Alibaba revenue tops estimates amid strength at AI-enhanced cloud division

Investing.com - Alibaba has posted second-quarter revenue which topped Wall Street estimates, bolstered by strength at Chinese e-commerce giant’s artificial intelligence-enhanced cloud computing unit.

The group has been betting big on AI as a means to help grow both its cloud and consumer-facing divisions, plugging billions of dollars into building out infrastructure and new models in a bid to harness the nascent technology.

Over the past four quarters, Alibaba has deployed roughly 120 billion yuan in capital expenditure toward AI and cloud infrastructure, CFO Toby XU said in a statement.

Revenue at Alibaba’s cloud intelligence division stood at 39.82 billion yuan in the quarter ended on September 30, above estimates of 37.99 billion yuan. Xu said AI revenue is contributing to an "expanding share" of its cloud business from "external customers," adding that Alibaba is re-investing its profits and free cash flow "for the future," even as "near-term profitability is expected to fluctuate."

Heavy investments in fast, one-hour delivery offerings also helped to entice users to Alibaba’s shopping apps, where retailers are rolling out discounts and deals amid fierce domestic competition.

"In our consumption business, quick commerce continued to scale with significant improvement in unit economics and drove rapid growth in monthly active consumers," said Alibaba Group CEO Eddie Wu in a statement.

A government policy allowing local shoppers to trade-in older appliances for newer versions has boosted Alibaba as well, although the scheme is due to expire on December 31.

Group-wide, adjusted earnings per American depositary receipts came in at 4.36 yuan on revenue of 247.80 billion yuan. Bloomberg consensus projections had seen the figures at 6.34 yuan and 245.2 billion yuan, respectively.

U.S.-listed shares of Alibaba were higher by 3.9% in premarket U.S. trading on Tuesday.

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