TLDR
- Alibaba Q1 net income hit $5.9B, beating $3.7B estimates
- Revenue of $34.6B missed forecasts but grew 2% annually
- New AI chip developed by Chinese manufacturer, currently testing
- Cloud segment revenue surged 26% to $4.7B
- Stock jumped 3.9% in premarket trading
Alibaba Group delivered mixed first-quarter results that surprised investors on the profit side while falling short on revenue. The Chinese e-commerce leader posted net income of $5.9 billion, crushing analyst expectations of $3.7 billion.
Revenue reached $34.6 billion, missing the $35 billion consensus but still growing 2% year-over-year. The company continues battling fierce competition in China’s retail market through aggressive pricing strategies.
The 76% surge in net income came from equity investment gains and profits from selling Turkish shopping platform Trendyol. These gains offset lower operational income as Alibaba invests heavily in market share retention.
BABA stock rose 3.9% to $124.27 in premarket trading after initially declining post-earnings. Investors processed the mixed results alongside news of the company’s latest AI chip development.
AI Chip Strategy Takes Shape
Alibaba has created a new artificial intelligence processor that’s more versatile than previous generations. The chip handles broader AI inference tasks and is currently undergoing testing phases.
This new processor is manufactured by a Chinese company, marking a shift from earlier chips made by Taiwan Semiconductor. The move aligns with China’s push for technological independence from foreign suppliers.
The development comes as Nvidia faces sales restrictions in China due to regulatory opposition. Chinese authorities have effectively blocked Nvidia’s H20 chip, the most advanced processor the U.S. company can sell in China.
Domestic competitors including Huawei, Cambricon, and Baidu are racing to develop Nvidia alternatives. While China still lags in matching Nvidia’s top-tier capabilities, the gap continues narrowing.
Cloud Business Drives Growth
Alibaba’s cloud computing division showed exceptional performance with 26% revenue growth to $4.7 billion. This exceeded analyst forecasts of $4.5 billion and reinforces the company’s cloud leadership in China.
The cloud segment’s strength provides resources for continued investments in quick commerce and AI initiatives, according to CFO Toby Xu. These investments support Alibaba’s long-term competitive positioning.
China commerce revenue grew 10% to $19.6 billion through Taobao and Tmall platforms. However, profits dropped 21% to $5.4 billion due to instant retail investments and pricing pressures.
The company continues expanding same-day delivery capabilities, offering one-hour delivery windows to compete with JD.com and Meituan. This strategy drives volume growth but pressures short-term margins.
Alibaba shares have outperformed China’s broader market in 2025, gaining over 40% compared to the MSCI China index’s 28% rise. Benchmark analyst Fawne Jiang maintains a Buy rating with a $176 price target.
The new AI chip remains in testing with a Chinese manufacturer and represents Alibaba’s latest step toward reducing foreign technology dependence.
