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What happened: Alibaba (BABA) stock fell 3% in premarket on Wednesday before paring losses to less than 1%.

What’s behind the move: The Chinese e-commerce and cloud giant reported a 3% increase in fourth quarter revenue on Wednesday, missing analyst expectations. Alibaba’s earnings were weighed down by heavier spending on AI initiatives, cloud infrastructure expansion, and continued investment in its rapid-delivery business, which focuses on fulfilling orders within an hour.

Cloud revenue surged an annualized 38% to $6.13 billion, roughly in line with Wall Street estimates.

What else you need to know: Earlier this year, the company split its artificial intelligence operations from its cloud computing division and appointed CEO Eddie Wu to head the newly established “Alibaba Token Hub” unit as it pushes to turn its AI investments into a profitable business.

Alibaba has been increasing its spending on AI and user acquisition efforts.

“Alibaba effectively redeployed more than 90% of its March-quarter China e-commerce profit into Qwen user acquisition and adoption — a spending run rate that looks set to persist into fiscal 2027,” Bloomberg Intelligence’s Catherine Lim noted.

Year to date, the stock is down roughly 8%.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.

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