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Alibaba First-Quarter Earnings Fall Short Amid AI Infrastructure Investment

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Alibaba First-Quarter Earnings Fall Short Amid AI Infrastructure Investment

Alibaba's (BABA) fiscal first-quarter earnings missed expectations even as revenue edged past Wall Street's views, while the Chinese e-commerce giant continued to spend heavily to build artificial intelligence infrastructure.

The company reported non-GAAP earnings per American depositary share of 8.52 Chinese renminbi ($1.27) for the June quarter, compared with 14.75 renminbi a year earlier. That's weaker than the FactSet-polled consensus of 10.14 renminbi. Revenue grew 9% to 268.95 billion renminbi, while analysts expected 268.48 billion renminbi.

Capital expenditures surged 75% to 67.68 billion renminbi, partly reflecting higher prices of chip components, the company said.

"The significant year-over-year increase was due to several reasons, including fluctuations in procurement cycles, increase in (central processing unit) compute capacity driven by anticipated growing customer adoption of AI agents, and higher pricing of a broad range of chip components," the company said in a statement.

Alibaba's New York Stock Exchange-listed shares were down 1.2% in Thursday trade.

The company booked a cash burn of 44.67 billion renminbi for the quarter, compared with an outflow of 18.82 billion renminbi in the same year-earlier period.

Last month, Amazon.com (AMZN) reported second-quarter results that topped Wall Street's views amid cloud-computing business strength, while the US e-commerce giant lifted its capex guidance.

First-quarter revenue from Alibaba's e-commerce group rose 4% to 205.86 billion renminbi, while AI cloud and computer services revenue surged 45% to 48.44 billion renminbi.

Last month, Morgan Stanley expected Alibaba's first-quarter cloud revenue growth to accelerate to 45% year over year, with momentum seen improving in the coming quarters.

"Compute demand will continue to outstrip supply," Alibaba Chief Executive Eddie Wu said during an earnings call, according to a FactSet transcript. "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."

Price: $126.80, Change: $-2.11, Percent Change: -1.63%

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