Alibaba disclosed earnings results on Thursday showing a substantial drop in profitability amid heavy capital allocation toward artificial intelligence infrastructure. Net income fell 75% during the June quarter as the company increased expenditures to support its AI expansion strategy.
Capital expenditure climbed 75% to 67.7 billion Chinese yuan, equivalent to approximately $10 billion. The company attributed the increase to several factors, including uneven customer purchasing patterns, expanded CPU-compute capacity, and elevated prices for various chip components across the industry. Revenue, however, advanced 9% to 268.95 billion Chinese yuan, slightly surpassing analyst expectations of 268.88 billion yuan.
The cloud division, regarded as central to Alibaba’s artificial intelligence monetization efforts, generated 48.4 billion yuan in revenue, representing a 45% year-on-year increase. CEO Eddie Wu stated that AI-related product revenue achieved “triple-digit growth for the twelfth consecutive quarter,” positioning the company advantageously within the expanding AI market. The company has pursued a comprehensive AI strategy spanning chips, cloud infrastructure, and models.
Alibaba’s stock traded with volatility following the announcement, declining as much as 4% in premarket activity before moderating losses to close down 1.6%. Earlier in the month, the company had unveiled what it described as its “most powerful” AI model, Qwen3.8-Max, which demonstrated performance comparable to or exceeding competitor offerings. Alibaba additionally released Qwen3.8-27B, an AI model optimized for consumer devices, entering a competitive segment for model developers targeting laptops and similar hardware platforms.
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