growing parts of the business, supported by rising enterprise demand and the rollout of new products, including AI models, infrastructure software and proprietary chips developed by its T-Head unit.
Alibaba said it had also reorganised its AI operations under a new 'Token Hub' structure to accelerate commercialisation, reflecting a broader industry shift toward pricing AI services based on computing usage.
Reporting by Josh White for Sharecast.com.