Tencent and Alibaba: AI investments are squeezing earnings growth
May 8, 2026
Bloomberg reports on May 8, 2026: Tencent's full-year earnings growth is set to slow to the low-teen percent range as AI spending doubles. Alibaba is committing 380 billion yuan over three years.
AI capex is squeezing Tencent's and Alibaba's earnings
On May 8, 2026, Bloomberg reported that Tencent's and Alibaba's quarterly and full-year 2026 results will be shaped by the rise in their AI spending. Bloomberg analysts now expect Tencent's full-year earnings growth to slow to the low-teen percent range as AI spending doubles. Alibaba is committing more than 380 billion yuan over three years to AI and cloud infrastructure. Bloomberg Intelligence adds that, in 2026, growing cloud demand is unlikely to deliver material upside to either company's cloud earnings.
What the numbers mean for Tencent
Tencent posted clearly double-digit earnings growth in 2025. With the announced doubling of AI capex, the expected full-year 2026 earnings growth drops to the low-teen percent range, according to Bloomberg. The backdrop is the pressure from DeepSeek V4 and from other Chinese open-weight rivals such as Z.ai's GLM-5.1, MiniMax M2.7 and Moonshot's Kimi K2.6, which keep pushing inference prices in China down.
Where Alibaba plans to spend the money
According to the South China Morning Post, Alibaba has flagged more than 380 billion yuan of AI and cloud infrastructure investment over three years. That is the largest publicly announced AI capex line from a private Chinese company. In the latest quarter, however, net profit fell 67 percent, which Bloomberg attributes to a mix of AI costs and a softer consumer environment in China. Investors are reading that as a double drag: Tencent and Alibaba have reportedly lost about 66 billion US dollars in combined market value as investors still do not see a clear monetization path for the AI investments.
What the broader picture for Chinese AI vendors looks like
Four Chinese open-weight models – Z.ai's GLM-5.1, MiniMax M2.7, Moonshot's Kimi K2.6 and DeepSeek V4 – reached a comparable level on agentic engineering within twelve days. According to LLM-Stats, none of these models charges more than one-third of the inference cost of Claude Opus 4.7. The consequence is more volume per query but thinner margins. That raises the pressure on Tencent and Alibaba to show end-customer applications that can carry these investments.
Why this matters
The numbers are a first hard reality check on the thesis that "AI is making cloud revenue explode". If the two largest Chinese cloud providers cannot see a clear jump in cloud earnings in 2026 even after doubling their AI capex, that is an early signal for Western hyperscalers, too. For European enterprises, the inference-price dynamic is what matters most: if DeepSeek V4 or Kimi K2.6 are at par with Claude Opus 4.7 or GPT-5.5 but at a third of the cost, internal AI stacks may start planning hybrid setups – with all the compliance, data residency and EU AI Act questions that follow.
Practical example
A German e-commerce platform with 30 million regular customers runs an internal search and recommendation agent on a Western frontier model in 2026. Monthly inference cost has reached the mid six-figure range. The CFO asks for a backup path. The engineering team sketches one: routine queries such as size advice or simple FAQ answers could run on a vetted, EU-hosted open-weight model at DeepSeek V4 level, while sensitive cases stay on the premium vendor. Before go-live, the data protection team has to clarify whether logs of the Chinese model are processed outside China, whether a GDPR data processing agreement is available and which EU AI Act duties for GPAI providers apply from August 2026.
💡 In plain English
China's two biggest internet groups, Tencent and Alibaba, are spending a lot of money on AI right now. That is squeezing their profits because the costs are growing faster than the income from their new AI services.
Key Takeaways
- →Bloomberg, on May 8, 2026, expects Tencent's full-year 2026 earnings growth to land in the low-teen percent range as AI spending doubles.
- →According to the South China Morning Post, Alibaba is committing more than 380 billion yuan over three years to AI and cloud.
- →Alibaba's net profit fell 67 percent in the most recent quarter, per Bloomberg.
- →Tencent and Alibaba have together lost about 66 billion US dollars in market cap as investors still do not see a clear AI monetization path.
- →Four Chinese open-weight models reached similar coding performance to Western frontier models within twelve days, at about one-third of inference cost.
- →Bloomberg Intelligence sees no material cloud earnings upside for either company in 2026 despite rising cloud demand.
Sources & Context
- Tencent, Alibaba Face Slowing Growth as AI Costs Mount (Bloomberg)
- Tencent Earnings Growth Seen Slowing As AI Investments Double (Yahoo Finance)
- Alibaba and Tencent Lose $66 Billion as AI Spending Raises Investor Fears (Techloy)
- Alibaba to lead AI capital spending among China's Big Tech firms (South China Morning Post)
- LLM Updates Today - May 2026 (LLM-Stats)