Alibaba reports a 22-quarter high in AI cloud growth

Alibaba reported that revenue from its AI Cloud and Compute Services segment rose 45% year on year to roughly $7.1 billion in the quarter ended 30 June 2026 — the company’s first fiscal quarter of its 2027 financial year — which it and analysts covering the results described as a 22-quarter high for that growth rate. Alibaba said AI-related product revenue reached $1.8 billion, marking a twelfth consecutive quarter of triple-digit year-on-year growth for that narrower category.

The growth came alongside a sharp rise in spending: quarterly capital expenditure climbed about 75% year on year to nearly $10 billion, which Alibaba attributed to building out AI infrastructure to meet customer demand. That spending pushed free cash flow into negative territory for the quarter, a trade-off the company presented as deliberate — investing ahead of confirmed demand rather than in response to a backlog it could not otherwise fill.

Alibaba’s results also noted, in passing, that its open-sourced Qwen model family had by then been downloaded more than three billion times globally with more than 300,000 derivative models built on top of it — a figure that drew wider coverage in its own right days earlier when a Hugging Face report placed Qwen’s download count well ahead of Meta’s and Google’s open releases.

The quarter fit a pattern common to the major cloud providers through 2026: heavy, front-loaded capital spending on AI infrastructure justified by cloud revenue growth that had accelerated rather than plateaued, with Alibaba’s management using the earnings call to reiterate longer-term external cloud revenue targets rather than signal any near-term pullback in spending.