Alibaba reported June-quarter net income of RMB10.444 billion on Aug. 20, down 75% from RMB42.382 billion a year earlier, as spending on AI infrastructure surged. Revenue rose 9% to RMB268.953 billion, according to the company’s results announcement.
The figures put the near-term financial cost of Alibaba’s computing-capacity expansion into focus: capital expenditure increased while free cash flow moved further into negative territory, even as demand for AI-related services grew.
AI infrastructure spending drives profit and cash-flow pressure
Capital expenditures reached RMB67.678 billion (US$9.975 billion) during the quarter, up 75% from a year earlier.
Alibaba attributed the higher spending to continued investment in AI infrastructure and increased computing capacity. Free cash flow was an outflow of RMB44.670 billion (US$6.584 billion), compared with an RMB18.815 billion outflow in the prior-year period.
The company said the larger free-cash-flow outflow was mainly due to increased cloud infrastructure expenditure. The result coincided with a sharp decline in reported net income, while revenue continued to rise; Alibaba did not separately quantify how much of the profit decline was attributable to AI infrastructure spending.
AI-related services revenue grows as capacity expands
Revenue from Alibaba’s AI-related services grew 45% in the quarter, the Associated Press reported. Alibaba said it expects growth in AI and cloud revenue to accelerate as supply expands.
The company is therefore increasing computing capacity while seeking to convert rising demand for AI services into faster cloud growth. Its June-quarter results show that the expansion is already requiring substantially higher capital spending and cash investment.
