Alibaba Cloud surges in Q1, AI lab efforts losing money

Alibaba's cloud computing business delivered revenue growth for external customers of 45% in its fiscal first quarter and provided more detail about its cloud, chip design and foundational model efforts.

The company revamped its reporting for the quarter ended June 30 to offer more detail on its AI efforts. Alibaba reports results for its cloud unit, which now includes its T-Head chip design business. Alibaba Cloud and T-Head are now under AI Cloud and Compute Services.

AI model labs including Qwen Consumer Business Group and Qwen Work are now in AI Labs and Applications. The e-commerce business Alibaba is known for also has more granular reporting.

Here's the breakdown of AI results for Alibaba for the first quarter.

Alibaba AI Cloud and Compute Services delivered revenue of $7.14 billion, up 45% from a year ago, with EBITA of $830 million.

• Demand was driven by AI-related products and total AI revenue was $1.82 billion.
• Alibaba said T-Head is a stack of proprietary chips across GPU, CPU, storage and networking and is used broadly across the company.
• The Zhenwu chip, including the latest Zhenwu M890 AI processor, has more than 650 external customers.
• Alibaba Cloud has a 38% market share in China.

AI Labs and Applications delivered revenue of $492 million with an EBITA loss of $2.04 billion.

• The company touted Qwen3.8-Max and said QwenWork is gaining traction due to its integration with Alibaba Cloud and DingTalk.
• Qwen App has more than 250 million users for AI shopping. Qwen App is integrated with Alibaba's e-commerce properties.

Also see:

• Hugging Face: Qwen is the foundation for customization
• Alibaba releases Qwen 3.8-Max
• Constellation ShortList™ Frontier Large Language Models

CEO Eddie Wu said in a statement that the company is in "a superior position to capture the substantial growth of demand for artificial intelligence and AI compute" and is just beginning to monetize.

Not surprisingly, Alibaba's AI efforts are driving more capital expenditures. The company said first quarter capex was nearly $10 billion, up 75% from a year ago. "The significant year-over-year increase was due to several reasons, including fluctuations in procurement cycles, increase in CPU-compute capacity driven by anticipated growing customer adoption of AI agents, and higher pricing of a broad range of chip components," according to Alibaba.

Overall, Alibaba reported first quarter net income of $1.55 million on revenue of $39.64 billion, up 9% from a year ago. Non-GAAP earnings per American depository receipt was $1.26 per ADS and missed estimates by a wide margin.