On August 20, Alibaba declined 4.55% in regular trading, trading at $123.38/share, with turnover of $498 million. The sell-off followed the release of its FY2027 Q1 earnings report before market open.

Alibaba reported revenue of RMB 268.95 billion, up 9% year-over-year, slightly above consensus estimates. However, adjusted net income came in at RMB 20.72 billion, falling 38% YoY and significantly missing the market expectation of RMB 25.58 billion. Net profit plunged 75% YoY to RMB 10.44 billion, while operating profit dropped 57%.

The profit shortfall stemmed primarily from aggressive AI infrastructure spending. Capital expenditure surged 75% to RMB 67.68 billion, driving free cash flow to a net outflow of RMB 44.67 billion. Cloud revenue grew 45% to RMB 48.44 billion, a 22-quarter high, with AI-related product revenue reaching RMB 12.38 billion for the 12th consecutive quarter of triple-digit growth. Management stated AI capex could break even within three years and guided for further acceleration in AI and cloud revenue growth in coming quarters.

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