Alibaba to raise AI spending as cloud revenue surges 38%

Alibaba is betting that the fastest way to win the AI race is to spend more, not less. The company said it will exceed the 380 billion yuan it had planned to invest over three years, even as it posted mixed March-quarter results that showed strong demand for cloud and AI tools but sharp pressure on profit.

For the quarter ended March 31, 2026, Alibaba reported revenue of RMB243.38 billion, up 3% from a year earlier and below the 247.22 billion yuan estimate that analysts had expected. Adjusted EBITA fell 84% year over year to RMB5.102 billion, underscoring how heavily AI, cloud infrastructure and quick commerce are weighing on the bottom line. U.S.-listed shares rose about 7% after the update, a sign that investors are looking past the near-term hit and toward the longer payback.

The clearest growth signal came from Cloud Intelligence Group, where revenue climbed 38% to 41.63 billion yuan. Alibaba said AI-related products accounted for 30% of external customer revenue in the division, and that AI-related product revenue has now grown at triple-digit rates for 11 consecutive quarters. Eddie Wu said the company’s “full-stack AI investments” had moved “from incubation to commercialization at scale,” and he said AI-related revenue is expected to become the primary growth engine in cloud and top half of cloud revenue in about a year.

That message puts Alibaba squarely in the middle of a broader technology contest that reaches beyond China. The company is signaling that compute, cloud capacity and model development are strategic assets, not just operating expenses, and that it will keep spending to defend market share. Wu said the company aims to grow faster than the market average to cement leadership, and he said margin remains secondary to growth. Toby Xu said Alibaba will continue investing in AI plus cloud to strengthen competitive advantages.

The company is also leaning on quick commerce to fuel demand, even as it hurts profitability. Revenue from that unit rose 57% year over year in the March quarter. Alibaba said current investments could lift cloud margins in the next one to two quarters, but it did not announce a new spending target to replace its earlier plan. For investors tracking the AI boom in China, the message was blunt: Alibaba believes the payoff is visible enough to justify even larger bets.