This article first appeared on GuruFocus.
Alibaba Group Holding Ltd. (BABA, Financials) claimed that its investment in AI for e-commerce has already paid off, which is a good indication for one of its biggest technology projects.
Vice President Kaifu Zhang told reporters in Shanghai that Alibaba’s AI tools from smarter search results to virtual try-on features are driving measurable business gains. Testing showed a 12% rise in advertising return on spend, an improvement Zhang called rare for such trials.
The results come as Alibaba gears up for Singles Day, China’s largest annual shopping event on Nov. 11. Zhang said the company expects AI-driven personalization and ad optimization to lift gross merchandise volume this year.
Alibaba’s domestic e-commerce unit is still its biggest source of income, taking in $19.53 billion in the quarter that ended on June 30, up 10% from the same time last year. According to the research firm Syntun, overall online sales on last year’s Singles Day rose by more than 20% to 1.11 trillion yuan across Alibaba’s Tmall, JD.com, and PDD, even though consumers weren’t buying as much.
The business has promised to spend 380 billion yuan ($53 billion) over the next three years on AI and cloud infrastructure. Executives think that long-term investment is the most important thing right now, even if profit margins go smaller for a while.
Alibaba sees AI and consumerism as two big chances that will help it develop in the future. The company’s next catalyst is the Singles Day sales period, where investors will look for signs that its heavy AI spending is translating into sustained revenue growth.
