Alibaba Cloud plans to rely more on its subsidiary T-Head, which produces artificial intelligence accelerators. Report Data center updates. During the company’s recent second-quarter 2026 earnings call, CEO Eddie Wu said the company remains confident in the prospects of its artificial intelligence and cloud divisions.
Wu said revenue and gross margins will improve as the company ramps up its efforts to deploy its proprietary artificial intelligence chips in data centers. Such wafers will account for an increasing share of the total number of accelerators in use; they will become a replacement for products purchased from third-party companies.
At the beginning of the year, T-Head launched an accelerator Zhenwu 810E For training artificial intelligence models and inference. In March, Alibaba announced that it would ship 470,000 chips. make outThey are still inferior to NVIDIA and AMD solutions, and in May Appeared Data shows that Alibaba Cloud will require more than 10 times the computing power by 2022, so it is necessary for the company to reserve its own accelerator.
At the same time, Wu’s assurances in the report are indeed necessary because the company’s net profit fell 75% this quarter as Alibaba ramps up capital expenditures on artificial intelligence. Operating profit (margin) was 6%, down significantly from 14% in the same period last year. Capital expenditures for the quarter were $10.07 billion, an increase of 75% year-over-year, primarily due to increased spending on artificial intelligence infrastructure to meet growing customer demand.
Other reasons include changes in procurement cycles, growth in CPU-based computing power and expectations for increased demand for artificial intelligence agents, as well as rising prices for various semiconductor components. A sharp increase in capital spending this quarter has raised questions about Alibaba’s previously announced spending of $53 billion over three years. Wu said don’t expect costs to grow linearly.
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The company’s CEO also said that Alibaba currently has the largest data center network among Asian cloud providers and regularly puts new sites into operation. In recent months, new data centers have been opened in South Korea, Japan, France and Malaysia.
Despite the Chinese tech giant’s growing spending, Alibaba noted that revenue from artificial intelligence and cloud products reached $7.139 billion, up 45% from $6.19 billion in the previous quarter. Artificial intelligence-related products brought the company $1.82 billion in revenue, with revenue growing by triple digits (in percentage terms) for the third consecutive year.
Analysts were informed that the company is confident it can generate $15 billion in revenue from external cloud services by 2030 and achieve a gross profit margin of 20%. At the current profit margin level, Alibaba intends to recoup its investment in artificial intelligence infrastructure within three years. As profit margins increase, it is expected to shorten the investment payback period to 2.5 years.
In addition, adjusted EBITDA was US$5.77 billion, down 14% year-on-year. Alibaba stock price last week Open It announced that it would issue an additional US$10.2 billion in shares in Hong Kong and invest the proceeds in AI. The stock price rose by 10%.
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