Alibaba reported results for the June quarter that reflected significant headwinds from investments in artificial intelligence infrastructure. The company’s net income fell 75% during the period, marking a substantial decline in profitability despite modest revenue growth.
Revenue reached 268.95 billion Chinese yuan, representing a 9% increase and slightly exceeding analyst expectations of 268.88 billion yuan. However, the company’s capital expenditure surged 75% to 67.7 billion Chinese yuan, or approximately $10 billion. The company attributed this increase to uneven timing of customer purchases, expanded CPU-compute capacity, and elevated prices for various chip components across the market.
The cloud division, which Alibaba considers central to monetizing its artificial intelligence operations, generated 48.4 billion yuan in revenue, reflecting 45% year-on-year growth. CEO Eddie Wu highlighted that AI-related products delivered triple-digit growth for the twelfth consecutive quarter, positioning the company to capitalize on rising demand for artificial intelligence and computing resources. The company also released new AI models during the month, including Qwen3.8-Max, which the company characterized as its most powerful model to date, and Qwen3.8-27B, designed for consumer hardware.
Market reaction proved negative, with Alibaba’s U.S.-listed shares declining 4.6% following the announcement. Analysts noted that while the detailed disclosure of the AI segment provides greater transparency into investment levels and product performance, the combination of rising capital expenditure and negative free cash flow of 44.7 billion yuan may raise questions about capital requirements and return on investment going forward.
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