Alibaba shows off its AI credentials as revenue tops expectations

By Jules Rimmer

Alibaba's impressive third quarter earnings come in the wake of positive developments with its new Qwen AI app.

Shares in Chinese tech giant Alibaba (BABA) spiked 5% Tuesday morning after third-quarter results impressed the market.

Alibaba revealed strong growth in its AI-related revenue, which doubled, and its cloud intelligence segment, which rose 34%.

Alibaba's third quarter demonstrated admirable growth in its cloud intelligence unit and AI-related revenue.

The company reported adjusted earnings of 61 cents per American depository receipt on revenue growth of 5% to $34.81 billion. Analysts polled by FactSet expected earnings of 85 cents a share on revenue of $34.3 billion.

"While the headline net profit and adj. EBITA might suggest a miss vs consensus estimates, which we believe mainly due to stale estimates by some and hence we believe the EBITA profit delivered likely to have exceeded pre-result expectation," said analysts at Citi.

That revenue figure was distorted somewhat by the disposal of its Sun Art and Intime operations and would have been more like 15% if adjusted for them. Strong growth of 16%, boosted by a successful Single Day promotion on Nov. 11, was also observed in the e-commerce division while digital commerce also shone with a 10% rise on the year before.

The results continued a successful week for Alibaba after it announced on Monday a successful launch of its new Qwen AI app that clocked up more than 10 million downloads. The investor presentation emphasized management's "focus and discipline on AI + Cloud and consumption" and observed powerful momentum from these strategies.

Management was able to boast that the number of its "88VIP" members, their highest-spending consumer group, increased by double digits to 56 million.

The momentum developed by its cloud intelligence group was chiefly driven by public cloud revenue growth and the increasing adoption of AI-related products. In September, Alibaba had unveiled a major upgrade to its full stack of AI capabilities, and it says it's the leader in China's cloud market with 35% market share.

The AI bonanza has been very positive for Alibaba with its New York-listed shares rallying around 90% so far in 2025 and weathering poor sentiment toward Chinese stocks over the summer after tariff war hostilities commenced.

The stock remains popular with research analysts. Of the two dozen or so submitting forecasts and recommendations to FactSet, only one broker has a sell call on the name and the remainder urge a buy. The mean target price is just below $190 implying 15% upside, but it's possible there are upgrades to come in light of these earnings.

-Jules Rimmer

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11-25-25 0809ET