Alibaba quarterly profit drops 75% as AI investment spending grows

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FILE - A visitor walks in front of Alibaba booth during the 3rd China International Supply Chain Expo at the China International Exhibition Center, in Beijing, China, Friday, July 18, 2025. (AP Photo/Mahesh Kumar A., File)

Visitantes passam pelo estande da Alibaba, perto de um cartaz onde se lê “Fique tranquilo entregando a IA para a Ali Cloud”, na Conferência Mundial de IA, realizada em Xangai, 17 de julho de 2026. (Foto AP/Ng Han Guan) — FILE - A visitor walks in front of Alibaba booth during the 3rd China International Supply Chain Expo at the China International Exhibition Center, in Beijing, China, Friday, July 18, 2025. (AP Photo/Mahesh Kumar A., File)

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11:05 AM on Thursday, August 20

By CHAN HO-HIM

HONG KONG (AP) — China’s technology giant Alibaba on Thursday reported a 75% drop in profit for the latest quarter as it invested big in artificial intelligence infrastructure, even as revenue coming from its AI-related services gained 45%.

The Hong Kong- and U.S.-listed company, which started out in e-commerce and online retail but is increasingly focused on AI technologies, said that its profit for April-June was at 10.5 billion yuan ($1.6 billion), down from 43.1 billion yuan ($6.4 billion) the same quarter last year.

Quarterly revenue grew 9% to almost 269 billion yuan (nearly $40 billion), with revenue from its AI cloud and compute services up 45% to 48.4 billion yuan ($7.2 billion).

But capital expenditures, including investments in AI infrastructure to meet customer demand, jumped 75% to 67.7 billion yuan (about $10 billion) during the quarter, weighing on profits.

Alibaba attributed the significant increase in spendings to factors including “fluctuations” in procurement cycles, increase in CPU, or central processing unit, compute capacity in anticipation of growing customer adoption of AI “agents” and higher pricing of chip components.

“As we continue to ramp up our supply, our AI and Cloud revenue growth will accelerate further in the coming quarters, alongside continued improvement in profitability,” said Alibaba CEO Eddie Wu in prepared remarks during an earnings conference.

Alibaba’s U.S.-traded shares fell more than 3% Thursday.

Alibaba, one of China’s biggest companies, said last year it planned to invest at least 380 billion yuan (about $56 billion) over three years in cloud computing and AI infrastructure.

It has been making advances with its flagship Qwen AI and has launched “agentic” AI services for commercial customers. In July, it previewed its Qwen3.8-Max AI model which the company said was “second only” to Anthropic’s Claude Fable 5.

It has also pledged an ambitious goal of surpassing $100 billion in terms of annual AI and cloud revenue within the next five years.