Alibaba Q2 revenue hits $34.6b, EBITA drops 14%

Alibaba Group reported revenue of RMB 247.7 billion (US$34.6 billion) for the second quarter of 2025, up 2% year-on-year.

The Hangzhou-based tech giant said that, excluding revenue from divested businesses Sun Art and Intime, revenue would have risen 10% year-on-year.

Income from operations fell 3% to RMB 35 billion (US$4.9 billion), while adjusted EBITA dropped 14%, partly due to spending on its Taobao Instant Commerce unit.

Net income grew 76% year-on-year to RMB 42.4 billion (US$5.9 billion), driven by gains from equity investments and the sale of Trendyol’s consumer services business.

Non-GAAP net income fell 18% to RMB 33.5 billion (US$4.7 billion).

Operating cash flow dropped 39% to RMB 20.7 billion (US$2.9 billion), and free cash flow turned negative at RMB 18.8 billion (US$2.6 billion), mainly due to increased cloud infrastructure investment and spending on instant commerce.

As of June 30, 2025, Alibaba held RMB 585.7 billion (US$81.8 billion) in cash and liquid investments.

🔗 Source: Alibaba Group

🧠 Food for thought

1️⃣ Heavy AI infrastructure investments are reshaping cash flow patterns across tech giants

Alibaba’s financial results reveal the substantial capital requirements of the AI transition, with free cash flow swinging from a positive RMB 17.4 billion to a negative RMB 18.8 billion primarily due to increased cloud infrastructure expenditures2.

This shift illustrates how AI investments require upfront capital commitments that can temporarily strain even profitable companies’ cash generation.

The company’s RMB 380 billion three-year commitment to AI and cloud infrastructure represents roughly 15% of its current market value, demonstrating the scale of investment required to compete in the AI era3.

Despite these cash flow challenges, Alibaba’s cloud revenue grew 26% with AI-related products achieving triple-digit growth for eight consecutive quarters, suggesting the investments are beginning to generate meaningful returns1.

2️⃣ Chinese tech companies are accelerating domestic AI capabilities amid geopolitical uncertainties

Alibaba’s aggressive AI infrastructure spending comes despite explicit geopolitical risks around U.S. semiconductor export restrictions, signaling how critical domestic AI capabilities have become for Chinese tech leaders3.