Alibaba is up 18%: thank you, AI!

Alibaba's stock soared more than 18% on the Hong Kong Stock Exchange, buoyed by a spectacular performance in its cloud business, boosted by artificial intelligence. This rebound, the strongest since the end of 2022, comes despite results that were generally below expectations. The stock, which is listed in the United States, had already welcomed the announcements on Friday, jumping 12.9%.

The cloud division, up 26%, significantly exceeded forecasts (18.4%) to reach 33.4 billion yuan ($4.67 billion). This is a strong signal, welcomed by analysts, who see it as a sustainable growth driver for the group.

What has changed?

The Chinese group is now clearly focusing on AI as a strategic lever. "Our investments in AI are starting to bear fruit," said CEO Eddie Wu, adding that more than 100 billion yuan has been invested in AI and infrastructure over the past 12 months. According to DZ Bank, AI-related revenues have grown by triple digits for the eighth consecutive quarter.

Alibaba is stepping up its technological announcements and even developing its own chips, according to the Wall Street Journal, against a backdrop of Sino-American tensions over advanced components. The goal is to reduce its dependence on Nvidia and secure the deployment of its data centers in China.

But the cloud's performance does not completely mask the weaknesses of the rest of the group. Overall revenue reached 247.7 billion yuan, below expectations (253.2 billion). Adjusted EBITA fell 14% and free cash flow turned negative, at -18.8 billion yuan, weighed down by heavy investments in infrastructure and express delivery.

Is this the return to favor expected by the market?

Not yet, but the market seems willing to believe so. The rise in the stock price reflects renewed confidence, supported by the rise of the cloud and Alibaba's AI strategy.

However, the group is at a turning point. Its core business, e-commerce in China, remains under pressure: revenues are up 10%, but EBITA is down 21%. Quick commerce, which enables deliveries within an hour, is weighing on profitability. Nevertheless, Alibaba sees it as a vehicle for expansion, with an ambitious target of an additional 1 trillion yuan in GMV per year within three years.

Internationally, the recovery of AliExpress and growth in Europe and the Middle East confirm a certain dynamism, but margins remain low. The group still needs to convince investors that it can transform its massive investments into sustainable growth drivers without sacrificing profitability.

But it is clear that it is the AI narrative that has been boosting the stock since this weekend.