Alibaba's net profit plummeted by 75% during the quarter ending in June, as the company prioritized massive investments in artificial intelligence. This aggressive expansion comes amid rising costs for data centers, specialized chips, and computing capacity.
The Cost of Computing Power
Capital expenditures reached 67.7 billion yuan (approximately $10 billion), a 75% year-over-year increase. The company attributed the spending surge to higher CPU demands, rising chip component prices, and the timing of customer purchases. Despite the profit squeeze, total revenue grew 9% to 268.95 billion yuan, slightly ahead of the 268.88 billion yuan expected by analysts.
Cloud Momentum and AI Growth
The cloud division remained a bright spot, with revenue climbing 45% to 48.4 billion yuan. CEO Eddie Wu noted that AI-related products have achieved triple-digit growth for 12 consecutive quarters. To manage high demand, Alibaba previously implemented price hikes of up to 34% for certain AI computing and storage services.
New Qwen Models and Market Strategy
Alibaba continues to expand its "full-stack" AI ecosystem, recently launching the Qwen3.8-Max model, which benchmarks suggest competes with systems from Anthropic. It also introduced Qwen3.8-27B, designed to run locally on hardware like laptops to reduce cloud dependency. Following the results, Alibaba's US-listed shares saw volatility, initially dropping 4% before settling at a 1.6% decline.
