Alibaba Profit Drops 75% on Heavy AI Investment

Alibaba Group reported a sharp 75% decline in quarterly profit on August 20, as the Chinese technology giant significantly increased spending on artificial intelligence infrastructure, even as its cloud business experienced a surge in revenue driven by strong AI demand. The results for the quarter ended June 30, 2026, highlight the company's aggressive pivot toward AI, which is fueling growth in one division while weighing heavily on overall profitability.

Total revenue for the quarter grew 9% year-over-year to 268.95 billion yuan (approximately $40 billion). The standout performer was the AI Cloud and Compute Services segment, which saw its revenue jump 45% to 48.44 billion yuan, marking its fastest growth in 22 quarters. Chief Executive Officer Eddie Wu stated that AI-related product revenue within this segment maintained triple-digit growth for the twelfth consecutive quarter and that AI has become Alibaba's "most certain growth engine." He added that demand is so strong the company expects AI and cloud revenue growth to accelerate further as it expands computing capacity.

However, the investment required to build this capacity directly impacted the bottom line. Net income...