Alibaba Core Profit Craters 84% as AI Spending Bites

CNBC reported Wednesday that Alibaba’s underlying profitability collapsed 84% in the March quarter. The Chinese technology giant has been pouring capital into artificial intelligence infrastructure and a fast-growing instant delivery service, squeezing margins even as cloud revenue climbed.

A Profit Metric Under Pressure

Alibaba disclosed adjusted earnings before interest, taxes, and amortization of roughly 5.1 billion Chinese yuan, equivalent to approximately $751 million. That gauge strips away one-time items to reflect the health of core operations. The dramatic compression alarmed investors. Alibaba’s U.S.-listed shares swung from early premarket gains to a loss of around 3.4% once the figures circulated.

The e-commerce arm bore the brunt of the squeeze. Adjusted EBITA for Alibaba’s China commerce division fell 40% year-on-year. That decline came even though customer management revenue, the segment’s single largest income line, managed modest growth of 1% over the same period.

Cloud and AI Remain Bright Spots

Not every metric disappointed. Alibaba has committed heavily to semiconductor procurement for AI workloads, data center construction, and the expansion of its own model family marketed under the Qwen brand. Those outlays have started generating returns inside the cloud unit, where demand from Chinese enterprise customers chasing AI capabilities has driven accelerating revenue growth.

Cloud has therefore emerged as the clearest vindication of management’s capital allocation strategy, even as other divisions absorb the cost of the same spending cycle.

Quick Commerce Fuels a New Battlefront

Alongside AI, Alibaba has been building out a rapid-delivery shopping service designed to put goods in customers’ hands in under an hour. Revenue from that segment surged 57% year-on-year in the March quarter, suggesting the investment is attracting users.

The fast-delivery arena has nonetheless become intensely competitive across China’s largest internet platforms. Rivals have made similar commitments, meaning Alibaba must sustain spending simply to hold position. That dynamic has made it harder for investors to judge when, or whether, the unit will contribute meaningfully to the bottom line rather than drain it.

Background: A Familiar Tension for Chinese Tech

Alibaba has navigated a turbulent few years marked by regulatory scrutiny from Beijing, a broad restructuring of its business units, and pressure to demonstrate growth amid a softer domestic consumer environment. The company has leaned into AI as its primary growth narrative, a posture shared by peers including Tencent and Baidu. Heavy investment phases have historically depressed near-term margins at Chinese internet companies before eventually yielding scale benefits.

Whether Alibaba reaches that inflection point quickly enough to satisfy shareholders remains the central question heading into the next reporting cycle.

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