Alibaba’s shares declined about 3% on Friday, closing near HK$125, as investors weighed the drag from aggressive artificial intelligence spending against accelerating cloud growth. The Hang Seng Index rose 0.7% in contrast, reflecting broader market strength.
The company reported a 76% year-over-year drop in net income to RMB10.54 billion, missing BofA Securities’ consensus estimate of RMB22.6 billion by 53%. Non-GAAP net income fell 38% to RMB20.72 billion, also below the RMB25.6 billion forecast. Revenue increased 9% to RMB268.95 billion, broadly in line with expectations, but adjusted EBITA declined 30% due to elevated technology and AI investments.
Alibaba Cloud and Compute Services revenue accelerated 45% to RMB48.44 billion, while AI-related product revenue reached RMB12.38 billion, marking 12 consecutive quarters of triple-digit growth. Cloud adjusted EBITA more than doubled to RMB5.63 billion, lifting the segment margin to approximately 12%. However, capital expenditure surged 75% to RMB67.68 billion, driven by AI infrastructure, CPU compute capacity, and higher chip-component costs. Free cash flow turned negative at RMB44.67 billion, compared with a positive inflow of RMB18.82 billion a year earlier.
Customer-management revenue fell 7% year-over-year, or rose 1% on a like-for-like basis excluding accounting impacts from a new business-development program. BofA noted the segment was 4% below consensus. Quick-commerce revenue grew 45%, though the business remains unprofitable.
Analysts highlighted the tension between near-term profitability pressures and long-term growth ambitions. US Tiger Securities emphasized that AI investments are transitioning toward commercialization and that quarterly capex should not be extrapolated due to volatile hardware cycles. BofA and Mizuho flagged concerns over softer transaction activity and weaker monetization in core commerce, noting that AI gains have yet to fully offset declines in customer-management revenue.
