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Alibaba said compute demand continues to outstrip supply and expects AI and cloud revenue growth to accelerate further as it ramps capacity.
In sum – what to know:
AI drives cloud growth – Alibaba Cloud external revenue rose 45%, while AI-related products reached a CNY 49.5 billion annual revenue run rate.
Infrastructure spending surges – Capex reached CNY 67.7 billion as Alibaba expands compute capacity, accelerates data center delivery, and ramps its Zhenwu AI chips.
AI push tests investors – Alibaba is raising $10.2 billion through a discounted share sale to fund AI infrastructure, chips and models, adding dilution and execution concerns.
Chinese company Alibaba is turning AI from a strategic bet into a rapidly scaling business, with cloud growth accelerating, AI revenue surging, and infrastructure spending reaching new levels.
Alibaba Cloud’s external revenue grew 45% year-on-year in the June quarter, its fastest growth in 22 quarters, while AI-related products generated CNY 12.4 billion ($1.84 billion) of quarterly revenue and reached a CNY 49.5 billion annual run rate. AI-related revenue accounted for 35% of external cloud revenue and has grown at triple-digit rates for 12 consecutive quarters.
Alibaba’s quarterly capital expenditure reached CNY 67.7 billion, which the company attributed partly to investment in cloud infrastructure and higher compute capacity to support anticipated demand from AI agents.
Alibaba said compute demand continues to outstrip supply and expects AI and cloud revenue growth to accelerate further as it ramps capacity. The company has also cut delivery time for hyperscale AI data centers to 100 days and expects supply of its Zhenwu M890 AI processor to increase in the second half of the year.
The company is also building out the rest of the AI stack. Its model and application services, including MaaS, have surpassed CNY 16 billion in annual recurring revenue, while its Qwen models have been downloaded more than 3 billion times globally, according to management.
Group revenue increased 9% to CNY 269 billion, while adjusted EBITDA fell 30% to CNY 27.3 billion, primarily because of technology investment.
“AI has become Alibaba’s most certain growth engine,” CEO Eddie Wu said in a conference call with investors, adding that the company intends to remain strategically disciplined while investing in its full-stack AI capabilities.
During the call, CFO Toby Xu said Alibaba’s servers equipped with its chips typically reach breakeven within three years and are expected to generate positive free cash flow during the remaining useful life.
The earnings come as Alibaba raises additional capital for its AI expansion. Reuters reported that the company launched an HK$80 billion ($10.2 billion) share sale at HK$112.70 per share, an 8.4% discount to the previous close, to fund chips, AI infrastructure and models.
The offering attracted roughly $28 billion in orders, according to sources cited by Reuters, including about $6 billion from long-only and sovereign investors. Around 40% of the book was expected to go to such investors, with Qatar Investment Authority, Norway’s Norges fund,and Hillhouse among investors identified by one source.
In September 2025, Alibaba Cloud had outlined new international expansion plans, announcing its first data centers in Brazil, France, and the Netherlands, with further facilities planned in Mexico, Japan, South Korea, Malaysia, and Dubai during 2026.
The company had previously reaffirmed its plan to spend $53 billion on cloud and AI over the next three years.
