Alibaba AI Spending Surges 75%, Crushing Net Income

Alibaba Group Holding Ltd. reported quarterly earnings Thursday that showed revenue up 9% from a year earlier, while a surge in artificial intelligence investment drove net income down 75%.

The company spent 67.7 billion yuan (about $10 billion) on capital expenditures in the quarter, a 75% jump from the same period last year. Most of that went into AI infrastructure, including chips, cloud data centers and model development.

External revenue from Alibaba's cloud business rose 45%. AI-related product revenue posted triple-digit growth for the 12th straight quarter, CEO Eddie Wu said in the company's earnings release.

"With our full-stack AI strategy, we have put Alibaba in a superior position to capture the substantial growth of demand for artificial intelligence and AI compute," Wu said.

The company's open-weight models have been downloaded more than 3 billion times worldwide in the past six months, more than models from Google, Meta and domestic rivals like DeepSeek, according to a report days before the earnings.

Wu described Alibaba's AI investment model as "fundamentally different from that of pure-play AI companies" because it spans chips, cloud infrastructure and AI models. The company is pushing the technology directly into its eCommerce ecosystem, where 250 million users have completed their first AI-driven shopping experience using Alibaba's Qwen model, Wu said.

On the consumer side, Alibaba is deploying multimodal search and virtual try-ons. On the merchant side, Wu said sellers are "widely adopting" AI for data analytics, advertising and customer service. The company plans to launch AI agents tailored for eCommerce scenarios through its Qwen Office platform.

"Our goal is twofold," Wu said. "First, to use AI technology to enhance the experience and efficiency of existing shopping scenarios. And we've already observed that AI has driven significant efficiency gains in our product recommendations. And secondly, to drive new kinds of AI-driven interactions."

Alibaba's stock page shows an Alpha Score of 51 out of 100, rated Mixed, in the Consumer Discretionary sector.

The company has its roots in eCommerce but has shifted its focus heavily toward AI over the past several quarters. The earnings call focused almost entirely on how proprietary AI is beginning to change shopping habits and merchant operations, with Wu framing the shift as a multi-year investment cycle rather than a short-term profit play.