Alibaba reported a 75% year-over-year drop in quarterly profit to 10.5 billion yuan as it pours more cash into AI infrastructure, including chips, data centers, and AI services.

The earnings call cited factors behind higher spending: fluctuations in procurement cycles, increased CPU compute capacity, and rising chip component prices.

Alibaba has advanced its Qwen AI platform, launched agentic AI services for commercial customers, and previewed the Qwen3.8-Max model, signaling a push to monetize AI through subscriptions and ecosystem expansion.

Despite weak profitability, several analysts maintain Outperform or Buy ratings on optimism around cloud growth and AI-driven monetization.

Analysts note Alibaba’s undervalued status may hinge on sustained revenue growth, expanding margins, and a premium earnings multiple, though regulatory and sentiment headwinds persist.

AI gains have not yet fully offset softer monetization in core commerce, with consensus metrics showing a narrowing profit margin as AI investments scale.

Looking ahead, analysts expect operating cash flow to improve if delivery competition eases, but heavy capex on chips, data centers, and AI apps could offset near-term gains.

Alibaba reorganized around four units—e-commerce, AI cloud and computing, AI model applications, and other units—to bolster its AI-focused strategy.

The article notes the earnings timing but does not provide full quarter dates or broader financials beyond profit and AI revenue figures.

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

Quick-commerce grew 45% with improving unit economics, though the segment remains loss-making and adds to the cost of the AI-driven investment push.

Alibaba’s stock underperformed the Hang Seng Tech index as sector-wide dynamics affected sentiment around the AI and cloud transition.