NextFin News -- China's e-commerce giant Alibaba has announced a major adjustment in an all-hands email: starting from FY2027, the previously fixed 13th-month salary will be folded into the year-end bonus system, renamed the “Side-by-Side Annual Award,” with payouts pushed back to April–May of the following year. This policy applies only to full-time employees in mainland China.
Yet the 13th-month salary adjustment is only the ripple on the surface.
The real surge is underwater—over the past three months, Alibaba has carried out a series of intensive organizational reshuffles: the ATH business group was established, the Group Technology Committee was officially launched, and the Tongyi large-model business unit was elevated. The direction is already crystal clear: AI is a battle Alibaba must win.
Eddie Wu has set a goal of surpassing US$100 billion in cloud and AI revenue within five years, and investing RMB 380 billion over the next three years into cloud and AI infrastructure.
At this juncture, the 13th-month salary change is not an isolated tweak to the system. The current has long since shifted—every chip is being pushed onto AI.
The Change Offers Alibaba an Extra Cash Flow Window
In this compensation adjustment at Alibaba, the 13th-month salary has been merged into the year-end bonus and renamed the “Side-by-Side Annual Award,” with the payout moved from the end of each year to April–May of the following year. Two questions are worth discussing: how large is the group affected by this change, and what is Alibaba’s real intent?
According to financial report data, as of March 31, 2026, Alibaba Group’s total headcount was around 130,000, with the vast majority in mainland China. Using a conservative estimate of 100,000 mainland employees and an average base salary of RMB 20,000 per person, the total size of the 13th-month salary pool comes in at roughly the RMB 2 billion level.
Delaying the payout by 4 to 5 months means Alibaba gains an extra cash-flow window of the same length every year.
The nature of the “13th-month pay” has also changed.
In its company-wide letter, Alibaba used the phrase “bring the 13th-month pay back to its essence as an annual bonus.” The original 13th-month pay may have been closer to regular labor compensation. But the keyword in the letter is “bonus,” not “pay.”
After it was renamed the “Shoulder-to-Shoulder Annual Bonus,” it became tied to performance and aligned with the fiscal-year cycle. This gives the company more room to maneuver and helps lay the groundwork for more refined control of labor costs during expansion phases.
The name change itself also has an effect. From “13th-month pay” to the “Shoulder-to-Shoulder Annual Bonus,” Alibaba may be trying to reshape employees’ perception of this money—from “the 13th month of salary I’m entitled to” to “a reward the company gives me.”
At the same time, the cost of quitting for employees has risen.
From a broader industry perspective, the beginning of each year is the peak season for job-hopping in the internet sector—“Golden March, Silver April.” Paying the 13th-month bonus in April or May means that employees who resign early in the year have to give up a month of fixed pay.
The decision threshold for switching jobs has been raised. For companies, this is a more economical way to retain people.
Alibaba’s adjustment to the 13th-month pay may look like it’s “doing subtraction,” but that doesn’t mean Alibaba is tightening its investment in talent—delaying the payout isn’t the same as cutting it; it’s simply a change of timing.
On the contrary, Alibaba has been hiring at the same time. From 128,000 employees at the end of last year to 131,000 as of March 31 this year, Alibaba’s headcount increased by 3,265 in a single quarter. With more people, total payroll spending will naturally rise as well.
Alibaba is also reshaping its compensation structure. In FY2026 Q4, Alibaba’s total share-based compensation expense was RMB 3.092 billion, down 10% from RMB 3.435 billion a year earlier. The earnings release said that “after considering the macroeconomic environment and trends in the talent market, the proportion of long-term cash incentives granted increased, while the number of equity incentives decreased.”
Simply put, while Alibaba’s share price has been weak, it has increased the weight of cash incentives and reduced the weight of equity incentives to make itself more attractive to talent.
Overall, this adjustment is not an isolated compensation move.
Linking together the delayed 13th-month payout, the redefinition of the payment, and the increase in long-term cash incentives, Alibaba’s core objective becomes clear: through cash-flow timing and a redesign of incentive mechanisms, it is setting aside room for AI-strategy investment and organizational restructuring to meet future competition.
Alibaba to Take on Big Tasks
AI is a competition Alibaba has to win, and the current time window is crucial.
A Goldman Sachs research report once concluded that 2026 would be the decisive year in Chinese internet giants’ AI strategy showdown. In the second half of the race, the real contest is who can bring AI into real-world deployment faster and run a complete commercialization flywheel.
From a financial perspective, Alibaba Cloud has already pulled ahead.
In fiscal year 2026 Q4, the Cloud Intelligence Group posted revenue of RMB 41.626 billion, up 38% year on year. External commercialized revenue grew 40%, up 4 percentage points from the previous quarter. Among that, revenue from AI-related products reached RMB 8.971 billion, delivering triple-digit growth for the 11th consecutive quarter, with an annualized run rate now above RMB 35.8 billion.
Wu Yongming’s messaging on the earnings call has been shifting as well. Alibaba Cloud has moved from previously being “in the AI investment phase” to, this quarter, saying “AI has moved past the initial investment phase and has begun large-scale commercialization.”
But the next step after large-scale commercialization is an extremely aggressive target—Wu Yongming projected that, over the next five years, Alibaba’s annual commercial revenue from cloud and AI (including MaaS) must exceed US$100 billion.
What does that target imply?
Earnings data show that in fiscal year 2026, Alibaba Cloud’s external commercialized revenue had only just surpassed RMB 100 billion. Going from RMB 100 billion to US$100 billion is a leap of roughly 7x. To grow sevenfold in five years would require a compound annual growth rate of about 47%.
Wu Yongming is using an exceptionally high target to force the organization into a sprint.
In fact, judging from developments since 2026, Alibaba has already gone through a second major round of AI organizational restructuring.
On March 16, the Alibaba Token Hub (ATH) business group was established, standing alongside e-commerce and Cloud Intelligence as one of the group’s three top-level business groups. Wu Yongming personally took the helm, with the core goal defined as “creating Tokens, delivering Tokens, and applying Tokens.”
Twenty-three days later, on April 8, Wu sent another company-wide letter announcing the official establishment of the Group Technology Committee, chaired by him, with Zhou Jingren, Wu Zeming, and Li Feifei joining the lineup. This committee has been seen by the outside world as Alibaba’s “wartime command center” for its AI push.
That same day, the former Tongyi Lab was upgraded to the Tongyi Foundation Model Business Unit, and a number of key technical executives were redeployed and reorganized. Alibaba framed this adjustment as: “bringing together our strengths and resources and committing them to the most critical battlefield.”
As AI commercialization enters a decisive window, Alibaba is attempting to build an organizational system that concentrates resources to accomplish major undertakings.
Can Alibaba Keep Burning Cash?
There’s no doubt that in 2026—when incremental growth in e-commerce is limited and AI has become the pivotal pillar—Alibaba is still pulling out all the stops to secure its ticket to the AI era. But looking globally, the competition is especially fierce.
Large models are still in the early “hundred schools of thought” stage. Products like Doubao, Yuanbao, and Qwen are iterating at breakneck speed. Commercialization is not yet mature, and whether AI players’ ARR can keep growing sustainably and steadily faces a major test.
The long and difficult road to monetizing AI applications has made the quality of Alibaba’s cash flow a focal point for the market.
Its financial report shows that as of March 31, 2026, Alibaba still had as much as RMB 520.8 billion in cash and liquid investments on its balance sheet. That number looks huge, but to understand it, you can’t look only at the stock—you have to look at the incremental changes and the burn rate.
In fiscal year 2026, Alibaba’s net cash provided by operating activities was RMB 76.2 billion. Over the same period, capital expenditures reached RMB 126.0 billion. Cash generated from operations was not enough to cover investment spending, leaving a shortfall of roughly RMB 50 billion.
Alibaba has been plugging that gap through means such as monetizing assets via disposals, raising funds and taking on debt, and drawing down its cash reserves. To some extent, that is a “living off past gains” situation.
And it won’t be short-lived.
Based on what we’re seeing now, Alibaba is fighting on two fronts: “AI + instant retail.” In the past several quarters, instant retail was the main profit drain. But starting in FY2026 Q4, AI-related product marketing and R&D spending took center stage.
Spending to acquire users for the Qwen App is already reflected directly in the financials——in FY2026 Q4, adjusted EBITA for the “All Others” segment widened from a loss of RMB 3.413 billion a year earlier to a loss of RMB 21.16 billion.
This is only the beginning. A RMB 380 billion investment in cloud and AI hardware over the next three years implies average annual capex of more than RMB 120 billion.
If operating cash flow cannot rise meaningfully, the gap will remain.
Looking back, delaying the 13th-month salary would free up roughly RMB 2 billion of cash for Alibaba each year—effectively shifting about four to five months of cash-control timing. But compared with the hundred-billion-plus investment planned for the coming year, it’s little more than a drop in the bucket.
It’s not the primary way to relieve cash-flow pressure, nor even a secondary one——it’s simply a signal: Alibaba is moving into full wartime mode, and every non-strategic cash outlay must make way for AI investment.
But the capital markets’ patience is limited.
As 2026 began, the market’s attention had already shifted to the commercialization capabilities of AI companies. By 2027, the market may keep pressing the question: exactly how much incremental revenue will AI commercialization bring to Alibaba? When will the cloud business’s profits be able to cover the investments in AI?
Over the next two years, the real way to ease Alibaba’s financial pressure is to prove that AI can make money.
So, under the capital markets’ unflinchingly strict scrutiny, Alibaba’s AI development logic is driving changes across the entire company—and in the process of securing this AI ticket, it must also work to shift from an input narrative of “burning cash for growth” to an output narrative of “revenue growth finally contributing to profits.”
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