Alibaba’s Strategic Overhaul: Betting Big on AI and Integration

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Alibaba Group is undergoing a fundamental strategic shift, making bold moves to secure its future in a competitive landscape. The e-commerce giant is dismantling traditional silos and making substantial investments, a dual approach that is delivering impressive revenue growth in some segments while significantly impacting near-term profitability.

A standout performer in Alibaba's portfolio is its cloud business. The Cloud Intelligence Group reported a substantial 34% revenue increase to 39.8 billion yuan. Group CEO Eddie Wu directly attributes this surge to intense market demand for artificial intelligence infrastructure.

Revenue generated from core AI products, including services for model training and inference, has now achieved triple-digit growth for nine consecutive quarters. This segment contrasts sharply with the price-sensitive core commerce business, as corporate clients demonstrate a willingness to make significant investments in high-performance computing, providing healthier margins.

A Unified Platform Strategy: Retiring Ele.me

In a major consolidation move, Alibaba officially retired its well-known food delivery brand, Ele.me, on Friday. The service has been fully absorbed into the Taobao ecosystem under the new name "Taobao Shangou." Users are now greeted by Taobao's characteristic orange interface instead of Ele.me's familiar blue.

This decision represents a strategic pivot towards a centralized "super-app" model and is far more than a simple rebranding exercise. The leadership's goal is to leverage Taobao's massive existing user base to drive growth in instant retail and delivery services, creating a more cohesive consumer experience. This move is widely seen as a direct challenge to competitors like Meituan in the fast-growing instant commerce sector.

The Cost of Transformation and Market Reaction

This aggressive transformation comes at a high cost. Alibaba's net profit fell by approximately 52% year-over-year, pressured by massive capital expenditures. The company is investing billions into new AI data centers and subsidizing the integration of Taobao Shangou to gain market share.

Despite the profit contraction, the market appears supportive of this expensive strategic pivot towards an "AI-first" future. Alibaba's shares have gained roughly 64% since the start of the year, trading well above their recent lows. Investors seem to be tolerating the short-term margin pressure in anticipation of long-term technological leadership and market dominance.

The company is effectively repositioning itself from a pure-play commerce giant to a hybrid bet on both China's consumer recovery and the global AI infrastructure race. The key question for its stock performance will be whether the Taobao Shangou integration can successfully reduce marketing costs and enhance user engagement over the coming quarters.

Key Share Data

• Friday's Closing Price: €135.80
• Daily Change (Friday): +0.44%
• 30-Day Change: -5.30%
• Year-to-Date (YTD) Change: +64.01%
• Distance from 52-Week High: -15.97%
• RSI (14-Day): 29.4