News

Alibaba: cloud and chips carry the load

Posted on: Aug 30 2025

Key takeaways

  • Cloud revenue up 26%, with AI now a major external driver
  • Group revenue missed estimates; operating profit slipped 3%
  • NYSE-listed shares rose as investors priced tomorrow’s story over today’s profits

AI fuels cloud momentum

Alibaba’s June-quarter revenue rose 2% to CNY 247.7 billion (USD 34.6 billion) but fell short of expectations. However, excluding the divested businesses Sun Art and Intime, revenue would have grown 10% from last year. Operating income fell 3% to CNY 35 billion (USD 4.9 billion), as spending on cloud, AI, logistics and quick commerce weighed on results. Cloud Intelligence was the standout. Sales jumped 26% to CNY 33.4 billion (USD 4.7 billion), with AI-related products delivering triple-digit growth for the eighth straight quarter. Management said AI now makes up a significant share of external cloud revenue. Alibaba is betting its infrastructure will remain the backbone of generative AI adoption in China, particularly as foreign suppliers face trade restrictions.

E-commerce wins users, loses cash

Alibaba’s domestic commerce engine still delivers scale. Taobao monthly active users rose 25%, fuelled by instant commerce rollouts and a strong mid-year shopping festival. The merger of Taobao, Tmall, Ele.me, and Fliggy created tighter links across the ecosystem, boosting engagement and driving record order volumes. But growth is expensive. Heavy spending on delivery networks, consumer subsidies, and product expansion narrowed margins and turned free cash flow negative. CFO Toby Xu noted efficiency measures are underway yet stressed that Alibaba is deliberately investing ahead of the curve to lock in consumer mindshare. Ant Group offered no cushion. The fintech affiliate posted a 60% profit slump, reflecting higher R&D and global expansion costs. That decline directly reduced Alibaba’s equity income, keeping overall profitability under pressure.

Chips: Alibaba’s homegrown hedge

Beyond near-term numbers, Alibaba is advancing its AI hardware ambitions. The company is testing a new chip designed for a wider range of inference tasks—core to running large AI models. Unlike its earlier processors fabricated at TSMC, the new design is produced by a mainland Chinese manufacturer. This shift highlights Beijing’s drive to develop self-sufficiency in semiconductors after US curbs cut off access to Nvidia’s most advanced chips.

Nvidia’s H20, the only high-end AI processor it is allowed to sell in China, faced restrictions earlier this year. Although exports have since resumed, Chinese firms like Alibaba are racing to build alternatives. Developing a versatile in-house chip would not only reduce supply-chain risk but also secure the infrastructure needed to expand Alibaba Cloud’s AI services. For investors, the chip project signals how far Alibaba is willing to go to protect and monetise its AI roadmap—even if profits are delayed by heavy upfront investment.

 

Investor reaction: story over numbers

Despite softer revenue and earnings, Alibaba’s ADRs gained about 7% in pre-market trading on 29 August 2025. Investors focused on the faster-growing segments—cloud, AI products, and user expansion—rather than near-term profit erosion. This reflects a broader dynamic: markets often reward a credible growth story, even when current numbers disappoint. The optimism rests on two planks. First, Alibaba has proved its AI story is not just narrative: cloud demand tied to AI workloads is producing real revenue growth. Second, the chip effort shows it is not relying solely on foreign technology at a time when geopolitics can redraw supply chains overnight. Together, these give investors confidence that Alibaba’s roadmap is future-proof, even if the present looks messy.

What to watch next

  • Cloud margins: will scaling AI workloads translate into profit or just higher costs?
  • E-commerce efficiency: can instant commerce monetise at scale without eroding free cash flow?
  • Ant Group recovery: a clearer path to profit is needed to lift sentiment.
  • Chip development: progress on in-house AI semiconductors could be a strategic hedge against US curbs.

Building tomorrow costs today

Alibaba is doubling down on its twin pillars of consumption and cloud. Consumption spans everything from Taobao shopping to Ele.me food delivery—a play to capture more of China’s daily spending. Cloud is the backbone of its AI push, now reinforced by in-house chip development. Together they tell a story of scale and self-reliance, but also of thinner margins and heavy investment. The bet is clear. If Alibaba can harness China’s consumer base while also powering its digital backbone, it creates a flywheel of demand and data. The risk is equally clear: profits today are thinner, and investments in chips, logistics, and commerce need time to pay off.

The question is whether these bets compound fast enough to convince investors that tomorrow’s growth is worth today’s squeeze. The strategy is bold, the costs are heavy, and the payoff is uncertain. Time will tell if today’s investment buys tomorrow’s durability.

 

 

This material is marketing content and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results. The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
Ruben Dalfovo
Investment Strategist
Saxo Bank
Topics: Equities Highlighted articles NVidia Corp. Advanced Micro Devices NVIDIA Corporation Artificial Intelligence Theme - Artificial intelligence Corporate Earnings Earnings beat Earnings miss
US 30 forecast: the uptrend has resumed, but it lacks strength

Posted on: Aug 28 2025

The US 30 index updated its all-time high, but the trend remains unstable. The US 30 forecast for today is positive.

US 30 forecast: key trading points

  • Recent data: US services PMI for July came in at 55.5
  • Market impact: such data is perceived by the US stock market as a signal of resilient domestic demand and economic activity

US 30 fundamental analysis

The published services PMI for July 2025 came in at 55.4 points, above the forecast of 54.2 but slightly lower than the previous reading of 55.7. This figure shows that the services sector continues to demonstrate solid growth, remaining well above the key 50-point threshold that separates expansion from contraction. As the services sector accounts for more than two-thirds of US GDP, its steady performance indicates the economy’s overall positive momentum.

This supports the US 30 index, as investors see confirmation that corporate earnings in the services sector have a strong basis for further growth. However, PMI staying at elevated levels may also raise concerns about persistent inflationary pressure in services, which could prevent the Fed from cutting interest rates in the near future.

US Services PMI: https://tradingeconomics.com/united-states/services-pmi

US 30 technical analysis

The US 30 index is again in an uptrend. The resistance level has formed at 45,790.0, with the support level at 44,590.0. Volatility remains elevated for the US 30. The uptrend is rather weak, meaning it could shift into a downtrend. The upside potential is limited in the short term.

The US 30 price forecast considers the following scenarios:

  • Pessimistic US 30 scenario: a breakout below the 44,590.0 support level could push the index down to 43,325.0
  • Optimistic US 30 scenario: a breakout above the 45,790.0 resistance level could boost the index up to 46,595.0
US 30 technical analysis for 27 August 2025

Summary

PMI data is perceived by the market as generally positive for equities and the US 30 in the short term, but investors remain attentive to the Fed’s policy stance and its response to inflation dynamics. The financial sector benefits from stable economic activity that supports lending and investment processes. Tech and communications firms also gain indirectly, as services growth increases demand for digital solutions and online platforms. The next upside target for the index could be 46,595.0.

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