Alibaba shares fell sharply in U.S. premarket trading on Thursday after the Chinese technology giant reported a 75% decline in net income for the June quarter. The decline came as Alibaba increased spending on artificial-intelligence infrastructure, while strong growth in its cloud business highlighted the company's continued investment in AI.
Alibaba's U.S.-listed shares fell about 4% in premarket trading on Thursday after the Chinese technology company reported a 75% decline in net income for the June quarter, according to CNBC.
Capital expenditure rose 75% to 67.7 billion Chinese yuan, reflecting increased investment in computing capacity and other infrastructure needed to support the company's artificial-intelligence operations.
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Alibaba said the increase in capital spending was partly driven by the timing of customer purchases, greater investment in CPU computing capacity and higher prices across a broad range of chip components.
Despite the higher costs, Alibaba's cloud business continued to expand rapidly. Revenue from the company's cloud division reached 48.4 billion yuan, representing a 45% increase from a year earlier.
The cloud business has become an important part of Alibaba's AI strategy as the company seeks to turn growing demand for artificial-intelligence computing into revenue. Cloud providers supply businesses with computing power, storage and other infrastructure required to develop and operate AI applications.
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The latest results highlight the trade-off facing Alibaba as it expands its AI infrastructure. The company is committing significantly more capital to computing capacity at a time when investors are closely watching whether those investments can translate into sustained revenue and profit growth.
Alibaba is among a group of major technology companies increasing spending on AI infrastructure as demand for advanced computing continues to grow. The company's cloud division is expected to play an important role in that strategy, particularly as AI workloads require increasing amounts of computing power.
Alibaba's U.S.-listed shares were last trading 4.11% lower in premarket trading following the results.
Source: CNBC
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