Alibaba Burned RMB 44.73 Billion in Free Cash Flow Last Quarter. The Numbers Tell a Messier Story.

Alibaba's Cloud and AI segment grew revenue 45% year over year last quarter, a 22-quarter high, with AI product revenue on a $7.3 billion annualized run rate after 12 straight quarters of triple-digit growth.

Alibaba's group-wide EBITDA margin was 11.93% last quarter, down from 17.24% a year earlier and roughly half the 20%-plus margins the company posted through early last fiscal year.

Free cash flow was negative RMB 44.73 billion last quarter, worse than the RMB 18 billion outflow a year ago, even as capital spending hit RMB 67.7 billion.

Management says AI infrastructure now pays back in about three years, shrinking toward 2.5, a claim the consolidated numbers have not yet confirmed.

Alibaba's Cloud Business Is Growing Faster Than It Has in Years

On the Q1 2027 earnings call, Alibaba (BABA) reported Cloud external revenue growth accelerating to 45%, a 22-quarter high, with segment adjusted EBITDA margin reaching roughly 12%. AI-related products generated RMB 12.4 billion in revenue, an annualized run rate of RMB 49.5 billion, or about $7.3 billion, marking a 12th straight quarter of triple-digit growth. Management pointed to proprietary T-Head chips now deployed across more than 650 customers, and to Model-as-a-Service revenue already past RMB 16 billion annualized, targeting RMB 30 billion by year end. Executives reiterated a goal of $100 billion in external cloud revenue by 2030. On Cloud's own numbers, the AI investment cycle looks like it is starting to pay off.

BABA Stock's Group Margins Tell a Different Story

That segment story does not show up yet at the consolidated level. Alibaba's group EBITDA margin has been roughly cut in half over the past year, falling from 20% to 21% in the quarters spanning late 2024 through early 2025 to a range of 7% to 12% in every quarter since, including 11.93% last quarter versus 17.24% a year earlier. The gap traces to where the AI spending lands.

Alibaba's AI Labs and Applications segment, home to the Qwen consumer app, posted an adjusted EBITDA loss of RMB 13.9 billion on inference costs and marketing, even as the loss narrowed sequentially. E-commerce Group EBITDA held roughly flat at RMB 39.7 billion despite heavier quick commerce investment, and GAAP net income fell 75% to RMB 10.4 billion, partly on lower equity-investment gains. Cloud is genuinely improving. The rest of the group is absorbing the cost of getting it there.

The Cash Flow Math Behind Alibaba's AI Spending

Free cash flow has been negative in six of the past eight quarters, swinging from a RMB 39 billion inflow in late 2024 to a RMB 116.65 billion outflow this past March. Last quarter's outflow narrowed sequentially to RMB 44.73 billion, still more than double the RMB 18 billion shortfall a year earlier. Capital expenditure of RMB 67.7 billion drove the gap, part of a three-year, RMB 380 billion infrastructure plan with RMB 190 billion spent so far.