In a significant move showcasing its commitment towards expanding cloud and AI hardware infrastructure, Alibaba has made headlines recently.

On February 24, Daniel Zhang, the CEO of Alibaba Group, announced that the company plans to invest more than 380 billion CNY over the next three years into the construction of cloud and AI hardware infrastructure, a sum more than the total invested in the past decadeThis remarkable financial allocation also marks the largest-ever investment by a private enterprise in China within the realms of cloud and AI hardware infrastructure.

This strategic investment comes after two pivotal moments: the explosive growth of China's AI industry and a recent meeting of private sector enterprisesZhang expressed, "The explosion of AI far exceeds expectations; China's tech industry is on the rise with vast potentialAlibaba will spare no effort in accelerating the construction of cloud and AI hardware infrastructure to foster the development of the entire industry ecosystem."

Currently, Alibaba Cloud stands as the number one cloud computing company in Asia, while its Tongyi Qianwen model has emerged as a global leader among open-source modelsThis substantial investment signifies a boost in confidence within the associated industries, reflecting Alibaba’s unyielding belief in and commitment to the future.

Focusing on three AI sectors, Alibaba has strategically earmarked funds to maximize the impact of its initiativesDuring a conference call regarding the analysis of Q3 FY2025 financial results on February 20, Zhang reiterated the company’s dedication to three primary areas: domestic and international e-commerce, AI plus cloud computing tech businesses, and internet platform products.
Zhang detailed that over the next three years, investments will be further directed towards three specific AI domains:
Firstly, investments will focus on the foundational infrastructure for AI and cloud computing

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The AI era demands distinct and extensive infrastructure support, making proactive investments in AI foundational construction essentialThe anticipated expenditure on cloud and AI infrastructure over the next three years is expected to surpass the total from the past decade. Secondly, efforts will be directed towards AI foundational model platforms and AI-native applicationsThe significant implications of foundational AI models for industry productivity transformation will drive increased research and development investments to ensure technological advancement and industry leadership, alongside promoting the progress of AI-native applications. Thirdly, investments will target AI transformation and upgrading of existing business linesUpgrading AI technologies will unlock tremendous opportunities for enhancing user value across e-commerce and other internet platform operationsThere will be a continuous focus on increasing R&D investments in AI applications and computing power while employing AI to deeply transform and upgrade various business sectors, capturing new developmental opportunities in the AI era.

"We have full confidence in our focused strategy around e-commerce and 'AI + Cloud' development, as well as anticipation for the business opportunities emerging from this new technological cycle," Zhang statedMoreover, he revealed that Alibaba will launch a deep reasoning model based on Qwen2.5-Max in the near future.

With a rapid application of AI technologies across various industries, the demand from customers for Alibaba Cloud products is swiftly increasingAlibaba Cloud’s revenue is currently experiencing a growth phase

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The newly developed open-source next-generation multi-modal model Qwen2.5-VL and the flagship model Qwen2.5-Max based on the MoE architecture have performed exceptionally well in multiple authoritative benchmark evaluations, positioning them at the forefront of the industryAs of the end of January, derivatives of the Tongyi Qianwen model had exceeded 90,000 globally, ranking first among mainstream organizations.

Over the past year, Alibaba has consistently invested in AI foundational infrastructure, with external commercialization revenue from Alibaba Cloud returning to double-digit growthIncome from AI-related products has achieved triple-digit year-on-year growth for six consecutive months.

Last week, Alibaba Group released its financial results for the third quarter of FY2025 (ending December 31, 2024), revealing a revenue of 280.15 billion CNY, an 8% year-over-year increase, compared to the estimated 277.37 billion CNYThe adjusted EBITDA for the third quarter was 62.05 billion CNY, with net profit attributable to ordinary shareholders amounting to 48.945 billion CNYThis marks a 333% increase in net profit to 46.434 billion CNY year-on-yearThe diluted earnings per American Depositary Share stood at 20.39 CNY, while ordinary diluted earnings were recorded at 2.55 CNYThe non-GAAP diluted earnings per American Depositary Share reached 21.39 CNY, representing a year-over-year growth of 13%.

Furthermore, in this quarter, Alibaba experienced an acceleration in e-commerce growth, with Alibaba Cloud’s commercialization revenue recovering to double-digit growthIncome from AI-related products has sustained triple-digit growth for six quarters.

Of notable importance, Alibaba significantly increased capital expenditures in the third quarter of FY2025. The financial report highlighted that the capital expenditures reached 31.8 billion CNY, reflecting a substantial increase of 80% compared to the previous quarter.

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