Chinese e-commerce giant Alibaba Group Holding LTD ( BABA ) reported a significant downturn in its cash flow during its second-quarter results, as the company doubled down on strategic bets in AI and “quick commerce.”

Cash Flow Plummets Amid Massive Capex

During the company’s earnings call on Tuesday, Chief Financial Officer Toby Xu attributed the steep decline in its cash flow, at $1.43 billion, down from $3.01 billion a year ago, to its “strategic investments in [the] quick commerce business,” alongside the growing capex to support its “AI+ cloud infrastructure.”

Xu said, “We are reinvesting our free cash flow to create a winning quick commerce business and to be a leader in AI,” while emphasizing the company’s ambitious target of touching $140 billion in gross merchandise value from the segment, within the next three years.

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“We are reinvesting our free cash flow to create a winning quick commerce business and to be a leader in AI,” he said, as the company sets its sights firmly on the horizon, even at the cost of near-term profitability.

The company noted that it is already stacking wins on the AI front, with its new Qwen AI app surging past 10 million downloads in less than a week.

Stock Down Following Mixed Q2 Performance

Alibaba ( BABA ) released its fiscal second-quarter results on Tuesday, reporting $34.81 billion in revenue, up 5% year-over-year, and ahead of consensus estimates at $34.43 billion.

Earnings, however, witnessed a steep 72% year-over-year decline, at $1.45 billion, as the company remains focused on growth at its Taobao Instant Commerce business, alongside the infrastructure build-out for its ambitious artificial intelligence segment.

The company’s shares were down 2.31% on Tuesday, closing at $157.01, and are up 1.27% after hours. In the Hong Kong markets, the stock is down 1.90% on Wednesday.

The stock scores high on Momentum, Growth and Value in Benzinga’s Edge Stock Rankings, with a favorable price trend in the medium and long terms. Click here for deeper insights into the stock, its peers and competitors.

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