Alibaba Answers a Profit Collapse With Price Hikes, Markets Disagree

When profits crater, many companies cut prices to compete — AlibabaBABA

did the opposite. After posting its worst quarter since early 2024 amid a 67% earnings plunge, the e-commerce giant announced it would raise AI computing costs to recoup heavy investments and flee a fierce price war. Shares opened green before closing 7.1% lower, as markets debated whether the move was bold or desperate.

• Specifically,BABA
  hiked chip and cloud prices up to 34% — part of a broader restructuring to consolidate and monetize its sprawling AI portfolio.
• It’s part of CEO Eddie Wu’s pledge to reach $100B in combined cloud and AI revenue within five years — quintupling current levels at a ~35% annual clip.

Cashing in: Alibaba isn’t alone in hiking prices, as TencentTCEHY

quadrupled costs, BaiduBIDU

raised by 30%, and GoogleGOOGL

followed suit. But while China’s other AI tigers surged this week after NvidiaNVDA

CEO Jensen Huang’s comments, Alibaba faces steeper challenges. To turn things around, it must overcome a recently departed star developer, plateauing e-commerce revenue, and an unclear commercial lead. Ultimately, charging premium prices works best when customers are convinced.