Alibaba reported a 75% drop in quarterly profit for the period ended June 30, 2026, as the Chinese technology giant poured record sums into artificial intelligence infrastructure, even as revenue from its AI-related services climbed 45%.
The result underscores how the company, which began as an e-commerce and online-retail group and is now pivoting hard toward AI, is trading near-term earnings for long-term positioning in one of the industry's most capital-intensive races.
The Hong Kong- and US-listed group said profit for April-June came in at 10.5 billion yuan ($1.6 billion), down from 43.1 billion yuan ($6.4 billion) in the same period a year earlier, a decline equal to roughly three quarters of the prior-year figure. Total 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).
Capital expenditures, including investments in AI infrastructure to meet customer demand, jumped 75% to 67.7 billion yuan (about $10 billion) during the quarter, directly weighing on the bottom line. Alibaba attributed the sharp rise in spending to fluctuations in procurement cycles, an increase in CPU compute capacity built up in anticipation of growing customer adoption of AI "agents", and higher pricing of chip components, a cost pressure affecting cloud providers globally as demand for AI compute outstrips supply.
"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," chief executive Eddie Wu said in prepared remarks during an earnings conference. The comment signals management expects the heavy investment phase to translate into faster top-line expansion while margins recover.
Alibaba's US-listed shares fell more than 3% on the day, reflecting investor caution over the trade-off between growth and cost.
The company, one of China's biggest, 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 made steady progress with its flagship Qwen line of models and launched "agentic" AI services for commercial customers; in July it previewed its Qwen3.8-Max model, which the company described as "second only" to Anthropic's Claude Fable 5. It has also pledged to surpass $100 billion in annual AI and cloud revenue within five years, an ambition that hinges on converting its infrastructure build-out into durable enterprise adoption across the region.
Sources
