Alibaba profit fell by 75% due to sharp increase in AI spending
Chinese tech giant Alibaba's net profit for April-June 2026 fell by about 75% amid a sharp increase in investment in artificial intelligence and cloud infrastructure. At the same time, the AI business became one of the main drivers of the company's revenue growth.
For the quarter, Alibaba posted a net profit of about 10.5 billion yuan ($1.6 billion), compared with 43.1 billion yuan a year earlier.
Meanwhile, the company's capital expenditures increased by about 75% - to 67.7 billion yuan, or nearly $10 billion for the three months. A significant portion of these funds is directed towards building and expanding AI infrastructure, increasing computing power, and purchasing equipment.
Rising prices for processors and other components necessary for data centers are creating additional pressure on spending. Alibaba is actively scaling up infrastructure to meet customer demand for computing for AI models.
Despite the sharp drop in profit, Alibaba's total revenue for the quarter grew by about 9% - to 269 billion yuan ($40 billion).
The fastest-growing segment is cloud computing and AI. Its quarterly revenue increased by 45% - to 48.4 billion yuan, or about $7.2 billion.
Thus, Alibaba finds itself in a situation typical of the global AI race: new technologies are already significantly accelerating growth in some business segments, but building the infrastructure they require involves multibillion-dollar investments.
The company previously announced plans to spend at least 380 billion yuan - about $56 billion - on cloud and AI infrastructure over three years. This is more than Alibaba invested in this area over the previous decade.
Alibaba expects that the massive investments will eventually allow it to accelerate cloud business growth and improve its profitability. For now, investors are reacting cautiously: after the release of the financial report, the company's American depositary receipts traded lower.
Based on materials from: Bloomberg, Alibaba Group
