What happened: Alibaba (BABA) stock climbed 7% on Wednesday.
What’s behind the move: The Chinese e-commerce and cloud giant reported a 3% increase in fourth quarter revenue on Wednesday, missing analyst expectations. Alibaba’s earnings were weighed down by higher spending on AI initiatives, cloud infrastructure expansion, and continued investment in its rapid-delivery business, which aims to fulfill orders within an hour.
During the earnings call, executives said the company plans to spend more on AI than previously announced. However, more than half of Alibaba’s cloud revenue will come from artificial intelligence within a year, CEO Eddie Wu said during the call.
Cloud revenue surged an annualized 38% to $6.13 billion, roughly in line with Wall Street estimates.
What else you need to know: Earlier this year, the company split its artificial intelligence operations from its cloud computing division and appointed Wu to head the newly established “Alibaba Token Hub” unit as it pushes to turn its AI investments into a profitable business.
Alibaba has been increasing its spending on AI and user acquisition efforts.
“Alibaba effectively redeployed more than 90% of its March-quarter China e-commerce profit into Qwen user acquisition and adoption — a spending run rate that looks set to persist into fiscal 2027,” Bloomberg Intelligence’s Catherine Lim noted.
Alibaba shares went from negative territory in premarket trading to a gain during morning trading hours.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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