Alibaba Group reported lower-than-expected earnings in Q2 of fiscal 2026 due to heavy AI spending. With a 71% decline in non-GAAP diluted earnings and a 78% drop in adjusted EBITDA, the company’s capital expenditure surged 80%, leading to a negative free cash flow of RMB 21.8 billion.

Alibaba’s commitment to RMB 380 billion in AI and cloud investment over three years is part of a wider trend among tech giants. Amazon anticipates $200 billion in capex for 2026, while Alphabet plans $175-$185 billion. Unlike Alibaba, Microsoft and Google balance spending with strong profitability.

Alibaba’s stock has risen 29.5% in the past six months, outperforming the industry and sector. Trading at a forward 12-month price/sales ratio of 2.42X, the company has a Value Score of F. The Zacks Consensus Estimate predicts a 33.85% decline in fiscal 2026 earnings.

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Read more at Nasdaq.: Will Heavy Capex Spending Weigh on Alibaba’s AI Ambitions?