Alibaba's external cloud revenue rose 45% year over year in the June quarter of 2026, its fastest growth in 22 quarters, driven by robust demand for AI infrastructure. AI Cloud and Compute Services revenue grew 45% to RMB48.4 billion ($7.14 billion), with AI-related products reaching RMB12.4 billion, or 35% of external cloud revenue. Adjusted EBITA for the segment jumped 133% to RMB5.63 billion, while Alibaba's in-house T-Head Zhenwu chips now serve more than 650 external customers. Capital expenditures surged 75% to RMB67.7 billion, contributing to a RMB44.7 billion free-cash-flow outflow, and rising chip prices, supply constraints and geopolitical restrictions could complicate expansion. Microsoft's Azure grew 48% in the first quarter of fiscal 2027, while Alphabet's Google Cloud surged 103% to $30.7 billion in the third quarter of 2026.
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