Downtown Beijing on May 2, 2025.
Greg Baker | AFP | Getty Images
BEIJING – Alibaba, Tencent and JD.com reported revenue this week that reflects the increased benefits of artificial intelligence in advertising as well as improved consumer spending in China.
E-commerce giant Alibaba rose to 1037 billion yuan ($139.7 billion) late Thursday for the three months that ended March 31, when sales for Taobao and Tmall groups rose 100%.
“E-commerce and advertising revenues were a positive surprise as expectations impact consumer behavior,” said Kai Wang, Asian stock market strategist at Morningstar, in an email regarding the revenue results of the three companies.
The revenue release, which covers only the period before the US-China tensions escalated in April, is important to note only the period before the new tariffs spread over 100% on products in both countries – an effective trade embargo. On Monday, the two countries issued a rare joint statement that announced 90-day reductions on most of the recently added tariffs.
Given the increasing uncertainty of Charlie Chen, head of Asian Studies at China Renaissance Securities, the US-China trade dispute since April has had a negative impact on consumption to some extent. He hopes consumption will increase as trade tensions ease.
However, despite insufficient overall consumption, the sale of certain electronics and residential goods has been on track since last year thanks to China’s trade subsidies to support such consumer spending.
JD.com said Tuesday that sales in that category had skyrocketed 17% over a year ago. Overall, the e-commerce company reported revenue from retail increased by 16.3% to 263.85 billion yuan for the three months ended March 31. This was better than the predicted retail segment sales of 226.88 billion yuan.
On Wednesday, Tencent said the “Fintech and Business Services” segment, representing consumer-related business transactions, reported revenues increased to 54.9 billion yuan in the first quarter, 5% year-on-year.
Analyst Nomura said segment revenue growth was in line with estimates, but noted that “Tencent Advertising was a major outperformer in China’s advertising industry despite its challenging macro environment.”
Tencent’s marketing services revenues increased from 20% to 31.9 billion yuan, supported by “robust advertisers’ demand” for short videos and other content within the WeChat social media app. Tencent has pointed out “continuous AI upgrades” to its advertising platform.
AI is boosting advertising
AI is helping Tencent raises its click-through rate (a measure of online advertising success) to nearly 3%, according to the Factset transcript, company executives said in Wednesday’s revenue call. This has historically increased sharply from the 0.1% click-through rate for banner ads, with about 1% of feed ads increasing, the company said.
The total monthly average user total of WeChat, known as China’s WeChat, surpassed 1.4 billion for the first time in the first quarter. The app offers one of two major mobile payment systems used in mainland China.
Many coffee shops and online retailers also use WeChat’s mini app for customers to place orders. Tencent said Thursday it is now a new unit within WeChat, as its e-commerce business has grown so much.
“AI AD improves efficiency and algorithms, which should translate into better targeting for consumers, even when macro conditions are suboptimal,” said King of Morningstar. “It’s still a little early to quantify how much profit AI ads will bring compared to non-AI ads, but we’ve seen monetization from AI-driven ads.”
JD said its marketing revenue for the quarter rose 15.7% to 22.32 billion yuan, partly attributing the rise in AI tools.
In a revenue call on Tuesday, JD Management said the ad research and development team is using large language models to improve ad conversion rates and accelerate advertising revenue growth. The company added that it implements AI tools that allow merchants to “run complex ad campaigns” with simple commands.
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Advertisers have long been seeking ways to target ads from consumers who are most likely to buy.
On Wednesday, YouTube announced that advertisers can use Google’s Gemini AI model to target ads when they are most involved in the video.
Alibaba said marketing revenue, known as “customer management,” rose nearly $10 billion, up 12% year-on-year, thanks to an increase in the company’s use of AI tools to increase merchants’ marketing efficiency, and increased Quanzhantui.
Uncertain outlook
However, Alibaba’s overall profits were only about half of what analysts predicted, lowering its shares by almost 7.6% in the subsequent US trading session.
China is scheduled to release retail sales data for April on Monday. Analysts voted by Reuters predicted retail sales in April rose 5.5% year-on-year, down slightly from 5.9% growth in March.
A Morgan Stanley survey from April 8 to 11, conducted shortly after the escalation of tensions in the US and China, found that consumer confidence fell to its lowest low in 2.5 years, with 44% of respondents concerned about unemployment. Research shows that only 23% of consumers who expect to spend more money in the next quarter have fallen 8 percentage points from the previous quarter.
In April, domestic demand continued to be short on the market, and the consumer price index for the month fell by 0.1% from the previous year. However, if we exclude food and energy prices, the so-called core CPI will increase by 0.5%, the same pace as March.
With the real estate market still not recovering and exports are limited by geopolitics, Chen expects Chinese policymakers to focus on increasing consumption to meet their annual growth targets.
He hopes that related stimulus policies will include increased spending on food and drinks, nursing care, travel, sports and durable products.
June 18th is the next major promotional season for shopping in China.
“I think we’re going to get a pretty good 618. Now obviously we’re not dealing with 30% year-on-year growth like in the first decade of the shopping festival,” Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, told CNBC earlier this week. The company helps foreign brands such as Vitamix and clinical sell online in China and other parts of Asia.
He predicts 618 sales growth will rise due to “very low double digits.”
