Produced by / Networld

On May 20, Joe Tsai, Chairman of Alibaba Group, and Wu Yongming, CEO, jointly issued a letter to shareholders. Though concise, the letter strikes at the heart of the current technology industry with every sentence.

Global AI development has reached a pivotal moment, with intelligent agents starting to handle more digital tasks, and industry competition has escalated beyond small-scale skirmishes. Alibaba is now openly revealing its strategic cards, focusing on two core areas: AI plus cloud computing and instant retail.

Alibaba is not merely dipping its toes in the water; it is clearly expressing its ambition to be a frontrunner in the AI era.

Many believe that Alibaba's e-commerce foundation is solid, and its foray into AI is just an added bonus. However, this letter reveals that Alibaba views itself as a startup once again, investing in core sectors with a long-term vision.

01. Alibaba Takes the Lead in AI Commercialization

The most pivotal sentence in the shareholder letter states, "Alibaba's AI business has transcended the initial investment phase and has officially entered a commercial payback cycle."

This assertion is not mere rhetoric; it is supported by robust data. In the fourth fiscal quarter of 2026, Alibaba Cloud's external revenue growth surged to 40%, with AI-related revenue contributing 30%. More critically, AI revenue has witnessed triple-digit growth for eleven consecutive quarters, a rare achievement in the industry.

While many companies in the sector are still grappling with monetizing AI, Alibaba has already charted a clear path. Moreover, Alibaba's AI is not a standalone product but a comprehensive ecosystem spanning from chips to models to applications.

At the foundational level, there is the T-Head AI chip, which has been mass-produced to supply computing power for cloud computing and model inference. In the middle tier, the Qwen large model has undergone three iterations in three months. The latest Qwen3.7-Max is tailored specifically for intelligent agents, featuring breakthroughs in programming and reasoning capabilities.

In addition to foundational models, Alibaba has also developed specialized models. For instance, HappyOyster supports interactive creation, while HappyHorse focuses on multimodal understanding.

The application layer is even more distinct. On the consumer front, there is the Qwen App, which seamlessly integrates with ecosystem applications like Taobao, Alipay, and Gaode, serving as a personal AI assistant. On the business side, the Wukong platform aids enterprises in managing complex workflows, forming a dual-pronged approach with the Qwen App.

Capital markets have long recognized Alibaba's strengths. Morgan Stanley released a research report stating that Alibaba is the only company in China that has truly achieved "four-layer vertical integration": self-developed chips (T-Head), cloud infrastructure (Alibaba Cloud), leading open-source models (Qwen), and rich consumer scenario applications. The report also elevated Alibaba to its top pick in China's internet AI sector.

This full-stack capability is what distinguishes Alibaba from its peers.

02. Instant Retail Emerges as a New Growth Engine for E-commerce

Besides AI, the shareholder letter also highlights instant retail, defining it as a core strategy for upgrading Taobao and Tmall. This choice is pragmatic, given China's over 1.1 billion internet users and its status as the world's largest online retail market.

Consumer habits have already shifted, with everyone now expecting 30-minute delivery, making instant delivery the new norm.

Alibaba's instant retail landscape is well-defined, with Taobao Flash Sale, Tmall Supermarket, and Hema working in tandem. The data underscores the momentum: from January to March this year, Taobao Flash Sale orders were 2.7 times those of the same period last year, with non-food retail reaching three times.

Hema needs no introduction, with its GMV surpassing RMB 100 billion in the 2026 fiscal year, online transactions accounting for over 60%, and two consecutive years of profitability.

Alibaba's approach to instant retail is not merely trend-following; it is AI-driven. AI is leveraged to acquire new users, enhance user stickiness, and meet diverse consumer needs.

The shareholder letter emphasizes that "customer first" is not just a slogan. In today's fiercely competitive e-commerce landscape, price wars are futile. Instant retail triumphs through delivery efficiency and service experience, areas where AI can make a substantial impact.

Alibaba has also set clear targets for instant retail: overall transaction volume to exceed RMB 1 trillion in the 2028 fiscal year and achieve overall profitability in the 2029 fiscal year.

These targets are not mere wishful thinking. With existing user demand, Alibaba's mature supply chain and delivery system, and AI empowerment, instant retail will become another growth pillar for Alibaba beyond e-commerce.

03. A Five-Year, USD 100 Billion Target: Alibaba's Commitment to Long-Termism

Alibaba's shareholder letter does not just focus on the present; it also outlines a grand vision for the future.

The core target is clear: over the next five years, commercial revenue from cloud and AI, including MaaS, is expected to exceed USD 100 billion (approximately RMB 690 billion), with a compound annual growth rate of about 47%.

This target is ambitious, equivalent to creating another Alibaba in terms of scale.

To achieve this, Alibaba is willing to make sustained investments. Wu Yongming stated that AI infrastructure investment over the next five years will far surpass the previously committed RMB 380 billion. Compared to 2022, before the large model boom, the scale of Alibaba's future data centers will "basically increase tenfold."

In the AI industry, computing power is the ultimate competitive edge. Alibaba's massive investment aims to outpace competitors in foundational capabilities.

Alibaba's confidence stems from its closed-loop, full-stack layout. From T-Head chips providing computing power to Alibaba Cloud hosting services, to the Qwen model delivering capabilities, and finally to the Qwen App and Wukong platform for application deployment, every link is under Alibaba's control. This closed-loop reduces costs, improves efficiency, and enables rapid market response.

Joe Tsai and Wu Yongming stated in the letter that Alibaba must maintain its entrepreneurial spirit. This statement carries significant weight. As a large company, Alibaba is not resting on its laurels but is instead venturing into new sectors like AI and instant retail with a startup mentality. This long-termism is key to Alibaba's ability to navigate industry cycles.

Summary

Alibaba's New Journey: Clear Signals and Strong Confidence

After reading this shareholder letter, one can clearly sense Alibaba's strategic determination and ambition. While the AI industry is currently abuzz, many companies have yet to find a clear path to monetization. Alibaba, however, has already transformed AI into a profitable business, leading the industry with its full-stack layout. Instant retail capitalizes on consumer trends and is empowered by AI, opening up new avenues for e-commerce.

The five-year, USD 100 billion AI revenue target is not just a slogan; it is a rational judgment based on technology, market, and ecosystem. Starting from e-commerce and establishing itself with cloud computing, Alibaba is now fully committed to AI and instant retail, with each step aligned with industry trends.

The signals sent by Joe Tsai and Wu Yongming are unequivocal: Alibaba is not content with the status quo and will continue to innovate with an entrepreneurial spirit, leveraging technology to empower its business.

In the coming years, Alibaba's core growth will hinge on AI plus cloud computing and instant retail. In these two sectors, Alibaba is well-prepared and capable of continuously creating value, delivering robust results to the market and shareholders.

Appendix: Original Alibaba Shareholder Letter