🧠 Food for thought

Implications, context, and why it matters.

Alibaba’s AI push is hurting profits

• AI revenue is rising, yet Alibaba’s spending in the area has cut into profits.
• In the latest quarter, adjusted net income almost vanished. Adjusted EBITA, a profit measure that excludes some costs, fell 84% from a year earlier as AI spending climbed 1.
• The outlay also drove free cash flow to negative US$2.51 billion for the quarter 2.
• Alibaba posted an operating loss of 848 million yuan (US$125 million). A year earlier, it recorded an operating profit of 28.5 billion yuan (US$4.2 billion) while spending far less on AI infrastructure 3.

AI spending is reshaping Chinese ecommerce competition

• Alibaba’s AI plan reaches past cloud computing. It also supports the company’s core ecommerce business, which made up 43% of total revenue in the fiscal year ended March 31, 2025 4.
• Alibaba has fully linked its flagship Qwen AI app, the company’s large language model-based assistant, with Taobao 3. Users can browse items and compare options through natural conversation. They can also place orders and manage deliveries 3.
• That level of spending has become a competitive need.
• PDD Holdings is the parent of discount shopping app Temu. Meituan runs delivery and local services in China. Both have warned that higher investment will weigh on profits as competition grows in instant retail, the rapid delivery of everyday goods 5.