This Chinese Tech Giant Quietly Cut Its Buyback 80% to Fund AI
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Alibaba (BABA) slashed buybacks 80% year over year while CapEx surged 75%, as CEO Eddie Wu declared AI the company’s “most certain growth engine.”
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BABAF and BBAAY investors should track whether AI Labs losses, now RMB 14B, widen faster than cloud revenue growth can offset them, with cloud currently up 45%.
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Alibaba (NYSE:BABA) just made its capital allocation priorities unmistakable. In the June 2026 quarter, the company repurchased 13.4 million ordinary shares (approximately 1.7 million ADSs) for US$162 million. A year earlier, in the same fiscal quarter, it bought back 56 million ordinary shares (7 million ADSs) for US$815 million. That is roughly an 80% cut in ADS repurchases at a company that still had US$19.3 billion of authorization remaining as of June 30, 2025.
The cash was rerouted into silicon and concrete.
Where the Buyback Money Went
Capital expenditures rose 75% year over year to RMB 67,678 million for AI infrastructure. Free cash flow deteriorated to negative RMB 44,670 million from negative RMB 18,815 million a year earlier. The newly disclosed AI Labs and Applications segment posted an adjusted EBITA loss of RMB 13,861 million, up from RMB 3,224 million. On top of that, the quarter absorbed a EUR 550 million European Commission fine and RMB 4,458 million goodwill impairment.
Internal cash is not covering the buildout alone. During fiscal 2026, Alibaba raised approximately US$3.2 billion in convertible notes and HK$12 billion in exchangeable bonds to fund cloud and international commerce, and total debt to adjusted EBITDA doubled to 2.29x. Full-year FY26 repurchases came in at just US$1.046 billion, a fraction of prior years.
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Management Frames It as an ROIC Bet
CEO Eddie Wu was direct about the shift. “AI has become Alibaba’s most certain growth engine,” he told analysts on the August 20 call. CFO Toby Xu argued the math works: “Our AI plus cloud investment has a clear path to attractive ROIC.” Management said AI hardware typically reaches break-even within three years on a five-year useful life, with AI compute supply expected to remain constrained industry-wide until at least 2030. That constraint is the whole reason the power, cooling, and networking suppliers behind the buildout keep drawing capital, a group we profiled in a free report on seven AI infrastructure names that aren’t chipmakers.
