On the evening of February 20, Alibaba Group Holding Limited, one of the largest e-commerce conglomerates in the world, reported its financial results for the third quarter of fiscal year 2025, which ended on December 31, 2024. The report revealed a revenue of 280.15 billion RMB, marking an 8% increase year-on-year. Operating profits saw an even more impressive surge, bringing in 41.205 billion RMB, up a staggering 83%. The net profit, calculated using non-GAAP criteria, was recorded at 51.066 billion RMB, a 6% rise compared to the same period last year.

Among Alibaba's diverse range of business units, the Taotian Group emerges as the primary revenue generator. This segment reported total revenue of 136.09 billion RMB, showing a year-on-year growth of 5%. Its adjusted EBITA was at 61.083 billion RMB, up slightly from 59.93 billion RMB in the previous year. Notably, revenue from customer management also experienced a 9% increase, a significant acceleration from the 2% growth observed in the previous quarter. This marks a positive trend, indicating a recovery in consumer engagement and business transactions. Meanwhile, the international digital commerce wing, Alibaba International Digital Commerce Group, recorded a revenue of 37.756 billion RMB, boasting a remarkable 32% increase year-on-year, although it still faced challenges with an adjusted EBITA loss of 4.952 billion RMB as investments in cross-border businesses like Trendyol and AliExpress increased.

Alibaba Cloud, a critical component of the company's strategy, reported revenue of 31.742 billion RMB, witnessing a 13% uplift compared to the previous year. This marked a significant rebound from a 7% growth rate recorded in the prior quarter. Analysts attribute this growth to rising public cloud revenues driven by AI-related products. Remarkably, Alibaba Cloud's AI revenue has consistently shown triple-digit growth for six consecutive quarters. Furthermore, external commercialization revenues from Alibaba Cloud rose by 11% year-on-year, showcasing strong market demand for its services.

In other segments, the Local Life Group reported a revenue increase of 12%, while the Big Entertainment Group’s revenue grew by 8%. Both divisions, however, are still in the phase of narrowing losses. On the contrary, the Cainiao logistics segment experienced a slight downturn, with revenues declining by 1% and an adjusted EBITA drop of 76%. This decline stems largely from decreased profitability in domestic logistics and cross-border fulfillment solutions. During the quarter, Alibaba also formalized equity sale agreements with businesses like InTime and Yonghui Superstores.

Tracking the stock market performance, data from Wind revealed that the Hong Kong-listed shares of Alibaba have surged by an impressive 48.7% since the beginning of the year, closing at 120.9 HKD on February 20. This robust upward trend in stock value has mainly been attributed to investor optimism surrounding AI developments driven by Alibaba's strategies. Particularly in recent days, Alibaba Cloud has been expected to benefit from computational capabilities influenced by DeepSeek and the substantial order it received from Apple, although share price growth slowed to 11.54% in light of market anticipation about Alibaba's continued investment in AI and cloud services.

Analyzing the trajectory of growth, Alibaba Cloud has rebounded notably over the past year, elevating its quarterly growth from approximately 3% to the current 13%. For several recent quarters, Alibaba Cloud has maintained stable profitability, with an adjusted EBITA profit margin around 10%. During this quarter, adjusted EBITA grew by 33% to reach 3.138 billion RMB. This success is principally attributed to a shift in product mix towards higher-margin public cloud offerings, along with improvements in operational efficiency that partially offset rising expenditures in customer growth and technology advancements.

In terms of capital investments, Alibaba has been increasingly bullish on its cloud segment. The latest fiscal report indicated that capital expenditure for the quarter reached 31.78 billion RMB, while free cash flow dipped to 39.02 billion RMB, reflecting a 31% year-on-year decline. The drop in free cash flow is largely attributed to heightened spending on cloud infrastructure, although this was somewhat mitigated by changes in working capital within other operational sectors.

During the earnings conference following the release of the financial report, Alibaba Group's CEO, Wu Yongming, emphasized that the next three years are projected to be the most capital-intensive period for investments into cloud and AI infrastructure in Alibaba's history. He expressed confidence that the sizable investments made would rapidly align with internal and external customer demand, as gauged from current user trends and forecasts for the industry.

Looking ahead, Wu outlined Alibaba's strategic focus on three key business domains: domestic and international e-commerce operations, AI and cloud computing, and internet platform products. He emphasized a commitment to intensifying investments around AI as a core strategy over the next three years, focusing on building AI infrastructure, foundational model platforms, and AI-native applications, alongside the transformation of existing business operations towards AI. Furthermore, Wu noted that Alibaba is preparing to launch a deep reasoning model based on Qwen2.5-Max in the near future, reflecting an aggressive positioning towards being a leader in the AI domain.

By the end of the reporting session, Alibaba's stock on the US markets had risen over 14%, showcasing strong market confidence in its financial performance and forward-looking strategy. As Alibaba continues to innovate and enhance its presence in the AI landscape while fostering growth across its various business sectors, stakeholders and market observers are keenly interested in how the company will navigate this transformative landscape.