Alibaba Group said Thursday, Aug. 20, 2026, that revenue from its AI Cloud and Compute Services business rose 45% year over year to 48.44 billion yuan ($7.14 billion) in the June quarter. The acceleration came as the Chinese technology company sharply increased infrastructure spending, while group net income fell 75% to 10.44 billion yuan ($1.54 billion).
The contrast places a clear price tag on Alibaba’s bid to turn artificial intelligence into a larger commercial platform. Total company revenue increased 9% to 268.95 billion yuan ($39.64 billion), according to Alibaba’s quarterly results. An Associated Press earnings report independently confirmed the company’s $1.55 billion profit attributable to ordinary shareholders, $39.64 billion in revenue and adjusted earnings of $1.26 per American depositary share.
Cloud growth accelerates
Alibaba reorganized its reporting this quarter, combining its former Cloud Intelligence Group with chip designer T-Head under a new AI Cloud and Compute Services segment. Revenue from both the segment and its external customers grew 45%, up from the 40% external cloud growth Alibaba reported for the March quarter.
AI-related product revenue reached 12.38 billion yuan ($1.82 billion), Alibaba said, marking a 12th consecutive quarter of triple-digit growth. The segment’s adjusted earnings before interest, taxes and amortization rose 133% to 5.63 billion yuan ($830 million), while its adjusted EBITA margin reached 12%.
The company also disclosed wider adoption of its proprietary silicon. Alibaba said more than 650 external customers across over 20 industries are using its Zhenwu processors through Alibaba Cloud services. That figure is company-reported and was not separately verified.
Infrastructure spending weighs on cash flow
Capital expenditures climbed 75% from a year earlier to 67.68 billion yuan ($9.98 billion). Alibaba attributed the increase to AI infrastructure demand, procurement timing, capacity for anticipated use of AI agents and higher prices for a broad range of chip components.
The investment pushed free cash flow to an outflow of 44.67 billion yuan ($6.58 billion), compared with an outflow of 18.82 billion yuan a year earlier. Income from operations fell 57% to 15.16 billion yuan. Alibaba said the decline reflected lower adjusted EBITA, a goodwill impairment and a provision, while net income was also affected by lower gains from investment disposals and mark-to-market changes.
The profit decline therefore does not map entirely to AI spending. Still, the quarter shows that Alibaba is accepting substantial near-term capital and earnings pressure as it builds computing capacity and expands its model, chip and cloud portfolio.
Commerce remains a mixed counterweight
Alibaba’s restructured e-commerce group generated 205.86 billion yuan ($30.34 billion) in revenue, up 4%. China quick-commerce revenue rose 45% to 53.30 billion yuan, driven by Freshippo and Taobao Instant Commerce, but China e-commerce revenue fell 8% and customer-management revenue declined 7%.
For executives evaluating the enterprise AI market, the most useful signal is the combination of faster external cloud sales and improved segment profitability. Alibaba is demonstrating that AI infrastructure demand can produce operating leverage inside the cloud unit even while the broader company absorbs heavier technology investment.
The next questions are whether that 45% growth rate proves durable, whether proprietary chips can reduce capacity constraints, and whether AI monetization can offset pressure in Alibaba’s core commerce operations. The June-quarter results show meaningful commercial traction, but also make clear that scale is being purchased with unusually high capital intensity.