Alibaba Group Holding Ltd (NYSE:BABA) stock rose 0.58% (As on May 16, 11:22:03 AM UTC-4, Source: Google Finance) after the company’s quarterly revenue missed projections, reflecting a persistent Chinese consumer downturn as well as intense rivalry in the critical field of AI. Net income almost quadrupled to 12.4 billion yuan in part because of gains from equity investments, but below estimates of an expected RMB24.7 billion. Alibaba has been releasing AI products at a frenetic pace since DeepSeek’s emergence on the global stage this year. Alibaba said its Qwen 3 flagship model, unveiled just last month, rivals DeepSeek’s performance on several fronts. The company has updated its video-generating model for the second time in a month. But it’s facing intense competition from Chinese AI rivals including Baidu Inc. and Tencent Holdings Ltd. Globally, Chairman Joe Tsai has warned of an AI bubble, cautioning that data centers are being built in the US without clear customers in mind. Further, the e-commerce business is also facing growing competition from ByteDance Ltd. and PDD Holdings Inc. In an effort to fend off JD.com Inc. and PDD, Alibaba said last week it will partner with China’s Instagram-like Xiaohongshu for Taobao and Tmall merchants to embed product links on the popular influencer platform. The company said that it would focus on driving AI and Cloud businesses as a new engine for long-term growth. Net cash provided by operating activities was RMB27,520 million (US$3,792 million), an increase of 18% compared to RMB23,340 million in the same quarter of 2024. Free cash flow was RMB3,743 million (US$516 million), a decrease of 76% compared to RMB15,361 million in the same quarter of 2024.
The company had reported the adjusted revenue growth of 7 percent to 236.5 billion yuan ($32.8 billion) in the first quarter of FY25, missing the analysts’ estimates for revenue of 237.9 billion yuan. The company’s Taobao and Tmall Group divisions saw total revenue rise 9% YoY to RMB101.37 billion, owing to an improvement in take rate. Customer management revenue jumped 12%, while Chinese commercial wholesale revenue in the segment rose 17%. Revenue from Alibaba International Digital Commerce Group grew 22% YoY to RMB33.58 billion, while Cloud Intelligence Group revenue rose 18% YoY to RMB30.13 billion. The Cloud intelligence group revenue was spurred by strong demand for AI, with AI-related product revenue achieving triple-digit growth for the seventh consecutive quarter. Adjusted EBITA, increased 36% year-over-year to RMB32,616 million (US$4,495 million).