Alibaba quarterly profit drops 75% as AI investment spending grows

Alibaba, the China-based technology giant, announced on Thursday that its quarterly profit had dropped by 75%, as the company poured substantial investments into artificial intelligence infrastructure. Despite this, its revenue from AI-related services grew by 45%. The Hong Kong and U.S.-listed company, which initially began as an e-commerce and online retail platform, has shifted its focus towards AI technologies.

For the April-June quarter, Alibaba reported a profit of 10.5 billion yuan ($1.6 billion), a stark contrast to the 43.1 billion yuan ($6.4 billion) earned during the same period last year. However, its revenue soared to nearly 269 billion yuan ($40 billion) for the quarter, with AI cloud and compute services contributing 48.4 billion yuan ($7.2 billion) to the total.

The significant increase in capital expenditures, including investments in AI infrastructure to cater to growing customer demands, rose by 75% to 67.7 billion yuan ($10 billion), adversely impacting profits. In a prepared statement, Alibaba CEO Eddie Wu expressed optimism, stating, "As we continue to ramp up our supply, our AI and Cloud revenue growth will accelerate further in the coming quarters, alongside continued improvement in profitability." Despite the profit slump, Alibaba's U.S.-traded shares saw a decline of more than 3% on Thursday.