Alibaba Group reported first-quarter revenue of RMB 269 billion ($39.4 billion), a 9% increase from the same period last year, as investment in artificial intelligence infrastructure offset slower e-commerce growth. Adjusted EBITDA declined 30% to RMB 27.3 billion, while GAAP net income dropped 75% to RMB 10.4 billion, reflecting heavy spending on AI capabilities and cloud infrastructure.
The company’s e-commerce segment, which contributed RMB 205.9 billion in revenue, grew just 4% year-over-year. Customer management revenue declined 7%, though excluding the impact of a new business development program, it rose 1%. Quick-commerce revenue surged 45% to RMB 53.3 billion, driven by Freshippo and Taobao Instant Commerce. Alibaba Cloud posted a 45% increase in external revenue, marking its fastest growth in 22 quarters, while AI-related product revenue reached RMB 12.4 billion, accounting for 35% of cloud external revenue.
AI investments weighed on profitability, with the AI Labs and Applications segment posting an adjusted EBITDA loss of RMB 13.9 billion. The company’s free cash flow turned negative at RMB 44.7 billion, compared with a negative RMB 18.8 billion a year earlier, as capital expenditures rose to RMB 67.7 billion. Despite the pressure on earnings, operating cash flow increased 11% to RMB 22.9 billion.
Alibaba reiterated a three-year investment plan totaling RMB 380 billion, with RMB 190 billion already deployed by June 2026. The company targets RMB 100 billion in external cloud revenue by 2030 and expects AI cloud gross margins to reach 20% over time. Cloud revenue growth accelerated to 45%, and the annual revenue run rate for AI-related products exceeded RMB 49.5 billion. Alibaba Cloud serves over 650 customers with its Zhenwu AI chips, while hyperscale AI data center delivery times have been reduced to 100 days.
Shares fell 3.52% to $22.99 following the results, extending a decline from a 52-week high of $36.68. The company maintained a strong balance sheet with approximately $30.7 billion in net cash, excluding long-term debt maturities.
Management emphasized the shift from AI incubation to commercialization. CEO Eddie Wu noted that heavy capital expenditures were necessary to capture future growth in cloud and AI services, while CFO Toby Xu highlighted improving operating efficiency and strategic flexibility to sustain investments in AI capabilities.
