Dear Shareholders,
Today, we stand at a critical inflection point in the development of Artificial General Intelligence (AGI).
Vast numbers of AI agents are poised to take on an ever-greater share of work in the digital economy, each powered by tokens generated from models. Agents will increasingly serve as the primary interface between humans and the digital world. As we face unprecedented industry transformation and strategic opportunities of this magnitude, Alibaba Group enters a new phase of entrepreneurial innovation and critical investments for the future. In this letter, we would like to share our thinking about the future – our strategic positioning, competitive strengths, and how we intend to capture the next wave of growth.
As we enter the AI agent era, AI models and capabilities are being rapidly incorporated into mainstream workplace and business environments, with token consumption surging across industries. We expect the addressable market for companies like Alibaba that provide full-stack AI capabilities is poised to grow exponentially. Against this backdrop, Alibaba's AI has moved beyond the initial investment phase and entered full-scale commercialization. Driven by robust AI demand, our Cloud Intelligence Group’s external revenue growth accelerated to 40% in the final quarter of fiscal 2026, with AI-related products accounting for 30% of this revenue. This reflects AI's role in driving a comprehensive upgrade of Alibaba Cloud's entire business, as its growth engine fully pivots from traditional compute and storage to models, AI compute, and agent services.
At the infrastructure layer, our proprietary T-Head AI chips have achieved production at scale, delivering high-performance compute capacity to our cloud infrastructure and Model-as-a-Service (MaaS) inference platform. In foundation models, we continued to accelerate our research and development pace, releasing three updates to the Qwen family within the past three months. Our latest generation large language model, Qwen3.7-Max, is specifically engineered for agents and expands the frontier of model capabilities, including in core competencies such as agentic coding and complex reasoning. Complementing the Qwen family, we achieved advancements in specialized models such as HappyOyster, a real-time interactive generative world model, and HappyHorse, a multimodal model for cross-modal understanding and generation.
At the application layer, in November 2025 we launched the Qwen app, our all-in-one personal AI assistant for life, work, and learning. Deeply integrated across our ecosystem, including Taobao and Tmall, Taobao Instant Commerce, Fliggy, Damai, Amap, and Alipay, the app serves distinctive capabilities spanning everyday life, services, productivity, and entertainment. The integration of AI into a broad spectrum of use cases expanded our user reach, enhanced engagement across Alibaba’s platforms and external services, and strengthened our leadership in applied AI. We also launched Wukong, our AI-native agentic platform built for enterprises. Wukong coordinates AI agents to handle complex workflows and leverages modular tools built across Alibaba's entire ecosystem. Together, they complete our comprehensive AI application strategy across both enterprise and consumer users.
Alibaba’s leading full-stack capabilities across the AI value chain put us in a strategically-advantaged position in the new world of AI. With our talent, technology and resources, we are confident in seizing the moment to propel AI + Cloud into another growth engine for Alibaba. To realize this vision, we are scaling up investments in our full-stack AI capabilities. We are actively advancing investments in AI infrastructure and proprietary chips. At the model and application layers, we will invest in stronger foundation model capabilities to connect with more applications, and develop a more powerful MaaS product to bridge these two layers effectively. We are seeing enormous opportunity to capture market value in this space.
In the consumer sector, quick commerce has become a core strategic pillar in the ongoing platform transformation of Taobao and Tmall. With over 1.1 billion Internet users, China is the world's largest online retail market. As our e-commerce business grew its roots from this dynamic and vast market environment, Taobao and Tmall will remain focused on user growth and improving user experience. We recognize the strategically vital role of quick commerce to leverage AI for driving user acquisition and engagement, fulfilling diverse consumer needs, increasing transactions, and enhancing monetization. We see that quick commerce is a necessary path to fulfilling our “Customers First” mission: with consumer behavior rapidly shifting to the norm of 30-minute delivery, we must stay ahead of consumer expectations and remain agile in this fast-moving market.
Growth is the constant theme at Alibaba. We are committed to technology innovation and incorporating leading-edge technology into our core businesses to create value for our customers and, ultimately, for our shareholders. To prevail in an intensely competitive environment, Alibaba must maintain our growth mindset – embracing change, investing patiently in our capabilities, and securing our future through long-term thinking. This is who we are.
Joe Tsai Eddie Wu
Chairman Chief Executive Officer
