Alibaba Group reported Thursday that net income dropped 76% to 10.54 billion yuan ($1.55 billion) in its fiscal first quarter, as the company poured money into artificial intelligence infrastructure and model development.
Revenue for the quarter ended June 30 rose 9% year-over-year to 268.95 billion yuan ($39.64 billion). Non-GAAP net income, which strips out share-based compensation, investment gains and losses, and certain other items, fell 38% to 20.72 billion yuan ($3.05 billion). Adjusted EBITA declined 30% to 27.33 billion yuan ($4.03 billion), the company said.
Capital expenditures reached 67.68 billion yuan ($9.98 billion) in the quarter, a 75% increase from the same period a year earlier, reflecting spending on AI infrastructure. Free cash flow was an outflow of 44.67 billion yuan ($6.58 billion), compared with an outflow of 18.82 billion yuan in the year-ago quarter.
The company’s AI Labs and Applications segment — which houses its AI model development, Qwen consumer app, and QwenWork enterprise agent — posted an adjusted EBITA loss of 13.86 billion yuan ($2.04 billion), compared with a loss of 3.22 billion yuan a year earlier. The widening loss reflected increased investment in AI capabilities and higher inference costs tied to the Qwen app, Alibaba said.
Cloud was the standout. Revenue from the AI Cloud and Compute Services segment rose 45% to 48.44 billion yuan ($7.14 billion), driven by growing adoption of AI products. AI-related product revenue reached 12.38 billion yuan ($1.82 billion), extending a streak of triple-digit year-over-year growth to 12 consecutive quarters. The segment’s adjusted EBITA more than doubled, rising 133% to 5.63 billion yuan ($830 million).
“We delivered a strong quarter, driven by the improving commercialization of our full-stack AI capabilities,” Chief Executive Officer Eddie Wu said in a statement.
The results follow a difficult prior quarter in which Alibaba posted adjusted net income of just 86 million yuan and its first operating loss since 2021, as spending on AI infrastructure and quick commerce delivery weighed on earnings. At that time, the company committed to reaching $100 billion in combined annual revenue from cloud and AI within five years, according to Bloomberg.
The company’s e-commerce business delivered mixed results. China Quick Commerce revenue surged 45% to 53.30 billion yuan, while China E-commerce revenue fell 8% to 110.90 billion yuan. The company’s 88VIP membership base grew by double digits year-over-year to approximately 64 million members as of June 30.
Analysts had anticipated stronger earnings, though the company’s revenue surpassed their forecasts, according to The Wall Street Journal.