Alibaba is finding a rhythm it hasn’t had for about three years. The Chinese group posted 268.95 billion yuan in turnover for its first fiscal quarter, or nearly $40 billion and an increase of 9% year-on-year. The cloud accelerates by 45%. Above all, AI-related products recorded a twelfth consecutive quarter of triple-digit growth.
In brief
- Alibaba increases its turnover by 9% year-on-year.
- The cloud is growing by 45%, driven by demand for AI.
- However, net profit fell by 75% over the quarter.
AI pushes Alibaba to its best pace in three years
Alibaba had already placed Qwen at the center of its strategy. The group had recently adapted certain functions of its AI to the new rules imposed by Beijing. The results are now starting to follow. Alibaba earned 268.95 billion yuan in revenue in the quarter ended at the end of June. Analysts expected around 268.88 billion.
The gap remains small. The rhythm, much less. Growth reached 9% year-on-year, the group’s highest quarterly level in around three years. Alibaba Cloud provides much of the acceleration. The division’s external revenues increased by 45%.
Products directly related to AI generated 12.38 billion yuan, or about $1.82 billion. They posted triple-digit annual growth for the twelfth consecutive quarter.
Eddie Wu, chief executive of Alibaba, attributes this progress to better marketing of the group’s AI services. The cloud is therefore no longer just used to finance Qwen’s ambitions. Qwen is also starting to power the cloud.
Alibaba spends $10 billion in the quarter
This growth is expensive. Alibaba spent 67.7 billion yuan on capital expenditures in the quarter. This represents approximately $10 billion and an increase of 75% year-on-year. Much of the money is going into chips and computing capabilities for AI. Demand still exceeds available infrastructure.
Alibaba must therefore build faster. The group had already shown how much it wanted to protect its home ecosystem. In July, Alibaba banned Claude Code from its employees amid tensions with Anthropic and accusations around model distillation.
Qwen AI is now even more important. Alibaba is also disseminating its models more widely. Qwen 3.8-Max was recently offered in open weights. The company had previously stopped the free plan of its agent Qwen Code.
The model is changing little by little. Providing wide access to Qwen AI helps increase its use. Some of the companies that then use these models need servers, computing and cloud tools. Alibaba sells just that. However, the bill arrives immediately. Free cash flow moves into the red with an outflow of more than $6.6 billion. Investors did not ignore the figure.
Profit plunges despite cloud boom
Alibaba posts 10.44 billion yuan in profitt, or approximately $1.6 billion.
The drop reached 75% over one year. Fifth consecutive quarter with profits below expectations. The U.S.-listed stock fell as much as about 5% after the release before paring some of its losses.
Growth is therefore returning.
The margins will wait. Alibaba relies heavily on volume. Qwen AI is taking up more space in the Chinese ecosystem and the group is also extending its agreements outside its own platforms.
Apple plans to use Alibaba technology to bring certain Apple Intelligence functions to iPhones sold in China. Chinese models are also making progress outside the country. Their share of tokens generated on OpenRouter would have increased from less than 2% at the end of 2024 to around 61% in mid-2026.
Alibaba is largely participating in this push. China is already investing heavily in this battle, as Chinese technology groups seek to narrow the gap with American AI players. For Alibaba, the accounts now give two figures that are difficult to separate. 45% growth for the cloud. 75% drop in profit. AI pays off more and more. It still costs a lot.
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