Alibaba profit plunges 75% on AI spending

Alibaba Group reported a 75% drop in quarterly net profit for the April-June quarter, falling to 10.5 billion yuan ($1.6 billion) from 43.1 billion yuan a year earlier, as the company sharply increased spending on artificial intelligence infrastructure. Revenue rose 9% to nearly 269 billion yuan ($40 billion), with AI cloud and computing services revenue jumping 45% to 48.4 billion yuan. Capital expenditure surged 75% to 67.7 billion yuan ($10 billion), driven by increased computing capacity, procurement cycles, and higher chip component prices. The company also recorded a free-cash outflow of more than $6.6 billion. Alibaba's US-listed shares fell more than 3% in trading. CEO Eddie Lin emphasized prioritizing AI growth over short-term profitability, with plans to invest well beyond the previously announced 380 billion yuan three-year budget and target $100 billion in annual AI and cloud revenue within five years. The company released its Qwen 3.8 Max model as open-weight, intensifying competition with US firms like Anthropic and OpenAI, while facing a slowdown in Chinese consumer spending.