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Alibaba reports 75% profit drop as heavy investment in artificial intelligence infrastructure drives spending

China’s technology giant Alibaba reported a 75% drop in profit for the latest quarter, falling to approximately $1.6 billion. The decline was primarily driven by a 75% surge in capital expenditures, as the company invested heavily in artificial intelligence infrastructure to meet growing customer demand. Despite the lower profit, quarterly revenue grew by 9% to nearly $40 billion, with revenue from AI cloud and compute services specifically increasing by 45%. CEO Eddie Wu stated that the company's full-stack AI strategy positions Alibaba to capture substantial growth in demand for artificial intelligence and AI compute. The company is focusing on agentic commerce innovations, integrating AI directly into the retail ecosystem to enhance shopping experiences and merchant operations. Alibaba's flagship Qwen model has already seen 250 million users complete their first AI-driven shopping experience. While the heavy spending on chips and cloud infrastructure weighed on short-term profits, the administration of the company's strategy aims to surpass $100 billion in annual AI and cloud revenue within the next five years.

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