Alibaba shares surge nearly 8% as firm expects to exceed $55.96 billion AI spending target

Shares of US-listed Chinese giant Alibaba surged nearly 8% on Wednesday after leadership provided a clear three-to-five-year outlook for artificial intelligence returns. The firm anticipates exceeding its original 380 billion yuan ($55.96 billion) three-year AI investment plan, as early returns encourage a rapid expansion of cloud-computing capacity.

However, the company missed fourth-quarter profit forecasts. Like its peers, Alibaba is capitalizing on the AI boom; revenue from its Cloud Intelligence Group climbed 38% to 41.63 billion yuan ($6.13 billion), slightly outpacing the previous quarter's growth. Alibaba has yet to specify a new spending target to replace the one set last year.

"The return on our investments in AI plus Cloud and (e-commerce business) are increasingly clear...our technology investments are beginning to pay off commercially," CEO Eddie Wu said on a post-earnings call.

At 12:58 p.m. EDT in New Yotk, Alibaba Group Holding Ltd. stock rose 7.93%, or $10.69, at $145.47.

In the March quarter, profitability was squeezed by heavy investments in AI infrastructure and the competitive "quick commerce" sector, which focuses on 60-minute deliveries. Consequently, adjusted earnings per American Depository Share fell to 0.62 yuan, significantly trailing the estimated 5.79 yuan.

However, executive Eddie Wu projected higher margins for Alibaba Cloud within the next two quarters, suggesting current investments will eventually drive profitability. Currently, AI products represent 30% of external cloud revenue, a figure expected to surpass 50% in roughly a year as AI becomes the primary growth catalyst.

"We aim to maintain growth that is faster than the market average in order to gain larger market share and firmly cement our absolute market leadership position... those are the primary objectives, and margin is still secondary," Wu said.

Beyond infrastructure, Alibaba has enhanced its Qwen chatbot, enabling users to shop on Taobao and Tmall through conversational agents rather than traditional listings. To accelerate profitability, the company recently decoupled its AI operations from its cloud arm, placing Wu in charge of the specialized "Alibaba Token Hub."

Excluding one-time items, quarterly net income plummeted 99.7%. Total revenue reached 243.38 billion yuan, narrowly missing the 247.22 billion yuan consensus. Conversely, the China e-commerce division outperformed, generating 122.22 billion yuan ($18 billion) and beating estimates. Executives remain confident that quick commerce unit economics will turn positive by the end of fiscal year 2027, citing improvements in user engagement and monetization.

Tencent revenue misses estimates

Tencent Holdings Ltd.’s revenue for the March quarter fell short of expectations, intensifying the pressure on its high-stakes artificial intelligence pivot as established sectors like gaming and advertising show signs of slowing.

Its stock gained 5.75%, or $3.35, at $61.65 in New York.

The Shenzhen-based giant reported a 9% rise in revenue to 196.5 billion yuan ($28.9 billion), missing the analyst consensus of 199.4 billion yuan. Despite the revenue miss, net income grew to 58.1 billion yuan, slightly outperforming the 57.8 billion yuan forecast.

This mixed financial result may deepen investor skepticism regarding the monetization timeline for Tencent’s AI initiatives. To keep pace with rivals, the company has pledged to more than double its AI spending this year, targeting a budget in excess of 36 billion yuan. The urgency is reflected in the market; Tencent has seen roughly $160 billion in market value evaporate this year—a 23% decline that has significantly outpaced the losses seen by Alibaba.