HONG KONG, May 14, 2026, 17:04 (HKT)
- Alibaba now plans to exceed its previous 380 billion yuan AI investment, though the company hasn’t specified a fresh spending target.
- Cloud revenue jumped 38% during the March quarter. Core profit, though, was nearly erased.
- AI demand stayed front and center for investors, despite a short-term drag from cloud infrastructure and quick commerce outlays.
Alibaba Group Holding Limited is ramping up its artificial intelligence and cloud investment beyond previous plans, following a 38% surge in cloud sales that sent its U.S.-listed stock up. The Cloud Intelligence Group brought in 41.63 billion yuan in revenue. The company now expects to blow past its earlier AI investment target of up to 380 billion yuan, even while profits took a hit this period.
Timing is key here. Investors are pressing China’s top internet firms on whether the AI frenzy actually translates to real profits, rather than just heftier data-center expenses. In its latest quarter, Alibaba served up both: a jump in cloud revenue tied to AI and, unusually, an operating loss.
March-quarter revenue landed at 243.38 billion yuan, marking a 3% rise year-on-year, but the company reported an operating loss of 848 million yuan—last year saw an operating profit of 28.47 billion yuan. Stripping out certain items, non-GAAP net income dropped sharply to 86 million yuan, compared to 29.85 billion yuan previously.
Chief Executive Eddie Wu flagged to analysts that the payback from AI and cloud is “increasingly clear,” saying tech investments are “beginning to pay off commercially.” Still, he underscored the company’s current playbook: growth and market share before anything else—“margin is still secondary.” Reuters
Alibaba reported that AI-related offerings made up 30% of its external cloud customer revenue last quarter, and suggested that figure might top half of its cloud revenue within a year. The Qwen AI app now hooks directly into Taobao and Tmall, giving shoppers a chat-driven way to browse instead of the usual product lists.
Alibaba’s AI business is moving out of the lab and into the spotlight. The company reported 8.97 billion yuan in AI-related product revenue for the quarter, notching its eleventh consecutive triple-digit year-on-year increase. CFO Toby Xu said Alibaba is sticking with its strategy to “continue to invest in AI + Cloud” and sharpen its competitive advantage. Business Wire
Prediction markets offered a slim edge, but it was enough to capture where bets are clustering on the models. On Polymarket, the end-of-May market for top Chinese AI company had Alibaba sitting at 65%, well above Baidu’s 22% and Z.ai’s 8%. The outcome tracks the Chatbot Arena LLM Leaderboard, not stock performance, but the pricing points to traders positioning Qwen as the standout Chinese model.
Alibaba’s legacy platforms lagged on emissions. The company’s China e-commerce revenue increased 6% to 122.22 billion yuan, thanks mostly to a 57% leap in its quick commerce segment, which brought in 19.99 billion yuan. Still, adjusted EBITA for the China e-commerce group dropped 40%, underscoring the hefty price of holding onto buyers and moving more packages.
Free cash flow dropped to negative 17.3 billion yuan for the March quarter, reversing from a 3.74 billion yuan inflow a year ago. Alibaba chalked up the shift to heavier spending on quick commerce, ramped-up Qwen user acquisition, and more money poured into cloud infrastructure. Still, the board signed off on an annual dividend of $1.05 per American depositary share, which works out to a total payout of roughly $2.5 billion.
Reaction from peers was a mixed bag. Tencent, which competes closely with Alibaba among Chinese internet giants pushing into AI, reported a 9% jump in first-quarter revenue. The company said its main operations are footing the bill for AI investments. Tencent also broke out operating profit numbers that leave out the impact of new AI products—aiming to clarify just how much the fresh AI spending is hitting the bottom line.
Some onlookers voiced careful optimism. Jacob Cooke, who heads up Beijing’s WPIC Marketing + Technologies, commented that Alibaba’s AI-driven expansion is set to “accelerate further.” Chelsey Tam, an analyst with Morningstar, echoed that the AI “investment phase is far from over,” saying firms are probably ready to move from chasing users to finding ways to make money. AP News
Risk comes down to disclosure—and the clock is ticking. Reuters Breakingviews points out that a chunk of expenses for model training and chatbots gets buried in Alibaba’s “All Others” segment, where adjusted EBITA losses have ballooned past $3 billion. That makes it tough to pin down real AI returns. Cloud demand slipping or price pressure ramping up could put investor patience to the test fast. Reuters
Alibaba’s message to investors is clear: it’s ready to sacrifice short-term profits in pursuit of AI scale. Now, all eyes are on cloud margins—does Wu’s forecast for improvement hold up? The other question: can Qwen actually coax more commerce volume back into Alibaba’s ecosystem before expenses start climbing again?
