The company reported better-than-anticipated revenue gains in its two most important divisions: e-commerce and cloud services, which houses its AI endeavors. That hints at a bounce-back in Chinese consumption from post-Covid troughs, and initial success at beating back rivals from ByteDance Ltd. to PDD Holdings Inc. that in recent years eroded its market share. The company’s stock rose as much as 11% after markets opened in New York on Thursday.

Investors may have also been bullish because of Alibaba’s growing determination to compete in artificial intelligence. Chief Executive Officer Eddie Wu said Alibaba will spend more on AI infrastructure over the next three years as it did in the past decade. He went as far as to say that Artificial General Intelligence, or AGI, is the company’s “primary objective.”

“This is the kind of opportunity for industry transformation that really only comes about once every several decades,” he told analysts on a conference call. “So when it comes to Alibaba’s AI strategy, our first and foremost goal is to pursue AGI.”

The financial results show Alibaba is already righting a business knocked off-kilter by a government clampdown that began in 2020. It regained its footing after Beijing signaled a pullback in scrutiny in 2023. Joe Tsai and Wu — two of co-founder Jack Ma’s most trusted lieutenants — took the helm that year and refocused investment on AI and e-commerce.

Read More: Xi Voices Support for Jack Ma, China Private Sector Chiefs

On Thursday, Alibaba reported a faster-than-projected 8% rise in sales to 280.2 billion yuan ($38.6 billion) in the December quarter, after cloud services revenue expanded its most on a quarterly basis in about two years.

That division, which houses the company’s AI-related projects and hosts computing power for external clients, grew revenue 13% to $4.3 billion. International commerce sales — driven by overseas marketplaces such as AliExpress and Trendyol — surged 32%. 

Alibaba has gained some $100 billion of market value in 2025, though it’s still far from its pre-crackdown peak. Ma himself joined a select group of the biggest names in Chinese technology and business at a televised summit convened this week by Xi Jinping — signifying Alibaba’s return to favor after years in the cold. The gathering featured entrepreneurs across a broad swath of industry, notably from the sphere of artificial intelligence. 

“Now that Alibaba has defended its main e-commerce business, and its side AI business is also booming, we could see Alibaba’s results flourish in upcoming quarters,” said Li Chengdong, head of Beijing-based Internet think-tank Haitun. “Their government relationship wasn’t in a good shape in the past few years and that must have led to a huge loss of clients. Now the AI business is finally reviving the group.”

Ma was the highest-profile casualty of Xi’s crackdown on the internet and private sector in 2020, when authorities scuttled the blockbuster initial public offering of Alibaba-affiliate Ant Group Co. 

That episode kicked off a yearslong campaign to tighten state control over the economy, rein in the nation’s billionaire class and shift resources toward Xi’s priorities including national security and technological self-sufficiency. Once one of China’s most outspoken entrepreneurs, Ma largely disappeared from public view.

But authorities have taken a less combative approach as China’s economy slowed and companies aligned themselves with Xi’s push for leadership in areas like AI. Alibaba, which operates one of the world’s biggest cloud services platforms, wowed investors this year by making major headway in that arena during the post-ChatGPT era.

“The results show very good progress — a very clear ‘back to basics’ strategy is paying off,” said Jeffrey Towson, partner at TechMoat Consulting.

Since the advent of OpenAI’s chatbot, Alibaba has invested in a clutch of China’s most promising startups, including Moonshot and Zhipu. It prioritized the expansion of the cloud business that underpins AI development, slashing prices to win back the customers that fled during the turbulent years.

It also decided to spend big on AI, joining a race led by Baidu Inc. at the time.

DeepSeek’s sudden rise to global prominence last month – a shock to both Silicon Valley and Wall Street — boosted Chinese tech stocks including Alibaba in recent weeks. 

Since then, Alibaba has unveiled a Qwen model that performed well in official benchmark tests and signaled the company’s growing relevance in the field. Apple Inc. is incorporating Alibaba’s AI technology into Chinese iPhones, a vote of confidence in its prowess.

On Thursday, Wu talked up Alibaba’s aspirations to ride the AI wave and develop AGI — the industry holy grail touted by prominent advocates from OpenAI’s Sam Altman to Masayoshi Son.

But like many of his peers, the Alibaba CEO stopped short of outlining a profitable use case for AI. It should however enhance services throughout the business, while Alibaba itself as an infrastructure provider should benefit, he said.

“We’re still in very early days when we’re talking about the advancement of artificial intelligence technology,” Wu said. “The future business business models and the future ways in which these models will be monetized are not necessarily clear to anybody today.”

Read More: Alibaba’s $110 Billion Rally on AI Optimism Faces Earnings Test

What Bloomberg Intelligence Says

Alibaba’s stronger-than-expected China e-commerce and cloud results show that the measures taken by the company in the nine months ended December to fend off competition from PDD, Douyin, Huawei, Tencent and Baidu were effective. This raises the likelihood that a well-structured strategy is in place to ensure longer-term results even if Alibaba invests more and cedes profit gains in the two businesses through fiscal 2026.

– Catherine Lim and Trini Tan, analysts