GoKawiilAlibaba on Wednesday said its core profitability plunged in the March quarter amid heavy investments in tech and e-commerce, as executives talked up the company's AI spending.
Executives at the technology giants spent the earnings call defending the company's investments, telling analysts that they will eventually pay off.
"We see the ROI (return on investment) on this investment in the next 3-to-5 years as being extremely clear," Wu said on the earnings call on Wednesday.
The Chinese tech giant said its adjusted earnings before interest, taxes, and amortization (EBITA), a measure of the company's underlying profitability, came in at 5.1 billion Chinese yuan ($750.9 million), an 84% year-on-year drop.
This financial metric strips out one-time gains or losses to focus on a company's core business.
Alibaba's U.S.-listed shares were initially higher in premarket trade before turning negative. The shares fell as much as 4% before paring losses.
Wu said the demand for AI is so strong that the company will have to spend more on compute in the next five years than its previous three-year 380 billion yuan capital expenditure projection.
However, this may not necessarily mean a rise in capex as some of the compute power could be rented as part of Alibaba's operating costs.