Alibaba breaks out AI revenue for the first time

Alibaba’s first-quarter financial report for its 2027 fiscal year introduced a new reporting structure that splits the company into E-commerce Group, AI Cloud and Computing Power, AI Labs and Applications, and All Other. For the quarter ending June 30, Alibaba reported revenue of 2689.53 billion yuan, up 9% year on year, while net profit attributable to owners of the parent fell 76% year on year to 105.37 billion yuan.

The AI Cloud and Computing Power Services segment recorded revenue of 484.37 billion yuan, a year-on-year increase of 45%, while AI-related products reached 123.76 billion yuan. Adjusted EBITA surged 133% year-on-year to 56.28 billion yuan, and the profit margin rose from 7.2% to 11.6%. The segment is supported by T-Head’s chip work, including Zhenwu M890 serving more than 650 external customers across over 20 industries, and Alibaba Cloud’s 38.1% share of China’s AI cloud market.

AI Labs and Applications moved in the opposite direction. The segment reported revenue of 33.38 billion yuan, up 16%, but adjusted EBITA posted a loss of 138.61 billion yuan, compared with a loss of 32.24 billion yuan a year earlier. Higher AI investment and Qwen App reasoning costs drove the loss as 250 million users experienced AI shopping, while Qwen model downloads exceeded 3 billion times and derivative models surpassed more than 300,000.

Cash flow shows the scale of Alibaba’s AI investment cycle. Net cash flow from operating activities was 229.45 billion yuan, up 11%, but net free cash flow outflow was 446.70 billion yuan as capital expenditure reached 676.78 billion yuan, a year-on-year increase of 75%. The next test is whether cloud AI revenue keeps rising, whether cloud EBITA margin stays above 12%, and when AI Labs losses begin to narrow.