Alibaba Reports Earnings Miss Amid Aggressive AI Spending

Alibaba Group reported a substantial earnings miss for the first quarter of fiscal 2027, with adjusted diluted earnings per share of $1.26 falling far below the $10.72 expectation. The financial shortfall was driven primarily by a 75% year-over-year increase in capital expenditures as the company aggressively builds out AI infrastructure. This spending caused free cash flow to swing to negative RMB 44.67 billion.

Other factors contributing to the compressed GAAP net income included a fine from the European Commission and goodwill impairment. Despite the overall earnings miss, the company's AI Cloud and Compute Services segment grew external revenue by 45% year-over-year. AI-related product revenue has now maintained triple-digit growth for twelve consecutive quarters.

CEO Eddie Wu stated that the company's full-stack AI strategy positions Alibaba to capture increasing demand for AI compute. Management indicated that high spending levels will persist to support this growth. During the quarter, the company repurchased approximately 1.7 million American Depositary Shares.