Alibaba shares fall 6% as AI spending drives 75% drop in net income
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- Alibaba posted a 75% fall in net profit for the June quarter as AI-related spending weighed on the tech giant's results.
- Capital expenditure rose 75% to 67.7 billion yuan ($10 billion), driven by CPU-compute capacity expansion and higher prices across chip components.
- Shares were last down 6.3% Thursday after a volatile session that included an initial 4% premarket drop and a brief intraday reversal.
- Revenue rose 9% to 268.95 billion yuan, slightly above the LSEG estimate of 268.88 billion yuan.
- Alibaba's cloud division posted 48.4 billion yuan in revenue, up 45% year-on-year — a segment Citi and other analysts view as Alibaba's primary AI monetization channel.
- CEO Eddie Wu said AI-related product revenue delivered triple-digit growth for the twelfth consecutive quarter, calling the company's "full-stack AI strategy" a competitive advantage.
- Citi analysts flagged concerns around capital needs and investment returns given the 75% capex jump and 44.7 billion yuan in negative free cash flow.
Why it matters: The print splits Alibaba into two stories: a near-term ugly optics story (75% net income drop, 44.7 billion yuan negative free cash flow) and a strong underlying AI momentum story (cloud up 45%, twelfth-straight quarter of triple-digit AI product growth). For shareholders, the open question Citi is flagging is whether the $10 billion capex surge translates into sustained return on investment — not whether the AI demand is real.
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