Financial Report: Is AI Becoming Another Money Pit? Ant Group's Quarterly Profit Growth Nearly Stalls

Ant Group, the fintech giant supported by Jack Ma, reported almost no profit growth in the latest quarter, reflecting cost pressures stemming from its expanded investments in artificial intelligence (AI), healthcare, large language models, and payment services.

Alibaba (BABA-US, 09988-HK), which holds one-third of Ant Group's shares, noted in its latest financial report that Ant Group contributed RMB 1.56 billion (approximately $232 million) in profits. According to Bloomberg's calculations based on shareholding ratios, Ant Group's profit for the three months ending March was approximately RMB 4.7 billion, marking only slight year-on-year growth. The previous quarter had seen a 79% plunge in profit.

Since Ant Group's financial reporting lags behind Alibaba's by one quarter, these figures reflect performance during the first quarter of this year. Ant Group declined to comment on the results.

After years of staying away from fundraising markets, several of Ant Group's subsidiaries are now actively seeking external capital again. Sources indicate that OceanBase, a database management firm, and Ant Digital, the enterprise solutions division, are both in talks with investors. Meanwhile, Ant International, responsible for global operations, raised $1.2 billion in July to expand cross-border payments and AI-driven business services.

These three businesses established independent boards of directors in 2024, paving the way for potential future spin-offs. Ant Group's robotics unit, Shanghai Robbyant Technology (Robbyant), is also exploring fundraising. The company unveiled its first humanoid robot last year, capable of providing medical consultations and performing basic kitchen tasks.

If fundraising proceeds smoothly, each business can secure the capital needed for independent expansion without waiting for the long-stalled IPO of Ant Group to restart. Ant Group was originally scheduled to go public in Shanghai and Hong Kong in 2020 but was halted by Chinese regulators. In recent years, the company has invested hundreds of millions of dollars in AI development, aiming to create new revenue streams beyond Alipay.

Bloomberg Industry Research estimates that ongoing investments in AI and healthcare will require massive spending, potentially offsetting growth in payment services. As a result, Ant Group's annual profits in 2025 and 2026 could fall below RMB 20 billion. When Ant Group repurchased shares in 2023, its valuation stood at approximately $79 billion, far below the $280 billion valuation during its 2020 IPO preparations.