Alibaba AI ARR targets 30 billion yuan by year-end, capital expenditure to exceed 380 billion yuan

Alibaba provided more positive guidance on its cloud business during the analyst call for the financial report of the fourth quarter of the fiscal year 2026. The company stated that, supported by long-term demand for AI and full-stack technical capabilities, Alibaba Cloud's external commercial revenue is expected to maintain high-speed growth in the medium to long term, and it will continue to accelerate on the basis of 40% in the next few quarters. Group CEO Wu Yongming said:

 “This means that AI is driving the entire business upgrade of Alibaba Cloud, and the growth momentum has shifted from traditional computing and storage to models, computing power, and Agent services.”

This judgment is based on the business data that has just accelerated. For the quarter ending March 31, 2026, Alibaba Cloud's revenue increased by 38% year-on-year to 41.626 billion yuan; external commercial revenue, excluding Alibaba's consolidation business, increased by 40% year-on-year, setting a new high in recent years.

Alibaba positions AI as the main engine for the growth of future cloud revenue. Wu Yongming estimates that in about a year, AI-related revenue will break through 50%, becoming the main source of cloud revenue growth.In terms of model and application services, Wu Yongming estimates that in the June quarter, the annualized recurring revenue (ARR) of AI models and application services, including the Bai Lian MaaS platform, will exceed 10 billion yuan, and will surpass 30 billion yuan by the end of the year.

In this regard, considering the rapid increase in investment in computational power expansion, the company's capital expenditure will exceed the previously proposed plan of 380 billion yuan. By 2033, the computing power required by Alibaba will reach 10 times that of 2022.

Alibaba stated that the rapid growth of the model services business will improve the gross margin in the next few quarters, and continued investment in cloud infrastructure is also expected to increase the gross margin of related products. Although the current AI supply capacity still struggles to fully meet the demand growth, the company has continuously increased its investment in AI over the past year and will maintain it for the next two years, believing that the return on investment will be very clear in the next 3 to 5 years.

“These high-profit margins of this part of the revenue are gradually highlighting, and will be the pillar of our future healthy and high-quality revenue growth.”

Regarding AI infrastructure, it is reported that PingTouGe's self-developed GPU chips have achieved mass production, with a cumulative mass delivery of 470,000 pieces by February 2026; in Alibaba Cloud's actual business scenarios, more than 60% of PingTouGe chips serve external commercial customers and have already supported AI tasks for more than 400 enterprise customers.