Alibaba · China · CNBC Technology
Alibaba shares fall 5% as AI spending drives 75% drop in net income
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China's Alibaba on Thursday posted a 75% fall in profits for the June quarter as AI spending weighed on the tech giant's results.
Key facts
- Capital expenditure was up 75% to 67.7 billion Chinese yuan ($10 billion), primarily driven by uneven timing of customer purchases, an increase in CPU-compute capacity and higher prices
- Meanwhile, revenue rose 9% to 268.95 billion Chinese yuan, slightly higher than an LSEG estimate of 268.88 billion yuan
- Revenue at the tech giant's key cloud division totaled 48.4 billion yuan, up 45% year-on-year
- However, capex increasing 75% and negative free cash flow of 44.7 billion yuan could raise concerns around capital needs and investment returns, they said
Summary
Capital expenditure was up 75% to 67.7 billion Chinese yuan ($10 billion), primarily driven by uneven timing of customer purchases, an increase in CPU-compute capacity and higher prices across a broad range of chip components, the company said. Meanwhile, revenue rose 9% to 268.95 billion Chinese yuan, slightly higher than an LSEG estimate of 268.88 billion yuan. As the AI race accelerates, companies across the sector are increasingly contending with rising expenses for computing power and hardware. Alibaba's U.S. listed shares were down 4.6% shortly after the market opened.