Alibaba Profit Crashes 84% Despite Surge in AI Spending

Explosive growth in Alibaba’s AI and cloud businesses failed to calm investor fears as billions poured into data centres, chips and one-hour delivery services drove the Chinese tech giant’s core profitability down by 84%

Chinese tech giant Alibaba on Wednesday reported an 84% plunge in quarterly core profitability, as aggressive spending on artificial intelligence infrastructure and rapid delivery services weighed on earnings despite strong growth in its cloud business.

Adjusted earnings before interest, taxes and amortization (EBITA), which strips out one-off items to reflect underlying profitability, fell to 5.1 billion yuan ($750.9 million) in the March quarter from a year earlier.

U.S.-listed shares of Alibaba initially rose in premarket trading before reversing course, falling as much as 4%. The stock was last down about 1.3%.

Alibaba has ramped up investments in semiconductors for AI, data centres and development of its Qwen family of AI models, helping fuel growth in its cloud computing division.

Revenue in the company’s cloud intelligence unit rose 38% year-on-year to 41.6 billion yuan in the March quarter, accelerating from the previous quarter, while adjusted EBITA for the segment jumped 57%.

“Our strategic investments continued to translate into business growth. Cloud Intelligence Group’s revenue continued to accelerate, with AI-related product revenue achieving triple-digit growth for the eleventh consecutive quarter,” Alibaba Chief Financial Officer Toby Xu said in a statement.

Alibaba said AI-related revenue totalled 9 billion yuan during the quarter.

The Hangzhou-based company has emerged as one of China’s leading AI players, developing chips and large language models while selling AI services through its cloud platform. Its Qwen AI models are among the country’s top-performing systems.

This week, Alibaba said it would launch a Qwen-powered AI shopping assistant on Taobao, its flagship e-commerce platform in China.

Investors, however, remain focused on Alibaba’s spending on so-called quick commerce, a fast-growing segment that promises deliveries in under an hour and has become a fiercely competitive battleground among China’s internet firms.

Adjusted EBITA in Alibaba’s China e-commerce business fell 40% year-on-year in the March quarter because of those investments, even as customer management revenue, the unit’s largest contributor, rose 1%.

Revenue from Alibaba’s quick commerce operations climbed 57% year-on-year, while overall China e-commerce revenue rose 6% during the quarter.

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