Alibaba Reports Strong Revenue Growth Driven by Cloud and AI
Chinese technology giant Alibaba announced first-quarter revenue of 268.95 billion yuan (approximately $40 billion) on Thursday, marking a 9% increase year-over-year and slightly surpassing analyst expectations of 268.88 billion yuan. This represents the company’s fastest quarterly growth rate in approximately three years, with the surge primarily attributed to its cloud and artificial intelligence businesses.
Cloud and AI Fueling Expansion
The company’s cloud division emerged as the primary engine of growth. Alibaba Cloud’s external revenue saw an accelerated expansion of 45%, while revenue from AI-related products reached 12.38 billion yuan ($1.82 billion). This marks the twelfth consecutive quarter of triple-digit year-over-year growth for AI products. CEO Eddie Wu highlighted the improved commercialization of the company’s comprehensive AI strategy as the key driver behind the quarter’s performance, according to Alibaba’s earnings statement.
However, this aggressive AI push comes at a significant cost. Capital expenditures surged by 75% to 67.7 billion yuan ($10 billion). Alibaba attributed this increase primarily to rising chip prices and the expansion of computing capacity to meet the escalating demand for AI, which is currently outpacing supply. Consequently, free cash flow swung to an outflow exceeding $6.6 billion for the quarter, according to Bloomberg.
The market’s reaction was swift. Alibaba’s U.S.-listed shares experienced a decline of around 5% shortly after the market opened, though they showed signs of recovery by midday.
Monetizing AI Through Distribution and Partnerships
Alibaba’s cloud performance coincides with a strategic shift towards distributing its Qwen models more broadly, moving beyond just their development. Earlier this month, the company released Qwen 3.8-Max, its most advanced model to date, as open weights for the first time at such a large scale. In April, the free tier of its Qwen Code coding agent was discontinued.
The company is also extending its reach beyond China’s domestic market. Apple is reportedly integrating its in-house AI model with Alibaba’s Qwen to power Apple Intelligence on Chinese iPhones. This potential deal could position Apple as the first foreign company permitted to operate a proprietary AI model within China.
This focus on distribution and partnerships is beginning to reflect in the data. Chinese open-weight models have seen a dramatic increase in usage, jumping from under 2% of tokens generated on OpenRouter in late 2024 to approximately 61% by mid-2026. This growth has occurred even as Alibaba’s quarterly profit has decreased by three-quarters.
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