Alibaba's AI Cloud and Compute Services Division Reports 45% Revenue Growth in June Quarter
Alibaba Group Holding reported a significant 45% revenue growth in its cloud and artificial intelligence division in the June quarter, leading to an adjusted profit of 27.3 billion yuan. The AI Cloud and Compute Services segment, which includes the cloud business and T-Head chip arm, achieved a revenue of 48.4 billion yuan, marking its fastest growth pace in 22 quarters. The AI-related product revenue within this segment continued its triple-digit growth trend, reaching 12.4 billion yuan.
The company's total revenue for the quarter increased by 9% year on year to 269 billion yuan, surpassing the Bloomberg consensus estimate. Adjusted Ebitda dropped by 30% to 27.3 billion yuan, while capital expenditure surged by 75% to 67.7 billion yuan. The increased investment in cloud infrastructure led to a more than doubled free cash outflow of 44.7 billion yuan.
Alibaba's New York-listed shares declined by 4% in pre-market trading after the earnings announcement, while its Hong Kong-listed shares rose by 1.6%. The company's strategy of developing full-stack AI capabilities, from chips to applications, aims to solidify its position as a market leader amidst fierce competition.
During the June quarter, Alibaba restructured its reporting segments to better integrate its commerce and AI businesses. It now operates under four main units: Alibaba E-commerce Group, AI Cloud and Compute Services, AI Labs and Applications, and Others. The AI Labs and Applications division saw a 16% year-on-year revenue increase.
Alibaba's CEO, Eddie Wu Yongming, highlighted the company's strong quarter driven by the commercialization of its full-stack AI capabilities. The full-stack strategy positions Alibaba well to meet the growing demand for artificial intelligence and AI compute.