Alibaba Group reported a steep decline in first-quarter earnings as it continues pouring resources into artificial intelligence development.

The Hangzhou-based company posted a net profit of 10.54 billion yuan ($1.57 billion), marking a 76% drop compared to the same period last year. Revenue reached 268.95 billion yuan, an 8.6% increase year-over-year, though profit fell well below analyst expectations.

Despite the earnings slump, Alibaba emphasized progress in its AI initiatives. Alibaba Cloud's external revenue growth accelerated to 45% during the quarter, reflecting strong demand for its cloud-based AI services. CEO Eddie Wu highlighted the commercialization of the company's full-stack AI capabilities as a key growth driver.

The tech giant is aggressively investing in AI to maintain its competitive edge in China's rapidly evolving digital landscape, even if those expenditures are currently weighing on bottom-line results.