Alibaba Group experienced a significant decline in its core profitability during the March quarter, with adjusted earnings before interest, taxes, and amortization (EBITA) plummeting 84% year-on-year to 5.1 billion Chinese yuan ($750.9 million). This sharp decrease reflects the company’s substantial strategic investments in advanced technologies, particularly artificial intelligence, and its burgeoning quick commerce initiatives. Despite the overall profit dip, the company’s cloud computing division emerged as a strong performer, demonstrating accelerated growth driven by robust demand for AI-related services.

The Cloud Intelligence Group recorded an impressive 38% year-on-year revenue increase, reaching 41.6 billion yuan in the March quarter, outpacing its growth from the previous period. This surge was primarily fueled by AI-related product revenue, which achieved triple-digit growth for the eleventh consecutive quarter, contributing 9 billion yuan to the segment’s total. Alibaba’s Chief Financial Officer, Toby Xu, highlighted that these strategic investments are effectively translating into business expansion, particularly within the cloud sector. CEO Eddie Wu further projected that annualized recurring revenue (ARR) from the company’s AI model and application services is expected to surpass 10 billion yuan in the current June quarter and reach 30 billion yuan by the year-end.

A key component of Alibaba’s strategy involves heavy investment in semiconductors for AI, data centers, and the development of its proprietary Qwen family of AI models. CEO Eddie Wu underscored Alibaba’s distinctive position as the sole AI cloud provider in China capable of deploying self-developed AI chips at scale. This capability grants the company autonomy over its computing supply chain and enables it to offer highly competitive AI inference and training services, a significant advantage in an environment of compute scarcity. These advanced AI capabilities are also being integrated across Alibaba’s broader ecosystem, including the upcoming launch of a Qwen-powered AI shopping assistant within its primary e-commerce platform, Taobao.

While AI investments are yielding long-term benefits, the company’s aggressive push into quick commerce — a service offering ultra-fast delivery within an hour — has impacted short-term profitability in its core e-commerce segment. The adjusted EBITA for Alibaba’s China e-commerce group fell 40% year-on-year in the March quarter, despite quick commerce revenue itself soaring 57% and overall China e-commerce revenue growing 6%. Following the financial disclosure, Alibaba’s U.S.-listed shares experienced volatility, initially rising before turning negative and ultimately closing down around 1.3%.