Detailed narrative
AI + Cloud commercialization inflection
Management declared an inflection point where AI has moved beyond the investment phase into commercialization at scale. Cloud Intelligence Group external revenue growth accelerated to 40%, with AI-related product revenue at ~RMB 35.8-36B annualized run-rate (RMB 9B in the quarter, USD 5.3B), now 30% of cloud external revenue and delivering triple-digit growth for the 11th consecutive quarter.
Management expects AI product revenue to exceed 50% of cloud external revenue within about a year and cloud external growth to accelerate further. The shift from chatbots to autonomous AI agents is driving demand across training, inference and agent orchestration workloads.
Model and application services (MaaS) as a new engine
Model and application services ARR, inclusive of the Bailian Model Studio platform, is guided to surpass RMB 10 billion in the June quarter and RMB 30 billion by year-end, up from over RMB 8 billion currently and more than 10x growth since Nov/Dec 2025.
Revenue comprises API calls on the Bailian/Model Studio MaaS platform plus AI software subscriptions, with most currently from proprietary models (Qwen, Tmall, voice/video generation). Management stresses MaaS inherently carries higher gross margin than IaaS, and rising per-token prices are being accepted as agents solve more complex tasks; supply cannot keep up with demand, with customers still waiting for access.
AI infrastructure and T-Head chips as a moat
Alibaba positions its full technology stack as a durable moat, with T-Head proprietary GPU chips achieving scaled MaaS production and over 60% of that compute capacity already serving external customers across internet, financial services and autonomous driving. It claims to be the only AI cloud provider in China delivering self-developed AI chips at scale, securing compute supply-chain autonomy.
Server deployment cost has more than doubled year-over-year amid compute scarcity, giving pricing power, while T-Head deployment (still a low ratio today due to China capacity constraints) is expected to contribute significantly to gross-margin expansion.
Consumption business — CMR rebound and quick commerce
China E-commerce Group revenue rose 6% to RMB 122B. CMR grew 8% YoY on a like-for-like basis (reported +1% after reclassifying merchant subsidies from S&M expense to contra-revenue). Quick commerce revenue jumped 57% to RMB 20B, with order volume 2.7x the prior-year quarter (non-food 3x) while improving UE and AOV QoQ via order-mix optimization; UE is guided positive by end of FY27.
Quick commerce is generating synergies with core commerce — driving customer acquisition, engagement, and accelerated growth in Freshippo and Tmall Supermarket, especially food, fresh produce and healthcare.
Financial results and heavy reinvestment
Total revenue was RMB 243.4B (+11% like-for-like ex Sun Art and Intime). Total adjusted EBITA fell 84% on strategic investments in technology, quick commerce and user experience. GAAP net income rose 96% to RMB 23.5B, mainly on mark-to-market gains and the absence of prior-year disposal losses.
Operating cash flow was an inflow of RMB 9.4B while free cash flow was an outflow of RMB 17.3B, reflecting AI reinvestment. Net cash was ~USD 38B (~USD 59B excluding debt maturing beyond 5 years, stated as USD 58B elsewhere in Q&A).
Capital investment framework and ROI
Management defended aggressive AI spending using a 'two factories' analogy — an AI training factory and an inference factory powered by AI data centers — arguing the ROI path is clear via 2B monetization (IaaS, MaaS, AI-native apps) and, later, 2C.
It stated 'there isn't a single card idle,' sees a critical 2-3 year window, and intends to remain equally resolute over the next two years. Compute demand is framed as needing ~10x the 2022 infrastructure by 2033, with the prior RMB 380B CapEx figure likely to be overshot, supplemented by OpEx-acquired compute and T-Head-based server sales/co-builds.
Segment and other-business dynamics
All others segment revenue declined 21% to RMB 65.5B, mainly from the Sun Art and Intime disposals and lower Cainiao revenue, partly offset by Freshippo and Amap growth; its adjusted EBITA loss was RMB 21.2B on increased investment in foundation models and the consumer Qwen app.
AIDC revenue grew 6% with its EBITA loss narrowing significantly toward breakeven on logistics optimization and efficiency, and AliExpress Choice UE improving sequentially. Cloud EBITA margin held stable at 9.1%.