Alibaba shares under pressure as AI spending surges

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Alibaba shares under pressure

Highlights

Alibaba revenue rose 9% to 268.95 billion yuan.
Net income fell about 75% as AI investment surged.
Cloud revenue jumped 45% from a year earlier.

According to CNBC, Alibaba reported revenue of 268.95 billion yuan ($39.6 billion) for the June quarter, up 9% from a year earlier and slightly above the 268.88 billion yuan expected by analysts surveyed by LSEG. Net income fell to about 10.5 billion yuan, while capital expenditure jumped 75% to 67.7 billion yuan, or roughly $10 billion.

Cloud growth meets a much higher cost base

The strongest part of the quarter was Alibaba’s cloud business. Revenue from the division reached 48.4 billion yuan, rising 45% year over year, while revenue from AI-related products recorded triple-digit growth for a 12th consecutive quarter. The figures strengthen the case for cloud computing as an increasingly important growth engine beyond Alibaba’s traditional e-commerce operations.

That expansion is proving expensive. Capital expenditure climbed to 67.7 billion yuan during the quarter, driven by investment in computing capacity and higher costs for chip components. Alibaba has been directing substantial resources toward AI infrastructure as it competes for customers across cloud computing, models, and AI applications.

Alibaba is simultaneously expanding its Qwen model family and competing across cloud infrastructure, enterprise AI, and consumer-facing applications. The strategy gives the company greater exposure to fast-growing demand for AI computing, but also raises the amount of revenue growth required to justify its expanding investment base.

Shares reverse course after earnings

Alibaba shares had gained 0.59% in the previous session to close at $128.90, but the earnings report reversed that momentum. The U.S.-listed stock fell 3.34% to $124.54 in premarket trading, as investors weighed strong cloud growth against the sharp decline in profit and rising AI investment costs.

The reaction highlights the tension surrounding Alibaba’s AI strategy. Investors have rewarded the company for its growing position in artificial intelligence, but the latest results show that building the infrastructure needed to compete at scale is putting significant pressure on near-term earnings.

The price of Alibaba’s AI ambition

Alibaba’s results illustrate the increasingly expensive economics of competing at the front of the AI market. The company is committing billions of dollars to computing capacity, chips, and data infrastructure while its established commerce operations remain exposed to subdued Chinese consumer demand.

For investors, the next stage will depend on whether rapid cloud and AI revenue growth can eventually outpace the costs required to generate it. For now, the quarter presents a sharp contrast: cloud revenue expanded 45%, while quarterly capital expenditure reached about $10 billion and net income fell by roughly three-quarters.

We also reported Alibaba AI agent ROME caught mining crypto during training.

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