Alibaba Cloud is looking to expand its data center capacity to be 10 times what it operated in 2022, said CEO Eddie Wu during the company's recent Q4 FY2026 earnings call on May 13.

The infrastructure expansion announcement comes after the company saw strong revenue from its cloud and AI offerings.

The quarter brought in $6.035 billion for Alibaba's Cloud Intelligence Group, a 38 percent growth Year-on-Year (YoY) and 40 percent growth from external customers.

Meanwhile, competitor Tencent Cloud said during its own earnings call that the company's use of GPUs for model training remains an "investment for the future" for now.

Alibaba embraces AI

Alibaba's AI offerings specifically brought in around $1.3bn, marking the eleventh consecutive quarter of triple-digit YoY growth, and account for 30 percent of the Cloud Intelligence Group's external revenue, with the company expecting this to cross the 50 percent threshold in one year.

With this in mind, the company remains aggressive on capex, opex, and build out.

CEO Wu told analysts: "Essentially, I think if you compare where things were in the year 2022 before this explosive growth in AI models and what we expect to need in 2033, I think we're talking about 10x increase. We need 10x the amount of data center infrastructure compared to what we had in 2022. There are different ways to get that compute capacity. Some of it can be capex, part of it can also be opex, and we're actually now acquiring quite a bit of computing capacity using opex."

He added that Alibaba could, with its T-Head chips unit, "actually also sell AI servers leveraging those chips to other computing centers, or we can co-build computing centers with others."

The company ended the quarter with around $38bn in net cash, and excluding debt with maturities beyond five years, net cash stands at approximately $59bn, which executives said gives them confidence to continue investing in growth.

Alibaba's custom chips received a lot of attention during the call. Wu said in his opening remarks that the GPUs have "achieved scaled mass production" and that 60 percent of compute capacity is now serving external customers.

"As the only AI cloud provider in China capable of delivering self-developed AI chips at scale, we've secured autonomy over our compute supply chain while providing customers with highly competitive AI inference and training services. In an environment of compute scarcity, this structural advantage is favorable to our revenue growth and gross margin improvement."

While the custom chips are a benefit to Alibaba, Wu still noted that there are "physical constraints" having an impact on production capacity for chips and memory.

"An advantage that we have at Alibaba Cloud is the scale of our customer base, as well as the scale effect from all of the capex that we've put in over these years. But in this environment of market scarcity, we're already seeing that the cost for us to deploy one new server this year is double what that same server would have cost a year ago. The cost inflation has been over 100 percent.

"Given that higher replacement cost effect, you know, we have a certain pricing power with respect to new customers and also old customers. I think in the long term, the asset pricing effect will be positive for our revenues going forward."

Wu estimates that "in the next two to three years, we can expect to see significantly higher gross margin for Alibaba Cloud, and we can expect to start to see that in the next one to two quarters."

Other key performance metrics for the company's cloud business include an EBITA of $550 million, up 57 percent YoY.

Tencent keeps GPUs for itself

The two companies' AI and cloud strategies were in stark contrast for the most recent quarter, with Tencent executives explaining that they have instead opted to mostly keep their GPU fleet for internal use.

Speaking on the company's approach to balancing its various AI products that it is developing, Tencent CSO James Mitchell said: "The reality is we've already made the choice and paid the price in that we have prioritized a multiplicity of internal services ahead of Tencent Cloud.

"I think most big tech hyperscale companies with cloud businesses have one, flagship internal use case where they're allocating a large number of GPUs. We have multiple flagships... The reason why we've been able to support all of these at once is that we have not been active in leasing out GPU capacity in Tencent Cloud.

"Looking through the rest of this year, as the supply of China design GPUs progressively ramps up, we'll be remedying that situation, we will be making more capacity available in Tencent Cloud, and consequently driving up Tencent Cloud's rate of expansion. That's where the trade-off has been made, that we have been consciously late to monetize the AI opportunity through Tencent Cloud because we've been simultaneously supporting a number of AI initiatives internally."

As for the return on investment cycle, Mitchel explained that when deploying GPUs into its advert tech, there's a relatively short cycle, but when put to training its Hunyuan foundation model, which is "something we view as important to our franchise," the company is taking a longer-term view.

Part of the issue was put down to a lack of GPUs, effectively forcing Tencent to pick whether to prioritize internal or external use cases. The company, however, has said that it is "more affirmative" and confident in the guidance that capex will increase as China-designed ASICs are becoming available "month by month through the year." This is a significant change from 2025, when the company was consistently reporting a reduction in capex due to lack of access to chips.

Capital expenditure for the most recent quarter was $4.69bn, up 16 percent YoY.

Mitchell later noted that the company is not CPU or networking-chip-constrained at present, an issue being experienced by the US hyperscalers.

Tencent does not break down its earnings by offering. Total revenues for the company were RMB196.5 billion ($28.94bn), up 9 percent over the first quarter of 2025, and Gross profit was RMB111.3bn ($16.39bn), up 11 percent YoY.