Alibaba’s quarterly sales jump 9%, but AI expense lowers profit
China’s Alibaba reported a 9% rise in quarterly revenue on Thursday, driven by robust AI demand that bolstered growth in its cloud business. However, it fell short of estimates for adjusted profit, attributed to significant capital expenditure. As enterprises implement AI, the requirement for cloud computing resources essential for training and operating these systems has escalated, providing advantages to China’s leading technology firms. Alibaba, the nation’s largest cloud services provider, has increased its investment in AI infrastructure, proprietary models, and applications, positioning this technology as a crucial growth driver for its cloud and consumer sectors. The company’s AI cloud and compute services revenue increased by 45% to 48.44 billion yuan in the quarter.
Alibaba’s adjusted earnings per American Depositary Share stood at 8.52 yuan, falling short of the anticipated 10.53 yuan, leading to a 2.6% decline in its U.S.-listed shares during premarket trading. “We delivered a strong quarter, driven by the improving commercialization of our full stack AI capabilities,” Eddie Wu said in a statement. Alibaba’s capital expenditure increased by 75% to 67.68 billion yuan in the quarter ending June 30, reflecting its ongoing commitment to investing in AI infrastructure. The company reported revenue of 268.95 billion yuan in the first quarter, surpassing the average analyst estimate of 268.88 billion yuan, according to data compiled by LSEG.
Its net income for the quarter declined by 75%. Alibaba is engaged in a competitive struggle with other Chinese technology firms and startups to introduce more advanced open-weight frontier AI models at significantly lower costs compared to proprietary U.S. alternatives such as Anthropic’s Claude. This situation underscores the swift progress of Chinese AI models and their expedited release timelines. “As synergies across our core businesses deepen and AI monetization ramps up, we have greater strategic and financial flexibility to make disciplined and sustained investments in full-stack AI capabilities,” Toby Xu said in a statement.
Alibaba is a significant investor in various Chinese frontier AI startups, including Moonshot, and provides it with cloud computing infrastructure. Earlier this year, Alibaba separated its AI businesses from its cloud computing division and appointed Wu to lead the “Alibaba Token Hub” group, as the company strives to achieve profitability in its AI segment. Alibaba’s fintech affiliate Ant Group reported a 1% year-on-year increase in quarterly profit, according to calculations, as it has sought to transition toward agentic AI commerce, AI digital health applications, and embodied AI models in recent years.
