Alibaba Profit Plunges 75% as AI Spending Surges

Thursday 20 August 2026 14:19

Alibaba Group posted a sharp 75% year-on-year decline in net profit for the quarter ended in June, as a surge in spending on artificial intelligence infrastructure weighed heavily on its results despite continued growth in revenue and cloud computing.

AI Investment Weighs on Alibaba’s Profit

Alibaba’s capital expenditures jumped 75% to about $10.06 billion during the quarter, driven mainly by the timing of customer purchases, the expansion of CPU-based computing capacity and higher prices for a wide range of chip components.

Despite the significant increase in spending, the company’s revenue rose 9% to roughly $40 billion, slightly exceeding analysts’ expectations.

The results highlight the growing cost of Alibaba’s efforts to expand its computing infrastructure and secure the components needed to support its artificial intelligence ambitions.

Alibaba Cloud Remains a Major Growth Driver

Alibaba’s cloud computing business continued to deliver strong growth, with revenue from Alibaba Cloud rising 45% year on year to approximately $7.21 billion.

The division has emerged as one of the company’s key growth engines as Alibaba seeks to capitalize on rising demand for artificial intelligence applications and computing capacity.

The company also said revenue from AI-related products recorded triple-digit growth for the 12th consecutive quarter, underscoring accelerating demand for artificial intelligence services and the computing infrastructure supporting them.

Alibaba Expands Its AI Model Portfolio

The results come as Alibaba intensifies its investment in artificial intelligence, amid growing competition with major global technology companies to develop advanced models and provide the infrastructure required to run them.

The company has expanded development of its Qwen family of AI models, including the launch of Qwen3.8-Max, which is aimed at competing in the advanced AI model market.

Alibaba has also been developing other models designed to run on consumer devices, including laptops, as it broadens the applications of its AI technology.

Investors Focus on the Cost of AI Expansion

Alibaba’s latest results underscore the challenge facing the company: its AI and cloud businesses are delivering strong growth, while the company is simultaneously absorbing substantial costs to build computing capacity and secure the chips and components required to remain competitive.

Alibaba shares listed in the United States fell in premarket trading before paring some of their losses, as investors remained concerned about the impact of accelerating AI spending on the company’s profitability and financial margins.