Alibaba reported a 75% decrease in profit for the April-June quarter, with earnings falling to 10.5 billion yuan ($1.6 billion) compared to 43.1 billion yuan ($6.4 billion) in the same period last year. The decline in profit comes as the e-commerce and cloud computing company significantly increased its investments in artificial intelligence infrastructure.
Despite the profit drop, quarterly revenue saw a 9% increase, reaching nearly 269 billion yuan (approximately $40 billion). Revenue specifically from Alibaba's AI cloud and compute services grew by 45%, totaling 48.4 billion yuan ($7.2 billion).
The company attributed the substantial increase in capital expenditures, which jumped 75% to 67.7 billion yuan (about $10 billion) during the quarter, to factors including fluctuations in procurement cycles, increased compute capacity in anticipation of growing customer adoption of AI agents, and higher chip component pricing. Alibaba has a stated goal of investing at least 380 billion yuan (about $56 billion) over three years in cloud computing and AI infrastructure.
Alibaba CEO Eddie Wu expressed optimism about future performance, stating in prepared remarks that "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." The company has been developing its Qwen AI model and has launched commercial AI services. Alibaba also aims to surpass $100 billion in annual AI and cloud revenue within the next five years.
Alibaba's shares, traded in the U.S., fell more than 3% following the earnings report.