On Thursday, Chinese e-commerce giant Alibaba Group Holding Limited (BABA  ) reported solid quarterly results that outperformed both top and bottom line expectations, with revenue having its strongest expansion since 2021's September quarter. Alibaba reported a strong performance like its U.S. peer Amazon.com Inc (AMZN  ) and with its AI efforts, it is going up directly against Meta Platforms (META  ) and Microsoft Corporation (MSFT  ). Unsurprisingly, the company's U.S.-traded shares rose by 4.5% in premarket trading.

Quarterly Highlights

For the quarter that ended on June 30th, Alibaba reported its revenue rose 14% YoY as it amounted to 234.16 billion yuan or $32.29 billion, topping the expected 224.92 billion yuan. Alibaba made 34.33 billion yuan in net income attributable to shareholders that rose at an impressive rate of 51% YoY, also topping the 28.66 billion yuan that Refinitiv's survey of analysts expected.

Alibaba's Performance Per Business Unit

The two main businesses, Taobao and Tmall Group, experienced a 12% YoY rise to 114.95 billion yuan. Taobao, the app for online shopping, experienced a 6.5% YoY rise in daily active users in June, and more than 7% in July.

Alibaba's overseas efforts bore fruits as international commerce retail experienced a 60% YoY rise in revenue to 17.14 billion yuan. International revenue fueled Alibaba's Cainiao logistics business that rose 34% to 23.16 billion yuan.

The cloud business rose 4% as it brought in revenue of 25.12 billion yuan, with its results dragged down by a drop in revenue from top customers, reduced need for demand work, along with streaming and education services, as the country abandoned its strict and limiting COVID-19 measures. AI marks the beginning of a new era

The internet conglomerate is focusing on the long-term possibilities that are coming with an AI-shaped future as opposed to merely taking advantage of a short-term opportunity. Alibaba highlighted its strategy to continue investing in AI development, believing that the Taobao app has the biggest potential to become a one stop AI-powered portal for life and consumption.

Catching Up To Microsoft

With the popularity of OpenAI's ChatGPT, companies in China have been seeking for similar offerings as the Microsoft-backed offering isn't officially available in the country. Due to the regulatory scrutiny in China, such products have been focused on business workings as opposed to publicly available chatbots. Embracing this momentum, Alibaba launched its large language model in April named Tongyi Qianwen that allows AI content creation in English and Chinese, with this kind of LLM being like the one that is powering ChatGPT that Microsoft integrated in its offerings. But earlier this month, Alibaba also announced it is opening a version of this model to third-party developers, directly challenging Meta. Last month, Alibaba also launched an AI service that generates images from prompts, named Tongyi Wanxiang.

Challenging Meta By Open-sourcing Its AI Model

Tongyi Qianwen has different model sizes and the seven billion parameters and the seven-billion-parameter model called Qwen-7B will be open-sourced, along with Qwen-7B-Chat, a version designed for conversational apps. By open sourcing, Alibaba aims to claim its leading tech role, challenging the U.S. tech giant Meta who made a similar move and threatening ChatGPT, its creator Open AI and partner Microsoft. Earlier this year, Meta has open-sourced its Llama large language model to researchers and it is actively working to boost its adoption by collaborating with tech firms. Last month, Microsoft also revealed is Llama 2 will be available on its Azure cloud-computing service.

Reorganization Aims To Unleash New Energy Across Alibaba's Businesses

CEO and Chairman Daniel Zhang summarized that Alibaba's international push has already bore fruits although the domestic consumer demand remain sluggish as the Chinese economy didn't rebound as quickly as anticipated, with second quarter GDP being lower than expected. Zhang will be stepping down as CEO to take charge of the cloud computing business that is marching towards its public debut. Alibaba veteran Eddie Wu will be getting at the CEO helm and Joe Tsai will be the new chairman. On one hand, regulatory pressure is easing as Chinese authorities desire to support the confidence in the private sector, yet on the other, Alibaba is facing significant competitive pressure amid a sputtering economy. But the latest results show encouraging trends for the Chinese e-commerce giant.

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