Alibaba has released its Q2 2024 financial results, with Alibaba Cloud seeing growth off the back of AI.

Quarterly revenue hit 26.5 billion Yuan ($3.64bn), up six percent year-on-year (YoY). The cloud computing division's EBITA was up 155 percent YoY to 2.3 billion Yuan ($322.15m).

Alibaba CEO Eddie Wu said that Alibaba Cloud will see double-digit growth in the second half of 2024, with much of that driven by AI products.

"There's very, very robust demand among our customers for AI and AI-relevant products," said Wu. "Demand is still far from being satisfied."

"If you look at the industry as a whole, demand for CPU-based traditional cloud computing is relatively limited, where most of the growth is now focused on GPU-based AI product development."

For the quarter, AI-related product revenue sustained "triple-digit growth," with Wu saying in his opening remarks in the earnings call: "We're seeing more major customers choosing Alibaba Cloud as their compute infrastructure for AI development. At the same time, Alibaba's proprietary large language models are gaining wider adoption. This year, Alibaba Cloud served as a major cloud service provider for the Olympic Games, providing cloud computing and AI services to Olympic Broadcasting Services, OBS."

Free cash flow decreased from 21.7 billion Yuan ($3.03bn) to 17.4 billion Yuan ($2.43bn), partly due to capex spend.

Toby Xu, Alibaba's CFO, said: "This year-over-year decrease mainly reflected the increase in expenditure related to our investments in Alibaba Cloud infrastructure and other working capital changes."

This is expected to continue, with CEO Wu noting that the company will continue to invest in AI capex at a similar pace "over the next several quarters."

Wu added: "What we see when we're making this kind of capex investments, as soon as we get a server up, a server is instantly running at full capacity. There's that kind of demand. So we can expect to see a very high ROI over these next quarters because we're building compute power to meet existing demand and that new compute power coming online is getting instantly taken up and running at full capacity on day one."

Alibaba tactically cut the cost of its cloud services this year, with some reductions reaching as much as 55 percent for Chinese customers. The move was conducted in order to help the company win back users from rivals including Tencent, JD.com, and Baidu.

This followed a slightly tempestuous period in which the company called off plans to spin out its cloud unit.

Plans for the move were first shared in May 2023, and in September the company was considering a $3bn private funding raise for the plan.

However, by November 2023, the plan was dropped due to the US export bans on advanced chips limiting Chinese cloud companies' offering potential.

Issues accessing GPUs, however, were not mentioned at all during this latest earnings call.