Alibaba of China aims to generate $100 billion in cloud and AI income over five years

Alibaba Group has set an ambitious target to generate more than $100 billion in revenue from its artificial intelligence (AI) and cloud businesses over the next five years, betting heavily on the rapid growth in global AI demand.

The announcement came on Thursday alongside the company’s latest quarterly results, which showed a sharp 67% decline in profit. Despite this, Alibaba remains confident about its long-term AI strategy, positioning it as a key driver of future growth.

For the October–December quarter, Alibaba reported total revenue of 284.8 billion yuan ($41.4 billion), marking a modest 2% increase compared to the same period last year. However, this figure fell short of market expectations. In contrast, its cloud business performed strongly, with revenue rising 36% year-on-year to 43.3 billion yuan ($6.2 billion), highlighting the growing importance of AI-related services within the company.

CEO Eddie Wu said the company is well positioned to benefit from what he described as “exponential growth” in AI demand. Alibaba has been expanding its AI capabilities through its flagship Qwen models and related applications, which include consumer chatbots and enterprise-focused cloud services. These tools are designed to serve both individual users and business customers, strengthening Alibaba’s presence across multiple segments of the AI market.

However, the company’s profitability has come under pressure. Net profit for the quarter dropped to 16.3 billion yuan ($2.4 billion), down significantly from 48.9 billion yuan a year earlier. This decline was largely driven by increased spending on marketing and sales, as well as ongoing competition in its core businesses.

Alibaba’s traditional e-commerce operations continue to face challenges, including intense price competition and weaker consumer demand. Additionally, a price war in the food delivery sector has further impacted margins, forcing the company to balance growth with profitability.

To manage rising costs and capitalize on strong demand, Alibaba recently announced price increases of up to 34% for some of its AI services. At the same time, it is expanding its product offerings. Earlier this week, the company launched a new AI agent tool called Wukong, aimed at business users and designed to automate complex tasks.

The company’s AI ambitions have also faced internal challenges. The recent departure of Lin Junyang, who led the Qwen AI model division, has raised questions about leadership stability within its AI operations. Despite this, Alibaba continues to invest aggressively in the sector.

Last year, the company committed at least 380 billion yuan ($53 billion) over three years to strengthen its cloud computing and AI infrastructure. This large-scale investment reflects its determination to compete with global technology leaders and capture a significant share of the fast-growing AI market.

Chinese tech firms, including Alibaba, are increasingly stepping up competition with U.S. companies, especially after the rise of AI startups like DeepSeek, which disrupted the industry with rapid innovation and cost-efficient models.

Overall, while Alibaba is facing short-term financial pressure, its long-term strategy is clearly focused on AI and cloud computing. The company is betting that sustained demand for AI technologies will drive strong revenue growth in the coming years, even as it navigates competition, rising costs, and internal changes.