Alibaba’s core profit plunges even as AI and cloud growth accelerate

Alibaba’s It said on Wednesday that its core profitability fell in the March quarter due to heavy investments in technology and e-commerce.

The Chinese tech giant said its adjusted earnings before interest, taxes and depreciation (EBITA), a measure of the company’s underlying profitability, was 5.1 billion Chinese yuan ($750.9 million).

This financial metric eliminates one-time gains or losses to focus on a company’s core business.

Alibaba’s US-listed shares were initially higher in pre-market trading before turning negative. They were last traded down 3.4%.

The technology giant is investing heavily in semiconductors for artificial intelligence, data centers and the development of its own model family under the Qwen brand. This has paid off in the cloud computing segment.

While the cloud has been a bright spot for Alibaba, driven by artificial intelligence demand in China, investors are grappling with the company’s continued investments in so-called flash or instant trading. It’s a shopping service that allows users to get a good experience with super-fast delivery speeds of under an hour, and has become something of a battleground for China’s e-commerce giants.

Adjusted EBITDA for Alibaba’s China e-commerce group fell 40% year-on-year in the March quarter thanks to these investments, even as its biggest contributor, customer management revenue, rose 1%.

But Alibaba is seeing strong growth from these investments, with flash trading revenue rising 57% annually.

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