Alibaba's stock slips as a big drop in net income overshadows AI progress

By Christine Ji

While Alibaba's cloud and AI units delivered another quarter of triple-digit growth, the company's costly pivot to rapid e-commerce delivery led to an earnings miss

While the core retail business underperformed, Alibaba's Cloud Intelligence Group posted 36% growth relative to the year before.

Alibaba Group Holding showed artificial-intelligence momentum in its latest earnings report, but investors are balking at the high cost of competing in the Chinese e-commerce landscape.

An increasingly competitive market has weighed on profitability, while sales growth has been fairly meager. Revenue grew a modest 2% to 284.84 billion RMB (CNYUSD) or $40.73 billion. Net profit for Alibaba (BABA) was 16.32 billion RMB or $2.37 billion, signaling a 67% decline from a year before.

Analysts tracked by FactSet had been anticipating 289.29 billion RMB in revenue and 24.50 billion RMB in net profit.

Alibaba's U.S.-listed shares fell 9% on Thursday morning.

The drastic fall in net profit was largely attributed to investments in quick commerce, user experiences and technology. Alibaba spent the quarter aggressively scaling its quick-commerce business by integrating instant delivery into the Taobao app and investing heavily in logistics. The company's quick-commerce push aims to deliver online orders of groceries and other items in less than an hour. Alibaba first introduced the feature in April of last year.

Alibaba's AI business was a more optimistic element of the report. The company's Cloud Intelligence Group grew 36% from a year before, 1 percentage point above consensus. AI-related product revenue delivered triple-digit growth for the 10th consecutive quarter.

"Over the next five years, our goal is to surpass 100 billion USD in combined cloud and AI external revenue," CEO Eddie Wu said on the earnings call.

Alibaba is also pursuing a full-stack AI strategy through its proprietary T-Head chips, which have now entered production at scale. An intensifying U.S.-China chip rivalry is propelling Alibaba's hardware business as both the Chinese government and private companies look to reduce supply-chain risks and improve the performance of domestic chips. On the earnings call, Alibaba shared that T-Head is looking to "close the gap between domestically-produced chips and ... foreign-produced chips in terms of manufacturing processes and overall performance across various dimensions."

While the T-Head business is "crucial to Alibaba's AI strategy," management added that a future spinoff of the division could be possible.

Additionally, the company's Qwen large language model surpassed 300 million monthly active users. Earlier this week, Alibaba released an enterprise platform for AI agents called Wukong.

Also read: Did everyone forget about DeepSeek? What Wall Street is getting wrong about Chinese AI.

-Christine Ji

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03-19-26 0947ET