Twilight of an Empire: A Deep Dive into Alibaba's Revolution
Alibaba's growth era is over. Facing intense competition and regulatory pressure, the tech giant is in a painful revolution, shifting from offense to defense. Our analysis breaks down its fight for survival across e-commerce, cloud, and global markets. This is the new Alibaba.
Subtitle: Why Alibaba's future is no longer about growth, but about survival and reinvention.
Alibaba, the business empire once seen as the pinnacle of China's technological prowess, is standing at a historic crossroads. It is no longer the high-growth, aggressive giant on the offensive. Under the triple pressures of regulation, competition, and internal sclerosis, it is being forced into a painful revolution where survival trumps growth.
For global investors, entrepreneurs, and policymakers, understanding the nature of this transformation is critical. This is no longer a growth story about conquering new territories, but an epic tale of how a behemoth learns to survive a siege and rebuild on its own ruins. The company's future depends not on its ability to conquer new domains, but on its capacity to hold the line in its core e-commerce and cloud computing businesses, fend off the fiercest attacks, and defend its last bastions.
Forget the glory of the past; face the cannon fire of the present. Understanding the logic of this "defensive war" is the key to deciphering China's new business landscape.
The Empire's Cracks (2020-2022)
How could a seemingly invincible empire have its internal vulnerabilities so instantly exposed by external pressure? The story begins with high drama.
In November 2020, as autumn settled over Shanghai, the air in global capital markets froze. Ant Group, the fintech titan poised to launch the largest IPO in history, was halted just 48 hours before its debut. This shocking blow didn't just shatter a capital feast; it became the first crack in the formidable armor of the Alibaba empire.
A chain reaction followed, quickly escalating into a regulatory storm that swept across the entire platform. The "choose one of two" policy, once a core competitive barrier, was deemed monopolistic. In April 2021, a record-breaking fine of CNY 18.2 billion (US$2.8 billion) was handed down like a declaration of war, signaling the end of the old rules. This was not just a financial penalty; it was a fundamental blow to Alibaba's business model. An era had ended.
As cracks appeared in the empire's walls, external challengers swarmed.
The real alarm bells rang on the main e-commerce battlefield. For years, Taobao and Tmall were considered unshakeable centers of traffic. But two ferocious rivals launched fatal attacks from different dimensions.
The first was Pinduoduo. Like a nimble cavalry, it used the sharpest weapon of all—low prices—to bypass Alibaba's heavily fortified cities and strike deep into the heart of consumer stratification. It not only caught up to Alibaba in total user numbers (over 900 million) but also delivered a fatal blow in user engagement. As early as February 2021, its Daily Active Users (DAU) at 259 million had already surpassed Taobao's 237 million. According to the latest data, Pinduoduo's GMV surged to approximately CNY 5.2 trillion in 2024, rapidly closing in on Alibaba's CNY 8 trillion.
The second was Douyin E-commerce. It acted like an aerial assault force, using content and algorithms to launch a paradigm-shifting attack on users. As consumers grew accustomed to "effortless" shopping amidst entertainment, Alibaba's traditional "shelf-based" e-commerce seemed clumsy and inefficient. In 2024, Douyin E-commerce's GMV reached a staggering CNY 3.5 trillion, with growth far exceeding the industry average.
The data tells an irrefutable, brutal truth: Alibaba's share of the Chinese e-commerce market has shrunk from a dominant 50.8% in 2021 to the mid-40% range by 2024.
The empire's moat was filled in just three short years. The myth of growth shattered, the stock price plummeted like a bleeding wound, and market confidence was shaken to its core. The onetime "Amazon of China" found itself trapped in an unprecedented siege. Twilight had fallen.
The Supertanker's Turn (2023-Present)
Facing an existential crisis, how does a massive, bloated organization attempt to revolutionize itself? The supertanker named Alibaba began an excruciatingly painful and clumsy turn in the stormy seas.
The first shot of the revolution was fired in March 2023 by then-CEO Daniel Zhang. He announced the market-shaking "1+6+N" organizational reform—splitting the colossal group into six core business groups and numerous other companies, allowing them to pursue independent financing and IPOs. It was seen as a desperate move to unlock value and inject agility. In theory, a more flexible and nimble "Alibaba fleet" would replace the cumbersome "Alibaba aircraft carrier."
However, reality proved far more complex. This radical revolution underwent a major course correction shortly after setting sail.
The most dramatic reversals occurred in two of its most promising businesses. In November 2023, Alibaba abruptly canceled the full spin-off of its Cloud Intelligence Group. Just four months later, in March 2024, the IPO for Cainiao Smart Logistics was also withdrawn.
Why the sudden shift from "divide" to "unite"? The answer came from two immense pressures, both internal and external.
Externally, a geopolitical chill had set in. U.S. export restrictions on advanced computing chips cast a long, dark shadow over the future of Alibaba Cloud. In this context, spinning off a business so heavily reliant on global technology would have been tantamount to exposing it to unpredictable risks—a gamble Alibaba could not afford.
Internally, the lesson came from the harsh reality of business competition. Management admitted in its announcement that withdrawing the Cainiao IPO was intended to strengthen the synergy between e-commerce and logistics to "regain market share." To this end, Alibaba spent $3.75 billion to buy back minority stakes, cementing its absolute control over its "logistics corps." Under the fierce assault from Pinduoduo and Douyin, Alibaba realized that while an independent logistics network could create financial value, a deeply integrated logistics system serving its core e-commerce was the strategic weapon needed to win this defensive war.
The revolution had entered deep waters, and a change in leadership became inevitable. Yet, the real challenge lay not just in strategy, but in culture.
In September 2023, Alibaba's co-founders and core team members—Joe Tsai and Eddie Wu—officially took over from Daniel Zhang as Chairman and CEO, respectively. Their return was widely interpreted as "wartime CEOs" replacing a "peacetime CEO," signaling a fundamental strategic reset.
Upon taking office, Eddie Wu quickly put forward a new mantra: "User First, AI-Driven." This was more than a slogan; it was a course correction for years of strategic wavering. But whether the new strategy could be executed depended on curing the "big company disease." In June 2025, a "viral internal memo" from a former executive laid the problem bare. The memo sharply criticized a cultural shift from "customer first" to "boss first," leading to bureaucracy and an obsession with short-term KPIs. The incident even drew a personal response from founder Jack Ma, who was abroad, acknowledging the severity of the issues. This confirmed the new leadership's greatest obstacle: it wasn't devising the right strategy, but remaking a culture capable of executing it.
Against this backdrop, Wu re-established the group's core focus: e-commerce and cloud. The value of all other businesses had to be re-evaluated around these two pillars. The group's financial moves confirmed this: on one hand, it "slimmed down" by selling non-core assets like the Intime Department Store; on the other, it shored up morale with an aggressive shareholder return program (repurchasing $11.9 billion in shares with another $20.1 billion authorized).
With that, the supertanker's new course became clear: the revolution's path was corrected, shifting from a radical split driven by capital market efficiency to a more pragmatic, focused, and synergistic defensive posture. The goal was no longer to have the fleet's ships sail their own courses, but to concentrate all firepower on defending the two most important continents.
The Future Bets (The Next 3-5 Years)
Under the new strategic map, where is Alibaba placing its future bets? Which are most likely to succeed? The answer comes down to three battlefields and one ultimate variable.
Battlefield 1: The Defensive War of Taotian Group
This is the main front of the entire war. The goal for Taotian Group (Taobao and Tmall) is no longer to break new ground but to defend its core territory from the relentless encroachment of Pinduoduo and Douyin. Although revenue growth has slowed to the low single digits (1%-4%) and profits are under pressure from reinvestment, it remains the group's cash cow. Its defensive fortifications consist of two main parts:
- Price Power: Facing Pinduoduo's low-price mindshare, Alibaba has been forced to abandon its high-margin stance and re-enter the price war. This is a painful but necessary "bleeding" tactic to stabilize its price-sensitive user base.
- User Experience: This is where Alibaba is trying to build a differential advantage. By growing its 88VIP membership program to 46 million members to offer premium services and optimizing the shopping process with tools like the AI shopping assistant "Taobao Wenwen," Alibaba hopes to win back users who value quality and efficiency.
The core of this defensive war is finding a delicate balance between "price" and "experience"—one that can both fend off the enemy's charge and prevent its own profit line from collapsing entirely.
Battlefield 2: The Value Re-Emergence of Cloud Intelligence Group
If Taotian is the empire's shield, the Cloud Intelligence Group is its sharpest spear. Despite being mired in a brutal price war (with core products discounted by up to 59% and large models by a staggering 85%), Alibaba Cloud has held on to its 33% market share in China, ahead of Huawei Cloud (18%) and Tencent Cloud (10%). Now, its strategy is shifting from "chasing scale" to "pursuing quality growth." Its core driver is AI.
Data shows that Alibaba Cloud's AI-related product revenue has seen triple-digit year-over-year growth for seven consecutive quarters. Its overall revenue growth has re-accelerated from 3% to 13%, and its adjusted EBITA has seen dramatic quarterly improvements of 45% and 89%. This indicates that in China's AI gold rush, Alibaba Cloud is becoming the most critical "arms dealer." Its "Model-as-a-Service" (MaaS) strategy aims to empower thousands of industries with its own Qwen large language models via its cloud platform.
This approach is strikingly similar to that of another tech giant, Huawei. As we analyzed in "The Architect of a New Automotive Order: A Deep-Dive Analysis of Huawei's Automotive Empire," Huawei's strategy in the auto sector is to be the "arms dealer," not the "carmaker." Likewise, Alibaba Cloud's goal is not to dominate every AI application but to become the indispensable infrastructure for all AI developers. This is an inevitable return to core technological value amidst fierce competition.
Battlefield 3: The Expedition of Alibaba International Digital Commerce (AIDC)
AIDC (including Lazada, AliExpress, etc.) carries the heavy expectation of becoming Alibaba's "second growth curve." Its revenue has been growing at a blistering pace of 29% to 45% for several consecutive quarters, showing immense market potential. But this expeditionary force faces unprecedented challenges.
Its rivals are SHEIN and Temu, two new species that have rewritten the rules of global e-commerce. Compared to them, Alibaba's international model is more traditional and heavier. It relies on a third-party marketplace and self-built logistics (Cainiao) to create a complete ecosystem. While this model is robust, it is far less "savage" and efficient in user acquisition and cost control. It brings to mind the Chinese expansion model we described in "The Dragon's Armada: Inside China's Terrifying Three-Wave Plan to Conquer the Global Auto Industry"—AIDC is more like a formal fleet, while Temu and SHEIN are agile and ferocious pirate ships.
This expedition is a high-stakes gamble. AIDC's quarterly losses have widened to CNY 5.0 billion, showing that Alibaba is using profits from its main battlefield to continuously fuel this force. Its success depends not only on itself but on its ability to build a sustainable competitive advantage in overseas markets that goes beyond price.
The Ultimate X-Factor: The Role of AI
AI is the ultimate variable cutting across all battlefields. For Alibaba, it is both a "super-tool" empowering its core businesses and an "expensive bet" with an uncertain return.
In e-commerce, AI is a defensive weapon used to improve efficiency and experience. In cloud computing, it is an offensive spear and the core engine of growth. But at the same time, facing a U.S. tech blockade and a fierce domestic model race, AI is also a massive cost center.
The ultimate success of this self-revolution will largely depend on whether Alibaba can wield this double-edged sword effectively—using it to defend today's territory while also winning tomorrow's wars.
Conclusion: The End of an Era, The Beginning of a Fight for Survival
The story of the Alibaba empire has turned its most glorious page. The era of growth as the only religion is over, replaced by a difficult revolution where survival is the primary goal.
Its moats have been eroded, its business model reconfigured under pressure, and its new growth engines are still struggling to climb under heavy fire. For investors, Alibaba is no longer a simple growth stock but a complex value and turnaround play. Its potential upside lies in the new leadership's ability to execute this painful strategic contraction and refocus. Its significant downside risks stem from relentless competition, persistent regulatory pressure, and a freezing geopolitical landscape.
The empire is not collapsing, but it is fighting for its life, striving to redefine its place in a world it no longer dominates.