Alibaba profit plunges more than 75 pc as AI spending weighs on bottom line

New Delhi, Aug 20 (IANS) Alibaba Group Holding Limited has reported a sharp decline in profit as the Chinese e-commerce giant ramps up spending on artificial intelligence and computing infrastructure while its core online retail business faces a broader slowdown in consumer demand.

The company reported a 9 per cent increase in revenue, broadly in line with market expectations, driven in part by strong demand for computing capacity from its cloud business. However, net income plunged more than 75 per cent to 10.5 billion yuan ($1.6 billion). Alibaba also recorded a free-cash outflow of more than $6.6 billion, underscoring the growing financial burden of its aggressive investment in AI projects and infrastructure.

Alibaba’s US-listed shares fell about 4 per cent in pre-market trading following the results.

The Hangzhou-based company has emerged as one of China’s leading AI players, with its Qwen family of models gaining global attention. Alibaba has committed tens of billions of dollars toward AI infrastructure, including chips, data centres and the development of AI agents, as it seeks to compete with leading US firms such as OpenAI and Anthropic.

The rapid expansion of its AI operations, however, is putting pressure on margins at a time when China’s consumer spending remains subdued. The company’s traditional e-commerce operations continue to face a challenging environment, increasing the importance of its cloud and AI businesses as future growth engines.

Under Chief Executive Officer Eddie Wu, Alibaba has accelerated its shift towards AI. The company has consolidated most of its AI-related research and product teams under Alibaba Token Hub, a new business unit directly overseen by Wu. It has also been selling non-core assets as part of a broader restructuring, including the disposal of its gaming unit Lingxi Games earlier this month.

Alibaba’s AI push has made it one of China’s largest corporate spenders on AI infrastructure. Wu has indicated that the company is prepared to prioritise long-term AI expansion over near-term profitability. The investment is expected to go beyond the previously announced 380 billion yuan three-year spending plan, with Alibaba targeting a fivefold increase in cloud and AI revenue to $100 billion over five years.

–IANS

pk