Alibaba reported a significant decline in core profitability for the March quarter, with adjusted EBITA plunging 84% year-on-year to 5.1 billion Chinese yuan ($750.9 million) as the company ramped up investments in technology and e-commerce initiatives [1]. The company's China e-commerce group saw adjusted EBITA drop 40% year-on-year, despite a 1% increase in customer management revenue, its largest revenue contributor [1]. Notably, Alibaba's quick commerce segment experienced robust growth, with revenue surging 57% year-on-year, reflecting the company's aggressive push into rapid delivery services [1]. These heavy investments, particularly in semiconductors for AI, data centers, and the Qwen AI model family, have bolstered Alibaba's cloud computing segment, which remains a bright spot driven by strong AI demand in China [1]. However, the market reacted negatively, with Alibaba's U.S.-listed shares falling 3.4% after an initial premarket rise [1].
Tencent, meanwhile, reported a 9% year-on-year increase in revenue for the first quarter of 2026, reaching 196.5 billion Chinese yuan ($28.9 billion), though this figure missed analyst expectations of 199 billion yuan [2]. Domestic games revenues grew 6% year-on-year to 45.4 billion yuan, a marked slowdown from the 24% growth seen in the same period last year [2]. Chairman and CEO Ma Huateng highlighted significant progress in new AI products and the use of AI to drive engagement, revenue, and profit across core businesses, which in turn funds further AI investments [2]. Tencent's fintech and other business services segment generated 60 billion yuan, up from 55 billion yuan a year earlier, with business services revenues rising 20% year-on-year, led by increased cloud services demand and AI-related services [2]. The company's AI agent tool, WorkBuddy, was noted as the most popular agentic service in China [2].
Analyst Ivan Su from Morningstar pointed out that Tencent's upgraded AI-driven ad recommendation model accelerated advertising revenue growth to 20%, and that AI spending is tracking in line with management's full-year guidance [2]. However, Su also noted the slowdown in gaming revenue growth, attributing it to the timing shift of Chinese New Year rather than a decline in underlying demand [2].
Both Alibaba and Tencent are experiencing the impact of substantial investments in AI and cloud computing, with Alibaba facing a sharp drop in profitability despite strong segmental growth, while Tencent continues to see revenue growth, albeit below expectations, with AI and cloud services providing key support [1][2].
CONCLUSION
Alibaba and Tencent's latest earnings highlight the divergent effects of heavy AI and cloud investments on their financial performance. While Alibaba's profitability has been significantly pressured by ongoing investments, Tencent managed to deliver revenue growth, though it fell short of analyst forecasts. The market remains cautious, with Alibaba's shares declining and Tencent's results reflecting both the promise and challenges of AI-driven transformation.