by SONG Jianan

Alibaba Group reported a sharp drop in quarterly profit after ramping up spending on its Taobao Flash Sale initiative and AI infrastructure, even as revenue edged higher.

Operating profit tumbled 85% in the September quarter and net income more than halved, with the company citing heavier investment in logistics, user experience and cloud technologies. Revenue rose 5% to 247.8 billion yuan (about US$35 billion), or about 15% on a comparable basis.

Growth remained strongest in instant retail, where Taobao Flash Sale has rapidly expanded since launching in April. The service has drawn thousands of Tmall brands and lifted order volume, supported by large consumer and merchant subsidies.

Cloud sales also picked up on rising demand for AI-related products. Alibaba said AI revenue continued to grow at triple-digit rates as companies increased their use of training and inference services.

Executives said the group is in an investment phase aimed at strengthening its AI and cloud capabilities and building a broader consumption ecosystem. Alibaba has spent roughly 120 billion yuan on related infrastructure in the past year.

Cash flow weakened as capital spending rose, and free cash flow turned negative. The company ended the quarter with 573.9 billion yuan in cash and liquid investments.