Alibaba Group (9988.HK) reported in its earnings release on Thursday that Ant Group, in which it holds a 33% stake, saw its quarterly net profit plunge 91% year-over-year. The sharp decline was driven by the Chinese digital payments giant’s heavy investments in artificial intelligence (AI) and healthcare, coupled with a drop in the fair value of certain investments.

According to Alibaba’s financial results for the quarter ended December 31, 2025, Ant Group contributed approximately RMB 393 million (about USD 57 million) in profit to Alibaba. Based on Alibaba’s 33% ownership stake, this implies Ant Group recorded net profit of roughly RMB 12 billion for the quarter—down dramatically from about RMB 130 billion a year earlier, when it contributed roughly RMB 43 billion to Alibaba’s bottom line. The 91% year-over-year drop marks Ant Group’s worst single-quarter performance in recent years.

Two key factors drove the steep earnings decline:

First, a reduction in the fair value of certain financial assets directly eroded profits. In contrast, during Q4 2024, Ant had posted a 61% year-over-year profit increase to RMB 38.3 billion, largely due to gains from rising fair values of select investments—a trend that reversed sharply this quarter.

Second, strategic spending surged as Ant intensified its investments in AI research and development and expanded its footprint in the healthcare sector. Over the past three years, Ant has maintained high-intensity R&D spending, consistently allocating more than 10% of its annual revenue to technology innovation, with a systematic focus on core AI and data infrastructure technologies.

On the same day, Alibaba reported only 2% revenue growth for the quarter ended December 31—below market expectations. The sharp drop in contributions from Ant Group, combined with slowing growth in Alibaba’s core businesses, has put significant pressure on the company’s overall profitability.

Notably, Ant Group recently completed a new round of profit distribution, paying dividends to all shareholders and employees holding equity incentive instruments. Han Xinyi, previously the company’s president, officially assumed the role of CEO on March 1, taking full responsibility for business operations and day-to-day management.

Ant Group declined to comment on this report.