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Alibaba is accelerating its focus on AI infrastructure and cloud services as a central growth pillar
In sum – what to know:
AI demand surge – Cloud revenue rose 35% as AI workloads expand across industries, driving sustained infrastructure growth.
Compute supply risk – Alibaba expects global AI computing shortages, shaping its push into chips and data center capacity.
Full-stack strategy – Integration across chips, cloud, models and applications underpins long-term AI infrastructure ambitions.
Chinese company Alibaba has set a target of exceeding $100 billion in combined cloud and AI revenue within five years..
The company reported a 67% decline in quarterly net income, while revenue rose modestly by 2% year-on-year for the three months ended December 2025. The weaker profitability was partly driven by increased spending on promotions and continued investment in AI and technology initiatives.
Despite these pressures, Alibaba is accelerating its focus on AI infrastructure and cloud services as a central growth pillar. The company’s chief executive officer Eddie Wu told investors that demand for AI capabilities is expanding rapidly across industries, with implications for both infrastructure and application layers.
“With the dawn of the AI agent era, the addressable market for AI infrastructure providers like Alibaba is set to grow exponentially,” the executive said.
Alibaba’s cloud intelligence group saw external revenue growth of 35%, supported by what the company described as sustained demand for AI-related products, which have delivered triple-digit growth for ten consecutive quarters.
A key element of Alibaba’s strategy is its full-stack approach, spanning chips, cloud infrastructure, models and applications. Wu emphasized that this integration is critical as AI adoption shifts toward agent-based systems embedded in enterprise workflows.
“From AI infrastructure to the application layer, Alibaba has built a complete full stack AI capability set to support the exponential growth in AI demand,” he said.
The company is also investing heavily in its in-house semiconductor unit, T-Head, which has shipped more than 470,000 AI chips to date. These chips are used across both internal workloads and external customers, supporting training and inference tasks.
Wu highlighted that compute supply constraints could become a defining factor in the global AI market: “Over the next 3 to 5 years, global AI computing power will be in extremely short supply.”
At the same time, Alibaba is reorganizing its AI operations around the newly formed Alibaba Token Hub (ATH), which integrates model development, MaaS (Model-as-a-Service), and application layers. The goal is to strengthen coordination between infrastructure and applications as AI agents become more widely deployed.
Looking ahead, Alibaba expects three main drivers of growth: MaaS adoption across industries, enterprise demand for private AI deployments, and continued expansion of traditional cloud services adapted for AI workloads.
In September 2025, Alibaba Cloud had outlined new international expansion plans, announcing its first data centers in Brazil, France, and the Netherlands, with further facilities planned in Mexico, Japan, South Korea, Malaysia, and Dubai during 2026.
The company had previously reaffirmed its plan to spend $53 billion on cloud and AI over the next three years.
