Alibaba swings to operating loss as AI spending eclipses revenue growth

Alibaba Group Holding (NYSE:BABA) reported a complex set of financial results for the quarter and fiscal year ended March 31, 2026, revealing a company in the midst of an expensive strategic pivot.

While the group maintained top-line growth, its aggressive push into generative artificial intelligence and cloud infrastructure led to a sharp contraction in core profitability.

Revenue for the quarter reached RMB 243,380 million (US$35,283 million), a 3% increase year-over-year.

However, the company noted that when excluding the impact of its disposed Sun Art and Intime businesses, revenue growth on a like-for-like basis was a more robust 11%.

The transition from a high-margin e-commerce leader to a tech-first powerhouse has come at a significant cost to the bottom line.

Alibaba reported a loss from operations of RMB848 million, a stark reversal from the RMB28,465 million income recorded in the same period last year.

This downturn was largely driven by an 84% plunge in adjusted EBITA, which fell to RMB5,102 million.

Management attributed this squeeze to massive capital allocation toward its technology businesses, quick commerce initiatives, and user experience enhancements, though some of these costs were offset by continued efficiency gains in the Cloud business.

Cash flow metrics further underscored the scale of Alibaba’s current spending cycle.

The company reported a free cash flow outflow of RMB 17,300 million, compared to an inflow of nearly RMB 3,743 million a year earlier.

This liquidity drain was primarily linked to the rapid expansion of cloud infrastructure and the heavy costs associated with acquiring users for its Qwen AI application.

Despite the quarterly cash burn, Alibaba maintains one of the most formidable balance sheets in the global tech sector, ending the fiscal year with RMB 520,824 million (US$75,504 million) in cash and liquid investments.

A technical paradox appeared in the net income figures, which rose 96% to RMB23,502 million.

However, this jump was almost entirely fueled by mark-to-market gains on equity investments and the absence of disposal losses from the previous year rather than operational strength.

On a non-GAAP basis, which strips out these volatile accounting items, net income collapsed to RMB86 million, representing a near 100% decline from the prior year’s RMB29,847 million.

For the full fiscal year 2026, Alibaba’s total revenue surpassed the trillion-yuan milestone, landing at RMB1,023,670 million, up 3% from the previous year.