Three tough battles, Alibaba's advance

Alibaba has welcomed a fiscal quarter with multiple indicators exceeding expectations.

The overall revenue of the group reached 247.8 billion yuan. After excluding Sun Art Retail and Intime, it increased by 15% year - on - year, exceeding market expectations. The cloud business grew strongly, with a year - on - year growth rate as high as 34%, significantly exceeding market expectations. The revenue of Alibaba's China e - commerce group also increased by 16% year - on - year.

After the release of the earnings report, Alibaba's U.S. stocks rose more than 3% in pre - market trading. Stimulated by multiple market news related to AI, Alibaba's stock price had been on an upward trend in the two days before the release of the earnings report.

Under the continuous high - level attention of the market to Alibaba's AI progress, at the earnings conference, Alibaba CEO Wu Yongming also emphasized a new AI strategy for the first time: Alibaba is making efforts in two major directions, AI to B and AI to C. In the AI to B field, it aims to be a world - leading full - stack AI service provider to meet the growing AI needs of all industries. In the AI to C field, based on the leading - performance AI models and Alibaba's ecological advantages, it will create AI super - native applications for end - users, promoting AI from all industries to be accessible to everyone.

He further explained, "This will stimulate greater synergies in the core business and become the driving engine for Alibaba's continuous growth and reaching new heights."

At the earnings conference, Wu Yongming also revealed that at present, the speed of putting AI servers into use cannot keep up with the growth of customer orders, and it is not ruled out that further investment will be made.

Since this year, Alibaba has continuously and firmly invested in three fierce battles: AI + cloud infrastructure, instant retail, and Qianwen AI to C, and concentrated its resources. This has enabled it to maintain a strong growth momentum and won a valuable opportunity for market re - evaluation.

01. Firmly Invest in AI, Focus on Both Customers and Users

Driven by the strong demand for AI, the overall revenue of Alibaba Cloud increased strongly by 34% year - on - year, reaching 39.8 billion yuan. The year - on - year revenue growth rate of external commercialization reached 29%, significantly exceeding market expectations, mainly driven by AI. The revenue of related products has achieved triple - digit year - on - year growth for nine consecutive quarters. Due to the significant improvement in revenue and operational efficiency, the adjusted EBITA of Alibaba Cloud increased by 35% year - on - year, reaching 3.6 billion yuan, a significant increase compared with the 26% year - on - year growth in the previous quarter.

In terms of AI capital expenditure, which the market is quite concerned about: Alibaba's capital expenditure was 31.5 billion yuan, basically in line with market expectations. The management maintains a very positive attitude towards the investment prospects of cloud infrastructure. The earnings report shows that in the past year, Alibaba's capital expenditure on AI + cloud infrastructure was 120 billion yuan, ranking among the top in the domestic Internet giants.

Wu Yongming's speech at the Yunqi Conference fully demonstrated Alibaba's determination to invest in AI and released a lot of positive news. He systematically explained the three - stage evolution route to ASI (Super Artificial Intelligence) for the first time. To achieve this goal, he also clarified the strategic path of Alibaba Cloud. As a "full - stack artificial intelligence service provider", Alibaba Cloud will implement its AI strategy through two core paths: First, Tongyi Qianwen adheres to the open - source and open route, aiming to create the "Android of the AI era". Second, it will build a super AI cloud as the "next - generation computer" to provide intelligent computing power networks globally. During this period, Alibaba launched seven AI models, achieving new breakthroughs in model performance, in - depth reasoning, multi - modality, Agent, and Coding capabilities. Among them, the flagship model Qwen3 - Max outperforms international competitors such as GPT5 and Claude Opus 4 in performance and ranks among the top three globally.

According to his statement, to promote the realization of this vision, Alibaba is actively promoting a 380 - billion - yuan AI infrastructure construction plan over three years and will continue to increase investment.

This speech greatly excited the market, directly driving Alibaba's Hong Kong stocks to rise by more than 9% in a single day, reaching a maximum of HK$174.9. The market value increased by nearly HK$300 billion in a single day, hitting a new high since October 2021.

UBS believes that the investment intensity and continuity guidance of Alibaba Cloud "exceed market expectations". The bank estimates that Alibaba Cloud may expand its data center capacity at a rate of 1 - 2 gigawatts per year in the future, which may translate into incremental capital investment of up to 100 - 200 billion yuan per year. According to Morgan Stanley's estimate, from 2026 to 2032, the annual new capacity of Alibaba Cloud will exceed 3 gigawatts, which is equivalent to the estimated new capacity of the entire Chinese market of 3 - 4 gigawatts in 2025.

The market is looking forward to it, and customers are willing to pay. Alibaba's full - stack layout and technical capabilities are continuously being recognized. A direct example is the growing list of enterprise customers, and Tongyi has now become the world's largest open - source model group. In addition, various industries are still accelerating their AI cooperation with Alibaba Cloud, including industry leaders such as the NBA, Marriott, and China UnionPay.

Recently, there have been new changes in Alibaba's AI narrative. The Qianwen App fired the first shot, quickly complementing Alibaba's AI to C product matrix, enabling it to walk on two legs in AI to B and AI to C. This means that Alibaba is leveraging its top - notch open - source models and technologies, the connection at the application end, and the innovation and improvement of the ecosystem to enter the AI super - application market and launch a new round of impact on the global market.

Wu Yongming explained this at the earnings conference. On the one hand, the model intelligence level and tool call capabilities of Qwen3 - Max have reached the global leading level. On the other hand, the synergy between AI and Alibaba's e - commerce, map, local life, and other business ecosystems has greater potential. Based on the AI model and Alibaba's ecological advantages, the Qianwen App is expected to be the first to create the future AI life entrance. Based on this, while AI to B is growing rapidly, Alibaba has made a strategic decision to fully enter the AI to C field.

The importance of AI to C products is self - evident. As the new super - entrance in the AI era, whoever can succeed in this field basically gets the ticket to the AI era in the next few decades.

It is reported that the Qianwen App's download volume exceeded 10 million in one week of its public beta, becoming one of the fastest - growing AI applications in history.

According to Alibaba's official statement, the strategic goal of the Qianwen App is to create the future "AI life entrance" and become a personal AI assistant that "can chat and handle affairs". In addition to intelligent dialogue, "handling affairs" is the core focus.

Alibaba's rich product ecosystem accumulated over the years can provide diverse scenarios for Qianwen to become the "AI life entrance". It is understood that the currently publicly - beta Qianwen App is still in its early version, and it is planning to connect various life scenarios such as maps, takeaways, ticket bookings, office work, learning, shopping, and health to the Qianwen App.

For the overseas market, the international version of the Qianwen App will be launched soon, aiming to compete directly with ChatGPT for global users based on the overseas user base of Qwen.

02. Invest in Long - term Growth, Taobao Flash Sale's UE Reduces Losses Significantly

The Q3 quarter covered the "summer battle" with the most intense competition, and the performance of Taobao Flash Sale has also attracted much market attention.

The operating profit of Alibaba's China e - commerce, including Taobao Flash Sale, was 10.3 billion yuan, shrinking compared with the same period last year. However, Alibaba's advantage lies in the strong foundation of its core e - commerce business. The market estimates that Alibaba invested about 36 - 37 billion yuan in flash sales this quarter. In this case, the operating profit of Alibaba Group's e - commerce in Q3 still exceeded 10 billion yuan. In addition, CMR also maintained a 10% growth rate.

As an important strategy, the short - term losses of flash sales are within market expectations and are also an investment that Alibaba has to make for long - term development. The market is more concerned about the results brought about by the losses and whether the operational efficiency has improved, that is, whether the losses are worthwhile and can bring long - term development value.

Judging from the current results, the investment in Taobao Flash Sale has indeed brought about an explosive growth in the order volume and market share of instant retail. This means that the expenditure on flash sales is actually a profit adjustment under the accelerated growth of Alibaba's business, a short - term profit fluctuation. Since April 30, Taobao Flash Sale, which has been in existence for only more than 100 days, has shown a steep growth curve: the average daily order volume is stable at around 80 million, basically on par with Meituan, which has long held the top position in the industry.

Although the investment seems huge, Taobao Flash Sale spends money very rationally.

The market is also very concerned about whether the heavy investment in Taobao Flash Sale can drive the core e - commerce business. Jiang Fan gave a positive answer at the last two earnings conferences. Flash sales have driven a significant increase in the number of active consumers on the Taobao App, and the traffic has also been converted into an increase in advertising and CMR. He also predicted that the improvement of user activity, the acquisition of new users, and the recall of lost users can reduce marketing expenses and drive e - commerce revenue more significantly in the medium and long term. Alibaba actually has a clear understanding of this account.

Within the Taotian system, the combination of near - field and far - field e - commerce is deepening step by step. The biggest variable in this year's "Double 11" is that the cross - selling of takeaways and e - commerce has begun to take shape. As of October 31, about 3,500 Tmall brands have connected their offline stores to instant retail. Under the synergistic effect, during the Tmall Double 11 period, the number of consumers on the Taobao App increased by double - digits year - on - year. Jiang Fan also said at the earnings conference that e - commerce categories such as food, health, and supermarkets have obvious synergies with flash sales. The flash sale orders of Hema and Tmall Supermarket also increased by 30% month - on - month compared with August.

As Jiang Fan said, Taobao Flash Sale is continuously improving its operational efficiency and entering the second stage. That is, while ensuring scale and market share, the UE has also been significantly improved. Since October, the UE of Taobao Flash Sale has been halved compared with July and August. On the one hand, the order structure is constantly being optimized, and the proportion of high - spending users is increasing. In the future, the average order value will also be increased by improving the retention rate of new customers. On the other hand, the logistics scale effect is prominent. The delivery time has been improved compared with the same period last year, and the average logistics cost per order has been significantly reduced, significantly lower than before the large - scale investment.

Alibaba CFO Xu Hong said at the earnings conference call that the investment in flash sales is expected to be significantly reduced in the next quarter, and the strategy will also be adjusted according to market competition.

Taobao Flash Sale has completed the first - stage scale expansion and is currently in the second stage of significant UE improvement. In the future, it will focus on improving the user experience, increasing the proportion of high - spending users, and strengthening the synergistic effect between far - field and near - field.

In terms of business synergy, Taobao Flash Sale will, on the basis of stably maintaining the takeaway order volume, accelerate the layout in the retail field and make full use of Taotian's supply advantages. It is understood that there are two development directions for non - food supply. One is to increase the density of small - store formats such as convenience stores. If the demand within a 3 - kilometer radius of each store is not fully met, more stores need to be added, and merchants should be encouraged to open stores. The other is to focus on the far - field supply of flash warehouses, Tmall brands, and Taobao.

Recently, Taobao Flash Sale also launched an instant retail IP "Taobao Convenience Store" for retail merchants, providing "24 - hour operation, 30 - minute delivery" services in the form of flash sale warehouses, with 10,000 SKUs. It plans to create 100 million - order best - selling products to help far - field brand merchants and white - label merchants carry out near - field transformation. For this purpose, Taobao Flash Sale will also invest 1 billion yuan to support merchants to open flash warehouses. It is understood that Taobao Flash Sale has also established a special team to design customized solutions for different brand merchants and prioritize solving relatively high - frequency demands within a few kilometers.

Taobao Flash Sale is also seeking growth from the synergy of various businesses. In this cooperation mechanism, there will also be several important connecting elements, such as the "88VIP" and Taobao's large - scale membership system, allowing all businesses to develop in their respective scenarios and generate greater synergy, ultimately achieving 1 + 1 > 2. This is what is constantly happening in reality.

In Alibaba's AI strategy, flash sales are also playing their value. Starting from the near - field, flash sales can help Taobao accumulate a large amount of new data related to life scenarios and consumption, which is of great help in improving the accuracy of large models and optimizing operational efficiency. Obviously, the interaction and synergy between large - scale consumption and AI in the future have greater potential.

03. Three Tough Battles, Alibaba Firmly Invests in the Future

The e - commerce market is a highly competitive battlefield, and Alibaba has always been known for its ability and willingness to fight. This Internet giant with a history of more than 25 years is also launching its most radical self - revolution in history, betting on the future of AI and the large - scale consumption platform.

In May this year, Wu Yongming issued an internal letter to all employees on Alibaba's intranet: "Return to the Original Intention and Start a New Business". He announced: "There is no 'conservatism' in Alibaba's genes, only 'creation'." Alibaba now has three major battles: investing in AI + cloud infrastructure, investing in flash sales to build a large - scale consumption platform, and recently fully entering the AI to C field.

To fight these three tough battles, Alibaba is constantly launching offensives and plans to invest more than 430 billion yuan. In July this year, CFO Xu Hong interpreted it to the media for the first time: "The two investment amounts are indeed relatively large, the largest in Alibaba's history, and actually unprecedented among Chinese private enterprises."

These investments and key battles represent Alibaba's future development direction and also aim to create a new flywheel to drive Alibaba's future growth.

In these key battles, Alibaba has achieved qualitative leaps in organization and performance.

Within the Alibaba system, the AI strategy has now penetrated into all aspects of the business and organization. Taking e - commerce as an example, employees have been given at least AI - related OKR indicators, such as the penetration rate of AI tools, the scale revenue of AI products (such as advertising), and the problem order resolution rate. Internet platform product - type businesses such as Gaode, Fliggy, and Ele.me are all trying to quantify the growth brought about by AI. To encourage employees to embrace AI, Alibaba's various businesses have also proposed more incentive measures, such as free learning opportunities and more rewards.

As Wu Yongming said in the internal letter: "In addition to improving products and user experience, it is also particularly important to use AI technology to reshape the organizational operation mode and improve efficiency. We will fully support in terms of tool support, organizational guarantee, and assessment mechanisms to ensure that the changes are not just on paper."

In the AI field, the market is used to associating Alibaba with Google. The saying "Google in the West, Alibaba in the East" is widely talked about in the investment circle because both have a full - stack AI layout, covering the vertical industrial chain from underlying infrastructure, basic models to AI applications. Rome was not built in a day. Alibaba and Google have achieved their status as the only two full - stack AI companies globally by pursuing long - termism in technology over the years.

Judging from the results, Alibaba is very good at concentrating resources to fight "big battles", which is demonstrated by many breakthroughs in various fields this year. Taobao Flash Sale quickly captured market share in the instant retail market within more than 100