Recently, Alibaba has been riding a wave of positive news.

Following the success of Deepseek, Alibaba's Tongyi Large Model has also garnered significant market attention. On Lunar New Year's Day, Alibaba Cloud released the Tongyi Qianwen flagship model Qwen2.5-Max, scoring 1332 points, surpassing popular models like Deepseek V3.

Subsequently, on February 11, news emerged of a collaboration between Alibaba and Apple in the field of AI. Prior to partnering with Alibaba, Apple had considered companies such as Baidu and Deepseek. Taking advantage of this momentum, Alibaba Group CEO Wu Yongming officially announced a plan to invest RMB 380 billion over the next three years in cloud and AI hardware infrastructure.

On February 20, Alibaba released its fourth-quarter results, showcasing an 8% year-on-year increase in revenue and a remarkable 239.12% surge in net profit attributable to shareholders. For the full year, Alibaba achieved revenue of RMB 981.767 billion and net profit attributable to shareholders exceeding RMB 220 billion.

Meanwhile, Alibaba founder Jack Ma has been making frequent public appearances since the end of last year, sparking widespread speculation, especially his participation in the highest-level symposium for private enterprises on February 17.

With these numerous positives, Alibaba's share price has soared. As of February 24, Alibaba's Hong Kong shares hit a 52-week high of HK$140.9 per share during intraday trading. In less than two months since the beginning of 2025, the share price has increased by nearly 70%, and the market value has risen by HK$1.2 trillion (approximately RMB 1.1 trillion). Additionally, investment bank Morgan Stanley issued a new report, raising its target price for Alibaba from $100 to $180 and upgrading its rating to overweight.

Behind the Impressive Performance

In March 2023, then-Alibaba CEO Daniel Zhang announced the "1+6+N" split model. The restructured Alibaba now comprises the Taobao and Tmall Group, the International Digital Commerce Group, the Local Life business dominated by Ele.me and Gaode Maps, the Digital Media and Entertainment Group, Cainiao Network, Alibaba Cloud Intelligence, and other business groups.

Despite a complex and volatile market environment, Alibaba has maintained resilient growth. For the third quarter of fiscal year 2025 ending December 2024, Alibaba's revenue increased by 8% to RMB 280.15 billion, surpassing market expectations. Net profit attributable to shareholders reached RMB 48.945 billion, a year-on-year increase of 239%.

Specifically, the Taobao and Tmall Group, the cornerstone of Alibaba's business, saw its total revenue increase by 5% year-on-year to RMB 136.09 billion. Among this, customer management revenue exceeded RMB 100 billion, with a growth rate of over 9%. Alibaba attributed this revenue growth to increases in both GMV and commission fees.

According to Kuama Finance Media, Alibaba implemented a low-price strategy with subsidies of tens of billions in 2024, leading to a decline in the growth rate of the group's advertising and commission expenses. Consequently, Alibaba's customer management expenses also decreased. However, since September 2024, Alibaba adjusted its original fixed fees to dynamic fees based on GMV, resulting in customer management fees surging from 1% in the middle of the year to 9% by the end of the year.

Despite a 9% growth rate, this figure ranks second from the bottom among all business groups, only slightly better than the still-loss-making Local Life Group. Due to fierce competition and high subsidy costs, Alibaba's Local Life Group has consistently been in a loss-making position. Although losses have decreased, it has yet to turn a profit. However, the good news is that adjusted losses have been reduced to RMB 596 million, and the fiscal year 2026 is expected to become profitable.

The performances of Alibaba Cloud Intelligence and the International Digital Commerce Group were particularly impressive. Alibaba Cloud Intelligence Group reported an adjusted profit of RMB 3.138 billion, a year-on-year increase of 33%. In the previous three quarters, the growth rates of this business were 45%, 155%, and 89%, respectively. The decline in profit growth rate can be attributed to Alibaba Cloud's increasing investment in large models, which has had a noticeable impact.

The International Digital Commerce Group, led by "Alibaba's Crown Prince" Jiang Fan, recorded growth rates of 45%, 32%, 29%, and 32% over the past four quarters. Alibaba attributed the growth of its overseas business to the revenue increases of AliExpress and the Turkish e-commerce retail platform Trendyol.

From a profit perspective, businesses such as the Taobao and Tmall Group, Alibaba Cloud Intelligence, and Cainiao Logistics all achieved new annual highs in the third quarter of fiscal year 2025.

However, behind these impressive financial reports lies Alibaba's continuous "rolling" layoffs. At the end of the natural year 2023, Alibaba had 219,260 employees, which dropped to 194,320 by the end of 2024, a reduction of 24,940 employees in one year. This translates to Alibaba contributing 68 talents to society every day in 2024.

Looking at a longer timeline, Alibaba has also seen significant personnel optimization in recent years. At the end of the natural year 2021, Alibaba had 259,316 employees. In the three years to the end of 2024, Alibaba reduced its workforce by a total of 64,996 employees.

AI Finally Stands Tall

Between 2021 and 2022, Charlie Munger invested in Alibaba through his company but eventually sold out at a loss. At the time, Munger chose Alibaba because he viewed it as a "cheaper Amazon" with a strong competitive advantage. Additionally, he believed the market's perception of regulatory oversight over Chinese technology was exaggerated.

However, as Alibaba's share price fell, Munger finally admitted at the 2022 shareholders' meeting that "Alibaba's situation is more complex than I anticipated." After Alibaba's share price fell below $90, global investors accelerated their withdrawal from Chinese stocks, and Munger also chose to sell out of his Alibaba holdings, expecting a loss of around 50%.

As a traditional e-commerce platform, Alibaba has significantly increased its investment in technologies such as cloud and AI during the years of its share price decline. After spinning off and independently operating Alibaba Cloud Intelligence and other businesses, it originally planned for an independent listing but later withdrew the plan. This spin-off was accompanied by organizational restructuring and turbulence.

Despite years of increasing investment in cloud and AI, the outside world often viewed these efforts as unprofitable and ineffective, with frequent reports of setbacks.

It was not until the release of Deepseek R1, which ignited the market at a lower cost, that Alibaba's Tongyi Qwen2.5-Max large model also gained market recognition. The open-source strategies of these two models, which confront OpenAI's closed-source model, have become a crucial turning point in the market's perception of Alibaba as a company.

After the release of Alibaba Tongyi Qwen2.5-Max, JPMorgan Chase also issued an article stating that China's strength in AI has been underestimated, and the gap between China and the US in AI is not as large as imagined. Investors should pay attention to the innovation capabilities of Chinese technology enterprises.

Shortly thereafter, Alibaba Group Chairman Joseph Tsai officially announced that Alibaba had secured an AI order from Apple. Before winning the Apple AI order, Apple had also considered star companies such as Baidu, Tencent, ByteDance, and Deepseek. Currently, there are rumors that the Chinese version of Apple AI is expected to be launched in April. While it is currently difficult to assess the financial gains from the collaboration with Apple, gaining Apple's recognition of Alibaba's technological strength will undoubtedly bring more customers and revenue.

Furthermore, Alibaba has invested in emerging AI startups such as Zhipu and Darkside of the Moon. Foreign media have reported that when news spread that Deepseek would open external financing, Alibaba expressed investment interest.

For its own business, Alibaba also regards AI and large models as key forces that can provide more support for its e-commerce business. Currently, reports indicate that many businesses within the Taobao and Tmall Group have been required to fully adopt AI, with results expected by the end of 2025. On the 24th, Alibaba CEO Wu Yongming stated that over the next three years, Alibaba will increase investment in AI-related infrastructure, basic model platforms, AI-native applications, and the AI transformation of existing businesses.

Therefore, the current capital market is no longer valuing Alibaba based solely on its traditional e-commerce positioning. Instead, Alibaba is poised to tell a new story as an "AI service provider."