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Alibaba profit drops 75% amid massive AI infrastructure investment
Alibaba Group reported a significant 75% decline in quarterly net profit for the period ending in June, falling to approximately $1.5 billion. This sharp drop is primarily attributed to a massive surge in capital expenditures, which rose 75% to nearly $10 billion as the company aggressively invests in artificial intelligence infrastructure and compute capacity.
Despite the profit plunge, Alibaba's revenue grew 9% year-on-year to roughly $40 billion. The company's strategic pivot toward AI and cloud services is showing momentum; the AI Cloud and Compute Services division saw revenue jump 45% to over $7 billion, marking its fastest growth in 22 quarters. Within this segment, AI-related product revenue has achieved triple-digit growth for twelve consecutive quarters.
However, the transition involves significant costs. The AI Labs and Applications unit reported an EBITA loss of $2.04 billion. Additionally, the company's free cash flow saw a substantial outflow of over $6.5 billion. CEO Eddie Wu noted that the company expects to break even on AI-related capital expenditures within the next three years as it continues to build out necessary compute capacity and deploy proprietary chips.
Entities
AliExpress · Alibaba Cloud · Alibaba Group · Alibaba Group Holding Limited · China · Eddie Wu · European Commission · IG Metall · Qwen · Speyer · T-Head · Toby Xu
Claims
What the coverage asserts, and how many sources carry each claim.
- [● 3 SOURCES] The company recorded a free cash flow outflow of over $6.58 billion. thenextweb.com · yespunjab.com
- [● 8 SOURCES] AI Cloud and Compute Services revenue was $7.14 billion, a 45% year-on-year increase. thenextweb.com · www.constellationr.com · insideretail.asia · www.perthnow.com.au · www.fool.com · +2 more
- [● 13 SOURCES] Total revenue rose 9% to $39.64 billion. thenextweb.com · yespunjab.com · www.fool.com · insideretail.asia · mymotherlode.com · +4 more
- [○ 1 SOURCE] The AI Labs and Applications unit reported an EBITA loss of $2.04 billion. www.constellationr.com
- [● 2 SOURCES] Alibaba Cloud holds a 38.1% share of China's AI cloud market. thenextweb.com · www.constellationr.com
- [● 14 SOURCES] Alibaba's net profit fell by more than 75% in the June quarter. thenextweb.com · yespunjab.com · www.fool.com · insideretail.asia · mymotherlode.com · +5 more
- [● 2 SOURCES] AI-related product revenue reached $1.82 billion. thenextweb.com · www.constellationr.com
- [○ 1 SOURCE] Capital spending reached approximately $9.98 billion in the three-month period. thenextweb.com