Alibaba Cloud 38% growth; buy recommendation on hold
Alibaba shares 4rose on expectations for artificial intelligence (AI) and cloud computing despite a decline in quarterly profit. A buy recommendation is on hold until investment results become clearer.
![Alibaba Cloud 38% growth; buy recommendation on hold]/blog-images/gen-24df45e9-1b19-4fc9-91f4-87aa4b750da4.avif)
Alibaba shares recently 4rose after the quarterly results were announced. The company's profit trend worsened, but investors responded to its artificial intelligence plans and in-house chip capabilities. The share price movement was driven by expectations for future cloud growth rather than current profits.
Revenue in the Cloud Intelligence Group 38% increased. Adjusted EBITA 57% rose. Adjusted EBITA is a measure of profit trends that excludes one-off costs and other items.
By contrast, the core e-commerce business was weak. Heavy spending on its quick-commerce grocery business led segment profit to fall by 40%. The company is investing in new growth businesses while continuing to compete in its core business.
What investors focused on in these results was the artificial intelligence roadmap. Alibaba was also regarded as a company with its own chip capabilities. Expectations that this could be linked to growth in its cloud business were reflected in the share price.
However, the decline in profit was considerable. It remains to be seen whether investment in quick-commerce grocery delivery will translate into actual revenue and profit. The next results will also need to show whether investment in artificial intelligence is delivering returns that outweigh its costs.
The investment view presented is to wait rather than buy immediately. A buying decision will be easier once the results of investments in artificial intelligence and quick-commerce grocery delivery become clearer. For now, the results showed cloud growth alongside a decline in profit from the core business.
Sources: The Motley Fool
Bullstory synthesized this report from the linked sources. AI may have assisted the writing process. Check the original reports for factual confirmation.