Alibaba Cloud posted strong growth in Q2 FY2026, driven by demand for AI services. Revenue rose 34% year‑on‑year to $5.6 billion, and the company said its “AI-related products” kept growing at triple‑digit rates for a ninth straight quarter. CEO Ed Wu noted that “demand is accelerating.”
At the same time, Alibaba is struggling to add servers fast enough to meet that demand. The group has had to give some customers priority access to capacity while limiting service for others. As Wu explained: “If an external customer is utilizing all of our services across cloud, all of Alibaba Cloud services spanning storage, spanning big data, and all of these other things, then of course that customer would be accorded a higher level of priority.”
He added a related point about smaller users: “If you have a customer that’s merely renting a GPU to meet some very simple inferencing needs, then the demands of those customers would accordingly be given a slightly lower level of priority.”
Alibaba says it has tried technical fixes too. In October 2025 the company reported it could cut GPU use by 82 percent with a “pooling” system. Even so, Wu warned that supply limits are a major problem across the whole hardware chain. He pointed to shortages at fabs, DRAM makers, storage firms and CPU suppliers and said this gap between supply and demand is likely to last another “two to three years.”
Over the past year Alibaba spent about $16 billion on AI-related buys. That is far less than some US rivals; for comparison, Amazon’s cloud arm recently reported roughly $34.2 billion in capex for one quarter. Alibaba had earlier said it planned to invest about $53 billion in cloud and AI over three years, but Wu said that figure may be “on the small side.”
He told analysts the company may increase capital spending if needed. The pace of adding new data centers and servers is limited by both investment speed and global supply. If customer demand keeps outpacing the pace of build‑out, Alibaba will consider scaling up its capex, though any move will depend on component availability and supply chains.
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