MUMBAI: Alibaba is spending its way into the AI race, and its bottom line is feeling the burn. The Chinese e-commerce giant has seen net profit plunge by more than 75 per cent, as heavy investment in artificial intelligence and computing infrastructure weighs on earnings even as cloud demand helps push revenue higher.
Alibaba’s net income fell to 10.5 billion yuan, or about $1.6 billion, while revenue increased 9 per cent. The growth was largely supported by stronger demand for computing capacity from its cloud business, highlighting the increasingly important role AI infrastructure is playing in the company’s growth story.
But that expansion came at a steep cost. Alibaba recorded more than $6.6 billion in free-cash outflow as it stepped up spending on AI projects, chips and data-centre capacity.
The spending spree reflects CEO Eddie Wu’s decision to prioritise AI expansion over near-term profitability. Alibaba has consolidated most of its AI research and product teams under Alibaba Token Hub, a new business unit led directly by Wu.
The company has also positioned itself among China’s biggest AI infrastructure investors, with spending spanning computing capacity, chips, data centres and agentic AI.
The company had previously committed 380 billion yuan over three years towards its AI and cloud push. Wu is now expected to steer investment beyond that figure as Alibaba targets a fivefold increase in cloud and AI revenue to $100 billion over five years.
That ambition puts Alibaba in a race against global AI players including OpenAI and Anthropic, while it also competes with China’s growing field of AI developers.
Its Qwen family of models has gained traction, with Alibaba recently making its Qwen 3.8 Max model open-weight. The move is part of a broader push to expand the reach of its AI technology, although turning that popularity into meaningful revenue remains a challenge.
Alibaba is also trying to convert AI usage into paying customers through its coding and agentic platforms. Its Qwen app has expanded beyond conventional chatbot functions, acting as an AI assistant for tasks including shopping and payments.
While AI is becoming Alibaba’s big growth bet, its traditional e-commerce engine is facing a more difficult environment.
Subdued Chinese consumer demand continues to weigh on online retail, making the stronger performance of the cloud business increasingly significant. Demand for computing capacity has risen as companies and developers expand their own AI workloads.
That leaves Alibaba balancing two very different realities: its established commerce business is under pressure, while its AI and cloud ambitions require billions of dollars in investment before they can deliver the returns investors are seeking.
For Wu, the calculation appears to be that today’s AI bill is the price of tomorrow’s growth. For Alibaba’s shareholders, the harder question is how long they are willing to wait for that investment to pay off.