Alibaba Profit Plunges 84% Despite AI and Cloud Growth

Alibaba Group Holding Ltd reported an 84% year-on-year decline in its core profitability for the March quarter, as the company significantly increased spending on artificial intelligence infrastructure and e-commerce initiatives. The company’s adjusted earnings before interest, taxes, and amortization (EBITA)—a metric used to measure underlying profitability by stripping out one-time gains or losses—totaled 5.1 billion Chinese yuan, or approximately $750.9 million.

The sharp reduction in profitability comes as the Hangzhou-based technology giant directs massive capital toward the development of its own family of artificial intelligence models, known under the brand name Qwen. These investments include heavy spending on semiconductors for AI, the expansion of data centers, and the continued evolution of cloud computing services.

Cloud and AI Demand Drive Revenue Growth

Despite the decline in core profitability, Alibaba’s cloud computing segment emerged as a significant driver of revenue. The division reported revenue growth of 38%, a performance attributed to rising demand for AI capabilities within China. This growth reflects a broader trend of enterprises seeking to integrate AI into various business functions, ranging from manufacturing automation to customer service chatbots.

The company’s strategic focus on the enterprise AI stack has seen its Qwen large language models being integrated across thousands of businesses. This integration is intended to create a flywheel effect that drives further cloud adoption, even as the high costs of model training and infrastructure development weigh on immediate margins.

E-commerce Competition and Quick Commerce

While the cloud division saw growth, Alibaba’s China e-commerce group faced significant margin pressure. Adjusted EBITA for the China e-commerce segment dropped 40% year-on-year during the March quarter. This decline was primarily driven by the company’s decision to invest heavily in so-called quick or instant commerce.

Quick commerce is a shopping service designed to provide users with goods via super-fast delivery speeds, often in under an hour. This service has become a major competitive battleground for e-commerce giants in China, requiring substantial investment to maintain the necessary logistics and delivery infrastructure.

Despite the drop in profitability within this segment, customer management revenue—which serves as the group’s single-largest contributor—grew by 1% during the quarter.

Market Reaction to Earnings Results

Following the release of the earnings report on Wednesday, May 13, 2026, Alibaba’s U.S.-listed shares experienced volatility. Although the shares were initially higher in premarket trade, they subsequently turned negative. During the trading session, the shares fell as much as 4% before being seen down approximately 1.3%.

The financial results reflect a period of intensive capital expenditure as Alibaba attempts to balance the maintenance of its dominant e-commerce empire with the high costs of competing in the global race for artificial intelligence leadership.