❯ Alibaba quarterly net profit down 75% YoY, AI applications segment posts 13.861 billion yuan quarterly operating loss

EARNINGSAlibaba’s latest quarterly revenue rose 9% YoY to about $39.64 billion, in line with market expectations, while net profit fell 75% YoY to about 10.54 billion yuan. The profit collapse stems from two sources: heavy investment in AI infrastructure and weak domestic retail consumption. Cloud business revenue grew 45%, driven by AI demand.

COST BREAKDOWNThis earnings report, for the first time, discloses results under four new segments, laying out the AI bill separately: the AI Labs & Applications segment posted a quarterly operating loss of 13.861 billion yuan, primarily from inference costs for the Qwen application; capital expenditures reached 67.678 billion yuan, versus 38.676 billion yuan in the same period last year, with the incremental spending going to AI infrastructure, procurement cycle fluctuations, and rising chip prices. The company’s free cash flow has been negative for two consecutive quarters.

WHO PAYSChina’s major tech companies, for the first time, have written how much AI actually burns into an independent line item on the financial statements. For secondary-market investors, the basis for judgment shifts from the vague “cloud revenue growth rate” to whether inference costs can be amortized at scale; for Alibaba management, the pressure falls on the specific point in time when AI applications will stop losing more than ten billion yuan in a single quarter. Until then, the cloud business’s impressive growth will continue to be offset by this loss line.

▪ SIGNALThe 45% growth in cloud business and the 13.8 billion yuan loss in AI applications are two sides of the same coin; the only divergence is which side materializes first.