China's Alibaba Group saw its cloud computing business revenue grow by seven percent during Q3 2024.

The company posted revenue for Alibaba Cloud of RMB29.6 billion ($4.2 bn) for the latest quarter, with CEO Eddie Wu noting that AI products contributed "an increasing share."

Tencent has also posted its earnings for the quarter.

According to Alibaba CFO Toby Xu, AI-related product revenue has achieved triple-digit year-over-year (YoY) growth for the fifth consecutive quarter, which "triggers" more demand for the company's public cloud solutions.

The cloud segment's adjusted EBITA increased by 89 percent to RMB 2.7 billion ($372.75m), while the adjusted EBITA margin increased four percentage points to 9 percent YoY. CFO Xu puts this down to a "shift in product mix toward high-margin public cloud products, including AI-related products and improving operating efficiency, partly offset by the increasing investments in customer growth and technology."

Xu added that the company would continue to invest in AI-related cloud infrastructure to meet this demand.

The company is currently seeing a lot of demand on the AI side for training models, but expects this to shift to inferencing with a "smaller number of companies that are actually doing model training."

Regarding the company's decision earlier this year to reduce its cloud prices, CEO Wu noted that the decision was made to help the company grow its user base.

"By lowering the API token price, we will attract lots of new users to come and use the models to deploy their applications on our cloud, and that will result in an increase in their use of our compute power, storage, database and other products. So, you could really think of the reduction in token price as an investment in user acquisition and user growth because we have a full technology stack," Wu said.

Tencent struggles to turn AI investment into revenue

Chinese gaming and social media giant Tencent has struggled to see significant returns on its investment in AI.

"There are ... fewer AI start-ups in China which are actually buying a lot of compute (power)... The AI revenue in China on the cloud side is somewhat at scale for us, but I think it will not be exploding like in the US," said Tencent president Martin Lau.

Lau added that they expect it to take a few more quarters to see "real use cases at scale."

The company has, like its competitors, invested significantly in AI infrastructure of late.

This being said, Tencent's chief strategy officer James Mitchell noted that the company is still seeing revenue growth YoY for the quarter, which has benefitted from "higher cloud services revenue."

Mitchell added: "Our cloud revenue from GPUs primarily used for AI grew swiftly year on year and now represents a teens-percentage of our infrastructure as a services revenue."

The company does not post earnings information specifically for its cloud services division instead including it within "fintech and business services."

That segment had a revenue of RMB 53.1 billion ($7.33bn) and a gross margin of 48 percent, up seven percent YoY which the company partially put down to "cost efficiency in [its] cloud business."

Baidu will also release its quarterly earnings later this month.