Alibaba Group Holding Limited (BABA) is significantly increasing its investments in artificial intelligence (AI), with capital expenditures reaching RMB67.7 billion ($9.4 billion) in the June 2026 quarter, a 75% year-over-year increase. This spending is part of a broader three-year investment plan totaling RMB380 billion, of which RMB190 billion has already been allocated. However, this surge in spending has resulted in a heightened financial burden, with free cash flow experiencing an outflow of RMB44.7 billion, a steep decline from RMB18.8 billion a year prior.
Despite financial pressure, early revenue from AI initiatives is rising, as AI Cloud and Compute Services revenues grew 45% to RMB48.4 billion. Alibaba’s adjusted EBITA rose 133% to RMB5.6 billion, signaling promising early returns. The company anticipates that AI-related capital expenditures will become profitable within three years as they develop proprietary chips and higher-margin AI services.
In comparison, major players like Microsoft (MSFT) and Alphabet (GOOGL) are also ramping up AI infrastructure investments, with Microsoft reporting fourth-quarter CapEx of $41 billion and Alphabet reporting $44.9 billion in the second quarter of 2026. Both companies anticipate substantial spending in the coming years to meet rising demand for cloud and AI services.
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