Alibaba Net Income Plunges 75% as AI Capex Surges 75% to $10B; Cloud/AI Revenue Grows 45%

Alibaba reported fiscal Q1 2027 (June quarter) results before the US market open on August 20: revenue rose 9% year-on-year to 268.95 billion yuan ($39.64 billion), narrowly beating the $38.63 billion analyst estimate, while net income dropped 75-76% year-on-year to 10.54 billion yuan ($1.55 billion) and adjusted earnings per ADS fell 42% to $1.26, missing the $1.85 consensus, Bloomberg, CNBC, and Reuters-sourced coverage reported. Capital expenditure hit 67.68 billion yuan ($9.98 billion), up 75% year-on-year, and free cash flow swung to a $6.6 billion outflow as the company poured money into AI infrastructure, chips, and data centers. Alibaba Cloud's AI Cloud and Compute Services revenue rose 45% year-on-year to 48.44 billion yuan ($7.14 billion), with AI-related product revenue of 12.38 billion yuan ($1.82 billion) extending a streak of triple-digit year-on-year growth to a 12th consecutive quarter; China Quick Commerce revenue surged 45% to 53.30 billion yuan while China e-commerce revenue fell 8% to 110.90 billion yuan. US shares fell about 4-5% in premarket trading despite the cloud/AI growth, as investors focused on the profit collapse. CEO Eddie Wu said the company would 'prioritize AI growth over short-term bottom-line considerations,' with analysts describing an industry-wide 'prisoner's dilemma' in which no major cloud provider can afford to underspend on AI relative to rivals including AWS, Microsoft Azure, and Google Cloud.