Alibaba: Surpassing Expectations with AI-Powered Sourcing

Chinese e-commerce giant Alibaba has surpassed analyst expectations for its quarterly review, reporting strong growth supported by its one-hour delivery options and sustained investments in AI.

Alibaba's solutions for B2B sourcing are powered by AI covering end-to-end operations – from product search and online order placement, to payment logistics and after-sales support.

Alibaba’s platform enables simplified global sourcing for small and medium-sized businesses which are looking to grow internationally by accessing more opportunities and undertaking digital trade.

Through the service, businesses can streamline ordering from search to fulfilment with full transparency and management of suppliers. Alibaba has now released its quarterly revenue surpassing analyst estimations.

According to the report, it reached a second quarterly revenue of 247.80 billion yuan (US$35bn) beating the estimates of 242.65 billion yuan (US$34.3bn).

AI investment in logistics and sourcing

Major players in China's 'quick commerce' sectors have been spending billions on their logistics in an attempt to ensure low-wait time delivery and profit from market shares.

To ensure it stays ahead of competitors, Alibaba has been heavily investing in AI. Earlier this year it noted a planned spend of 380 billion yuan (US$53.7bn) across three years on AI and cloud infrastructure.

Alibaba CEO Eddie Wu said this figure could grow to keep up with customer demand and mitigate supply chain challenges.

"We will be investing in AI infrastructure aggressively, the 380 billion yuan investment we previously mentioned might be on the small side given the customer demand," he added.

The heavy investments contributed to a 53% fall in Alibaba's net profit to 20.61 billion yuan (US$2.9bn), but analysts suggest these could evolve into long-term advantages for the retailer.

Surpassing revenue expectations

Despite the fall in net profit, Alibaba’s diversified business is helping it stay ahead of competitors in the instant retail sector.

Following the release of its quarterly review, US-listed shares in Alibaba opened up 2%. The company's performance, however, did miss adjusted profit estimates of 5.49 yuan (US$0.78) per American Depository Share, coming in at 4.36 yuan (US$0.62).

Heavy discounting and subsidies from Alibaba and its competitors have raised investor concerns about cash burn, but the business is confident in its growing profits.

Its instant retail business has helped improve unit economics in recent months, with Alibaba reporting its cost per order has halved since the summer – a key metric for procurement and supply chain efficiency.

Shifting market focus

Alibaba has begun to move into a consumer-facing focus, which has helped grow its profit.

The organisation has previously lagged behind in consumer AI markets due to its focus on enterprise clients. Now, however, it is investing in its consumer operations and is seeing a steady growth in that sector.

Expanding into the consumer AI market comes with the launch of a free app, which had more than 10 million downloads in its first week.

It comes amid a price war in China's domestic AI market, which has resulted in rivals slashing prices and creating new solutions to remain competitive.