The profitability decline was actually less severe than feared

$BABA-SW(09988.HK)$ Profitability was weaker than during the previous year's quarter. This was expected, and since BABA beat earnings estimates, the profitability declinewas actually less severe than feared.
Still, profits were down, which canbe explained by several factors. The company was impacted by asset write-downs due to price declines in some of its equity investments. Tech companies sawtheir values decline around the world during recent months, so some of BABA's investment stakes were hit as well. This is a non-cash and non-recurring item,however, thus its importance shouldn't be overestimated.
The company also saw its marginscome under pressure from increased investments, however, which might be more meaningful, as this is not a non-cash accounting item. Spending more on R&D, server capacity, and so on does impact cash generation to some degree, but BABA believes that these investments will pay off eventually.

Parts of this content is taken from Seeking Alpha.