Alibaba cloud revenue rises 45% as AI business expands
Key Facts
Revenue from Alibaba's Cloud Services and AI Computing segment rose 45% year-on-year to 48,437 million yuan in the quarter ended June 30, 2026, according to the group's filing. The company announced the results on August 20, 2026, in its earnings release for the fiscal period ended in June. The segment's growth coincided with a 9% increase in total group revenue from the same period a year earlier to more than $39.6 billion, according to Alibaba's statement. The cloud and computing business thus grew faster than overall group revenue during the period. But the group's quarterly profit fell 75% year-on-year, according to the Associated Press, despite growth in its cloud and AI businesses.
Within the cloud segment, adjusted earnings before interest, taxes and amortization rose 133% year-on-year to 5,628 million yuan, according to the filing with the U.S. Securities and Exchange Commission. Growth in this profitability measure outpaced the segment's revenue growth in the same quarter. Chief Executive Eddie Wu said in remarks on the results published on Alibaba Cloud's website that the adjusted earnings margin reached 11.6%. The segment's organizational structure combines the Cloud Intelligence Group with the company's chip design unit, according to the official filing. Together, the two businesses formed the Cloud Services and AI Computing segment, whose financial results the company reports under the reorganization.
Within the cloud business mix, AI-related products increased their share to 35% of revenue from external customers in the June quarter, according to Wu's remarks. These products accounted for 30% of external cloud revenue in the previous quarter ended in March, according to the group's announcement for that period. Annualized revenue from AI-related products exceeded 49.5 billion yuan, according to Wu, a measure separate from total revenue generated during the quarter. The chief executive attributed the broadening growth to demand for computing and storage services, as well as models offered as a service and AI applications. The demand drivers he named thus included computing capacity and services enabling the use of models and applications. Against this backdrop, cloud revenue from external customers had grown 40% year-on-year in the quarter ended in March, according to the previous period's results.
The expansion of these businesses was accompanied by a 75% year-on-year increase in capital expenditure to 67.7 billion yuan in the quarter ended in June, according to the Associated Press. That expenditure includes investment in AI infrastructure as part of the group's capital spending. Reasons for the increase included expanding central processing capacity in preparation for the adoption of AI agents, according to the news agency. It also cited higher chip component prices and fluctuations in procurement cycles among the factors driving spending higher. Alibaba had announced in February 2025 a plan to invest at least 380 billion yuan over 3 years to develop cloud computing and AI infrastructure, placing the quarterly spending in the context of the investment expansion the group had previously announced.
During the earnings announcement session on August 20, 2026, Alibaba shares fell about 4% in early U.S. trading, according to Investing.com's coverage published that day. Wu said the company's integrated AI strategy had put Alibaba "in a superior position to capture the substantial growth in demand." He linked this assessment to demand opportunities in AI and computing capacity in his presentation of the group's strategy. Looking ahead to coming quarters, the chief executive said in remarks accompanying the June-quarter results that he expected AI and cloud revenue growth to accelerate further. He added that this expected acceleration would coincide with continued improvement in profitability.