Alibaba profit plunges 75% as AI spending increases

Alibaba Group Holding Ltd. reported a 75% drop in quarterly profit for the April-to-June quarter as it increased spending on artificial intelligence infrastructure, with capital expenditure jumping 75% to 67.68 billion yuan. Revenue rose 9% to 268.95 billion yuan, narrowly beating analyst expectations, but adjusted earnings per American Depositary Share missed forecasts, sending US-listed shares down 4.6%. The company has committed 380 billion yuan to AI infrastructure from 2026 to 2029 and expects its AI-related capital expenditure to break even within three years, according to Chief Executive Eddie Wu.

Alibaba https://www.alibaba.com has posted a 75 per cent drop in quarterly profits as it ramped up spending on artificial intelligence infrastructure. The group recorded a nine per cent rise in revenue to 268.95bn yuan £29.6bn for the April-to-June quarter, narrowly ahead of analyst expectations of 268.88bn yuan. However, earnings were hit by the company’s accelerating investment in AI, with capital expenditure jumping 75 per cent to 67.68bn yuan during the period. Alibaba has committed 380bn yuan to AI infrastructure between 2026 and 2029 and has already spent around half of the planned investment this year. Its US-listed shares fell 4.6 per cent following the results after adjusted earnings per American Depositary Share came in below analysts’ expectations. Alibaba bets big on AI The retailer’s AI cloud and computing services division has been a key growth driver, with revenue climbing 45 per cent to 48.44bn yuan during the quarter. Its AI model-as-a-service operation has also surpassed 16bn yuan in annual recurring revenue as demand for the computing power required to train and operate AI systems continues to grow. Chief executive Eddie Wu said Alibaba expects its AI-related capital expenditure to break even within the next three years, based on current average gross margins. The group is also increasing the use of its own T-head chips across its data centres in a move designed to reduce its reliance on commercially sourced processors and improve profitability. Alibaba has reorganised its operations around four core divisions covering ecommerce, AI cloud and computing services, AI model applications and other businesses as it positions artificial intelligence at the centre of its future growth strategy. The company continues to face pressure in its core Chinese ecommerce market, with chief financial officer Toby Xu pointing to short-term macroeconomic challenges affecting consumer demand. Meanwhile, Alibaba said it expects its quick-commerce operation, where it competes with rivals including JD.com and Meituan, to achieve overall profitability in its 2029 financial year. Click here to sign up to Retail Gazette‘s free daily email newsletter https://www.retailgazette.co.uk/newsletter-sign-up-retail-gazette?utm source=Website&utm medium=Article&utm campaign=SignUp