(Yicai) May 16 -- Alibaba Group Holding's stock price dropped after the Chinese internet giant posted weaker-than-expected revenue growth for its fiscal fourth quarter, despite making notable strides in strengthening the competitiveness of its e-commerce and cloud businesses.

Alibaba [HKG: 9988] closed 4.3 percent lower at HKD123.40 (USD15.79) a share in Hong Kong today. In New York yesterday, its stock [NYSE: BABA] lost 7.6 percent to finish at USD123.90.

Revenue rose 7 percent to CNY236.5 billion (USD32.6 billion) in the three months ended March 31 from a year earlier, the Hangzhou-based company said in a financial statement released yesterday. The market expectation was for CNY241 billion.

Net profit based on non-generally accepted accounting standards jumped 22 percent to CNY29.9 billion (USD4.1 billion), while net profit attributable to ordinary shareholders was CNY12.4 billion.

Annual revenue rose 6 percent to CNY996.3 billion (USD137.3 billion) from the year before, while non-GAAP net profit rose 0.4 percent to CNY158.1 billion (USD21.8 billion).

“Our results this quarter and for the full fiscal year demonstrate the ongoing effectiveness of our 'user first, artificial intelligence-driven' strategy, with core business growth continuing to accelerate,” Chief Executive Eddie Wu said in a statement to accompany the earnings release.

Alibaba, whose earnings are closely watched as a bellwether for Chinese tech firms, is focusing on AI and cloud technologies to enhance operational efficiency, elevate the customer experience, and fuel future growth. The firm plans to invest more than CNY380 billion (USD52.8 billion) building AI and cloud infrastructure over the next three years, Wu said in February.

“Looking ahead, we will remain focused on our core businesses and continue to drive ‘AI + Cloud’ as a new engine for our long-term growth,” he pointed out yesterday.

AI Adoption

Income at Alibaba’s Cloud Intelligence Group climbed 18 percent to CNY30.1 billion in the quarter, as AI-related products maintained triple-digit year-on-year growth for the seventh consecutive quarter.

Alibaba noted that its AI products are being adopted more widely across a wide range of sectors, including internet services, retail, manufacturing, and media, with an increasing emphasis on value-added applications.

“While uncertainties persist in the global AI supply chain, growth of customer demand is unwavering,” Wu said on the firm’s earnings conference call. “We continue to see growing demand for cloud and AI -- an opportunity that will define the next 10 to 20 years and will not be derailed by short-term supply chain fluctuations.

"Our confidence and commitment to investing in cloud and AI infrastructure remains unchanged, and we are actively exploring diversified solutions to meet rising customer demand," Wu noted.

Wu explained that two clear trends have emerged in the adoption of ‘AI + Cloud.’ The first is that AI applications among large and mid-sized enterprises are expanding from internal systems to more customer-facing uses. The second is that the adoption of AI products is rapidly extending from big companies to more and more small and medium-sized businesses.

Beyond early adopters in the internet services, autonomous driving, financial services, and online education sectors, many traditional industries, such as animal farming and manufacturing, are also actively exploring AI applications.

“We are the No. 1 cloud provider in the region and a No. 4 cloud provider globally," Lydia Liu, vice president and head of investor relations at Alibaba, said during the call. "We have leading models and leading technology."

E-Commerce

Customer manager revenue at Taobao and Tmall Group, which encompasses Alibaba's domestic e-commerce business, rose 12 percent to CNY71.1 billion (USD9.8 billion) in the quarter, mainly because of improvements in take rates.

Meanwhile, Alibaba International Digital Commerce Group saw revenue jump 22 percent to CNY33.6 billion, fueled by strong cross-border business.

AIDC maintains a diverse geographical presence, with a strategic focus on select European markets and the Gulf Region. Both AliExpress and Trendyol continued to diversify their product offerings by engaging local merchants and partnering through different business models across various markets.

E-commerce has significant potential for AI applications, said Jiang Fan, CEO of Alibaba's E-Commerce Business Group, which comprises the Taobao and Tmall and AIDC business groups.

The focus is on enhancing user experience, with opportunities to restructure traditional algorithms for search, recommendation, and advertising, areas where Alibaba has already seen improvements, he noted.

Other Businesses

Quarterly revenue from Cainiao Smart Logistics Network soared 12 percent to CNY21.6 billion (USD3 billion), largely as a result of the increasing integration of logistics offerings into Alibaba's e-commerce businesses.

Its Local Services Group had revenue of CNY16.1 billion (USD2.2 billion), up 10 percent, driven by order growth from both Amap and Ele.me and increased revenue from marketing services.

Revenue from the Digital Media and Entertainment Group rose 12 percent to CNY5.6 billion (USD765 million), following a strong showing at its movie and entertainment businesses and growth in Youku's advertising revenue.

Editor: Futura Costaglione