Alibaba: E-commerce is stalling again — AI and cloud are keeping the group afloat

E‑commerce growth stalls as monetization tailwinds fade

Alibaba (阿里巴巴) on Monday pre‑market in New York reported another quarter that underscores a painful shift: core e‑commerce is no longer the engine it once was, while cloud and AI are emerging as the company’s real growth pillars. Group revenue rose just 1.7% year‑over‑year for the quarter (a comparable pace of about 9% after divestitures versus 15% last quarter). The platform’s core customer metric (CMR) grew only 0.8% year‑over‑year, down sharply from double‑digit gains previously, as the post‑subsidy era and a high prior‑year base hit both traffic and monetization.

Why the slowdown? Two structural effects: the domestic subsidy tailwind has largely unwound and a one‑off period where Alibaba raised take‑rates (a 0.6% service fee and site‑wide push tools from Sept. 2024) has passed its easiest comparables, removing a recent lift to revenue per transaction. Seasonality also mattered — a late Lunar New Year compressed some consumption into the following quarter. It has been reported that analysts back‑of‑the‑envelope calculations imply Taobao Flash Sales (淘宝闪购) still ran a heavy net loss this quarter — roughly RMB 25 billion — although the business is improving sequentially and per‑order losses reportedly narrowed toward about RMB 3.5.

Cloud and AI: the one bright spot

Alibaba Cloud (阿里云) continued to accelerate and now looks like the company’s primary salvation. Cloud revenue grew 36% year‑over‑year, with external cloud revenue up about 35% this quarter versus 29% last quarter — a meaningful acceleration in third‑party demand. The cloud’s operating margin held at about 9%, suggesting AI workloads have so far not materially eroded profitability. The company also said token consumption on its Bairun MaaS model platform rose six‑fold in the past three months as AI use cases move from chatbots to agent‑style workloads, and management flagged strong long‑term demand for cloud compute.

Capital spending was RMB 29.9 billion this quarter, down sequentially, which Alibaba framed as a more disciplined posture after aggressive prior investments. It has been reported that tighter U.S. export controls on advanced chips and constrained access to some Nvidia GPUs have complicated hardware sourcing for Chinese cloud providers and may have influenced the cadence of capex.

International, new ventures and the margin squeeze

International e‑commerce (led by Lazada in Southeast Asia) slowed to under 4% growth and swung back into a roughly RMB 2 billion adjusted EBITA loss, illustrating fierce competition from Sea and aggressive rivals such as regional short‑video shop players. “Other” businesses widened losses to around RMB 9.8 billion as Alibaba ramps AI apps (千问/夸克), mapping and local services and continues to spend heavily on customer acquisition — marketing expense alone jumped to RMB 70.9 billion this quarter. The result: group adjusted EBITA of about RMB 23.4 billion, improved versus the trough but under pressure from a weaker core e‑commerce base and rising investments.

What does this mean for investors and the market? Alibaba’s story is now bifurcated: its legacy long‑range e‑commerce cash cow is facing secular and policy headwinds — including subsidy normalization and tighter small‑merchant tax reporting — while cloud and AI offer the clearest path to higher‑quality growth. Can the AI narrative deliver gains big enough to offset shrinking margins in retail and renewed losses internationally? For Western readers, remember this plays out against a backdrop of geopolitics and technology restrictions that uniquely shape China’s cloud and chip supply chains.