Alibaba’s net profits took a hit last quarter after a sharp increase in spending on AI infrastructure, but CEO Eddie Wu said he expects its heavy CapEx bill to break even in just three years.

The cloud company’s CapEx reached $10 billion last quarter, up from $3.9 billion in Q4 FY26, attributing the jump to its need to boost compute capacity amid growing AI agent adoption during an earnings call on Thursday.

CEO Wu said: “If you think about all of the different ways that AI is monetized… be it through software subscriptions, be it through API calls, through models as a service, through training, inference, in all of these different respects, you need compute centers to run and to monetize.”

But he added current gross margins would see the CapEx spend break even in three years, and the company expected to pay it back in 2.5 years thanks to a rising average gross margin.

The Alibaba Group recorded $39.6 billion in revenue for the quarter, up 9% year-on-year, but saw its net income sink 75% from last year to $1.5 billion.

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