Alibaba’s aggressive investments in artificial intelligence, cloud computing and quick-commerce platforms have outpaced the company’s ability to convert revenue into cash. In the September quarter, revenue grew by 28% year-over-year, but free cash flow declined by 15%, widening a gap that has reached $4.2 billion over the past 12 months. Capital expenditures jumped 22% to $3.8 billion as the company expanded data-center capacity for its Alicloud division and ramped up subsidies for same-day delivery in key markets. This spending pattern raises questions about the sustainability of Alibaba’s growth strategy, given that operating cash flow covered only 60% of capex in the most recent period, compared to 85% a year earlier.

Investors rallied after a report showed Alibaba’s Qwen open-source AI models surpassed 700 million global downloads, making them the most widely adopted large language models in the world. This milestone could accelerate adoption of Alibaba Cloud’s AI services, which saw revenue rise 34% year-over-year to $5.6 billion in the quarter ended September. At the same time, Chinese authorities signaled plans to rein in price wars in the food-delivery sector, a move expected to raise compliance costs for smaller players and enhance profit margins for larger platforms. Analysts estimate that every 1 percentage point increase in delivery-platform gross margin could add up to $800 million in annual EBITDA for Alibaba’s local services unit.