Alibaba profit drops as AI revenue tops RMB49.5bn
AM730 · 2 SOURCESabout 1 hour ago2 MIN
Summary
Alibaba said adjusted net profit for the quarter ended June fell 38% year on year to RMB20.715 billion, missing market expectations, while quarterly revenue rose 9% to RMB268.953 billion. Chief executive Eddie Wu Yongming said AI-related products had surpassed RMB49.5 billion in annualised revenue, with their share of Alibaba Cloud's external commercialised revenue rising to 35%. He said AI products carry materially higher gross margins than the average cloud product and that the group will keep investing in AI infrastructure. The company also said AI commercialisation has moved from a turning point last quarter into a phase of faster growth and rising profitability this quarter
Key Points
- Alibaba's AI cloud and computing services generated RMB48.437 billion in revenue, with both total revenue and external customer revenue growth accelerating to 45% year on year
- AI-related product revenue reached RMB12.376 billion and recorded a triple-digit year-on-year increase for the 12th consecutive quarter, driven by wider customer adoption
- Capital expenditure climbed 75% year on year to RMB67.678 billion, mainly because of sustained AI infrastructure spending, procurement-cycle swings and higher chip component prices
- Wu said returns on AI computing capital spending are relatively certain, with current investments expected to break even within three years and potentially in about two to 2.5 years later.
- Alibaba's chip unit T-Head has accelerated commercialisation, and super-node instances based on its new Xuantie M890 chip have gone live on Alibaba Cloud and started large-scale sales
Why It Matters
For Hong Kong investors, the results show Alibaba is accepting weaker near-term profit in exchange for a larger AI build-out, making execution and payback timing central to the stock's outlook. The company is also tying future cloud growth more tightly to AI demand, so margin improvement now depends increasingly on whether enterprise customers keep scaling their use of AI products and computing power