1 week ago
Alibaba Profit Plunges as AI Spending Weighs on Shares
Alibaba is a large Chinese company that sells things online and provides cloud-computing services.
It is spending very large amounts of money to build artificial-intelligence products and data centers.
Because of those costs, its profit fell by more than three-quarters.
The company’s sales still grew by 9%, helped by strong demand for cloud computing.
Investors reacted negatively, and Alibaba’s U.S.-listed shares fell.
Chief Executive Officer Eddie Wu says AI should help the company grow in the future.
Alibaba is trying to make money from AI tools for coding and digital agents.
However, Chinese shoppers are spending less, and investors want the company to show faster financial returns.
Alibaba’s net income fell more than 75% to 10.5 billion yuan, or about $1.6 billion.
Revenue rose 9%, matching estimates, as demand for Alibaba’s cloud-computing capacity increased.
The company recorded more than $6.6 billion in free-cash outflows amid higher AI and infrastructure costs.
Alibaba’s U.S.-listed shares fell as much as 4% before narrowing the decline to about 3.1%.
Chief Executive Officer Eddie Wu is prioritizing AI and cloud expansion despite pressure to improve near-term returns.
- Who
- Alibaba Group Holding Ltd., led by Chief Executive Officer Eddie Wu, and its investors.
- What
- Alibaba reported a more than 75% profit decline while increasing spending on AI and cloud infrastructure.
- Where
- Alibaba is based in Hangzhou, China, and its U.S.-listed shares traded lower.
- When
- The results were reported on Thursday; the article does not provide a specific date.
- Why
- Profit was pressured by rising AI and computing-infrastructure costs, while weaker Chinese consumption affected its online retail business.
Long-Term AI Investment
Short-Term Financial Returns
Spending priorities
Long-Term AI Investment
Eddie Wu is prioritizing AI and cloud growth over short-term bottom-line considerations, arguing that these businesses can drive future expansion.
Short-Term Financial Returns
Investors are pressuring Chinese AI companies to translate large AI expenditures into financial returns, especially while many models are offered free or at low prices.
Business outlook
Long-Term AI Investment
Alibaba expects rising demand for cloud capacity and AI monetization through coding and agentic platforms to support future growth.
Short-Term Financial Returns
The spending is eroding margins, creating cash outflows, and may continue to absorb operating-cash gains as Alibaba expands infrastructure.
Key facts
- Net income
- 10.5 billion yuan, down more than 75%.
- Revenue
- Rose 9%, in line with estimates.
- Free-cash outflow
- More than $6.6 billion.
- Share movement
- U.S.-listed shares fell as much as 4% before trading about 3.1% lower.
- AI investment budget
- Alibaba previously disclosed a 380 billion yuan, three-year budget, with investment expected to extend beyond it.
- Long-term target
- Alibaba aims to quintuple cloud and AI revenue to $100 billion over five years.
- AI model
- Alibaba’s Qwen 3.8 Max was released as an open-weight model.
Sources
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