Alibaba Group Holding Ltd. reported a 75% collapse in June-quarter net income Thursday as capital spending on artificial intelligence infrastructure surged 75% to 67.7 billion yuan, roughly $10 billion, overwhelming a 9% revenue gain that barely cleared analyst estimates.
Cloud carries the top line
Cloud revenue jumped 45% to 48.4 billion yuan, the only segment growing fast enough to offset the spending drag. AI-related products have now posted triple-digit growth for twelve straight quarters, CEO Eddie Wu said, framing the outlay as a full-stack advantage rather than a cost burden.
The spending breakdown
Management attributed the capex increase to lumpy customer ordering patterns, expanded CPU capacity, and higher prices across a wide range of semiconductor components. Three months earlier the company had reportedly lifted list prices on AI compute and storage by as much as 34%, passing a portion of that component inflation through to users.
Shares shrug then sink
U.S.-listed shares opened 4% lower in premarket trading, recovered some ground during the session, and finished down 3.1%. The move coincided with the earnings release; the company did not identify a specific catalyst for the intraday volatility.
Model momentum versus margin pressure
Earlier this month Alibaba unveiled Qwen3.8-Max, claiming benchmark scores comparable to or above Anthropic's Fable 5, and released Qwen3.8-27B, a model sized to run on consumer laptops. The product cadence is real. Whether it translates into cloud margins that justify the current spend rate is the question investors are pricing now.