Alibaba reported a 75% year-over-year drop in quarterly profit to 10.5 billion yuan as it continues heavy investment in AI infrastructure, including advancing its Qwen AI platform and revealing the Qwen3.8-Max model in July to compete with top AI players.

The higher spending is driven by fluctuations in procurement cycles, increased CPU compute capacity, and higher chip component prices, alongside continued investments in AI and cloud initiatives.

Despite softer profitability, several analysts maintained Outperform and Buy ratings, pointing to strong cloud growth as a positive backdrop for the stock.

Analysts note Alibaba's undervalued status hinges on compound revenue growth, expanding margins, and a premium earnings multiple for tech platforms, while regulatory and sentiment headwinds persist.

AI gains are not fully offsetting softer monetization in core commerce, with CMR below consensus and a need to monitor core profitability as AI investments scale.

Looking ahead, analysts expect potential improvement in operating cash flow if delivery-related competition eases, though ongoing capex on chips, data centers, and AI applications may offset near-term gains.

Alibaba released Qwen 3.8 Max as an open-weight model to boost monetization and user acquisition, signaling a shift toward user growth and ecosystem expansion over margin-only pricing.

The earnings announcement timing is noted, but specific quarter dates and broader details beyond profit and AI revenue are not provided.

Alibaba’s stock trades around $128.90 with mixed momentum: modest near-term declines but some longer-term upside, as investors weigh AI-led growth against profitability concerns.

The company restructured reporting by folding T-Head into the cloud unit and creating an AI Labs and Applications segment, which may recast year-on-year figures versus earlier analyst models.

Alibaba’s stock underperformed the Hang Seng Tech index as peers rose modestly, reflecting broader sector dynamics during the period.

China customer-management revenue fell about 7% (or 1% like-for-like after adjustments) amid softer transaction activity, contributing to the revenue mix shift toward AI and cloud.