The Hong Kong- and US-listed company, which started out in e-commerce and online retail but is increasingly focused on AI technologies, said that its profit for April-June was at 10.5 billion yuan ($A2.2 billion), down from 43.1 billion yuan the same quarter last year.
Quarterly revenue grew nine per cent to almost 269 billion yuan, with revenue from its AI cloud and compute services up 45 per cent to 48.4 billion yuan.
But capital expenditures, including investments in AI infrastructure to meet customer demand, jumped 75 per cent to 67.7 billion yuan during the quarter, weighing on profits.
Alibaba attributed the significant increase in spending to factors including "fluctuations" in procurement cycles, increase in CPU (central processing unit), compute capacity in anticipation of growing customer adoption of AI "agents" and higher pricing of chip components.
"As we continue to ramp up our supply, our AI and Cloud revenue growth will accelerate further in the coming quarters, alongside continued improvement in profitability," Alibaba CEO Eddie Wu said in prepared remarks during an earnings conference.
Alibaba's US-traded shares fell more than three per cent on Thursday.
Alibaba, one of China's biggest companies, said last year it planned to invest at least 380 billion yuan over three years in cloud computing and AI infrastructure.
It has been making advances with its flagship Qwen AI and has launched "agentic" AI services for commercial customers.
In July, it previewed its Qwen3.8-Max AI model which the company said was "second only" to Anthropic's Claude Fable 5.
It has also pledged an ambitious goal of surpassing $US100 billion ($A140 billion) in terms of annual AI and cloud revenue within the next five years.
