Shares of Alibaba jumped +5.2% to $103.09 after Apple confirmed it will use Alibaba's AI models to power the intelligence features built into iPhones, iPads, and Macs sold in China. Developer testing begins November 4, with a public rollout arriving via an iOS update in December. For investors in a stock still trading roughly 43% below its 52-week high of $181.10, the question is straightforward: does powering Siri in China change Alibaba's earnings math, or is this mostly a prestige win?
Apple Tried Others First — Alibaba Won by Default and by Design. Apple initially explored deals with Baidu, DeepSeek, and ByteDance but ran into issues adapting those models for Chinese customers.
China's rules require foreign companies to use a domestically registered AI model for system-level features , which narrowed the field. Alibaba Cloud already holds 35.8% of China's AI cloud market, according to Omdia — a scale advantage that likely tipped the decision. Being Apple's chosen partner is a stamp of credibility that no marketing budget can buy.
The Reach Is Real: ~200 Million Potential Users. Apple ranked second in China last quarter with roughly 11.6 million phones shipped and a **20% market share. Across the installed base, that translates to hundreds of millions of devices eligible for Alibaba-powered features like text generation, image analysis, and conversational AI. For Alibaba, the arrangement connects its AI with an established consumer interface rather than limiting it to the company's own apps and cloud services. More users means more inference workloads running on Alibaba Cloud servers — a direct revenue pipeline.
AI Cloud Is Surging, But Profits Are Shrinking. AI Cloud revenue hit $7.1 billion in the June quarter, up 45% year over year — the fastest growth in 22 quarters.
AI-related products now account for 35% of the cloud unit's external revenue. Yet the cost is steep: capital expenditures surged 75% to RMB 67.7 billion, contributing to a negative free-cash-flow quarter.
Group net income fell 75% as infrastructure spending overwhelmed top-line gains. Apple's deal adds volume, but investors must watch whether it adds profit.
Wall Street Sees Upside — the Market Is Skeptical. Analysts carry an average price target near $186.51 , almost double the current price, reflecting conviction that AI spending will eventually pay off. Yet the stock trades at roughly 23× trailing earnings while burning cash — a valuation that prices in execution, not hope. The Apple partnership validates Alibaba's AI bet; now the company has to prove it can turn distribution into dollars.