Alibaba stock was flipping between small gains and losses in the U.S. premarket after the Chinese internet company's earnings fell short of expectations even as its artificial-intelligence revenue soared.

Alibaba reported a net profit of 10.54 billion yuan ($1.57 billion) for its fiscal first quarter, down 76% from the same period a year earlier. Revenue rose 9% to 268.95 billion yuan.

Analysts had expected a net profit of 21.8 billion yuan on revenue of 266.78 billion yuan, according to a FactSet poll of analysts' estimates.

American depositary receipts of Alibaba were fluctuating between small gains and losses in the premarket. The ADRs have fallen 12% this year so far as of Wednesday's close.

As with its previous earnings, Alibaba attributed a sharp drop in earnings to investments in its technology but highlighted its fast-growing cloud-computing revenue, driven by AI demand.

"We delivered a strong quarter, driven by the improving commercialization of our full-stack AI capabilities," said CEO Eddie Wu in a statement. "Alibaba Cloud's external revenue growth accelerated to 45%, with AI-related product revenue delivering triple-digit growth for the twelfth consecutive quarter."

Alibaba has been investing heavily in AI and recently bolstered its war chest by agreeing to sell videogames business Lingxi Games to Asian private-equity firm Trustar Capital for at least $1.5 billion. However, its American depositary receipts and Hong Kong-listed stock have both fallen around 13% this year so far.

Much like in the U.S., the major stock gains in Chinese AI have been reserved for hardware companies rather than model developers. For example, memory-chip maker CXMT listed in July and less than a month later became China's largest onshore-listed company.

In order to convince shareholders that it belongs in the AI winners' circle, Alibaba will likely have to keep showing significant acceleration in cloud-computing growth, while reducing its quick-commerce losses.