1Q26 Revenue: $34.57B, +2.0% YoY, miss estimates by $910M
1Q26 Non-GAAP EPADS: $2.06, miss estimates by $0.10
FY25 Guidance: No guidance provided.
Comment: Alibaba reported a mixed set of results, weighed down by intensifying price competition with domestic rivals as it seeks to defend market share in China’s increasingly crowded consumer retail market. Revenue from its core commerce segment, including Taobao and Tmall, rose 10% YoY to $19.6bn, but operating profit fell 21% to $5.4bn, reflecting heavy investment in “instant retail,” which promises delivery within an hour of purchase. Despite margin pressure, net income surged 76% YoY, beating expectations. The increase was largely driven by gains from equity investments and the disposal of Turkish e-commerce unit Trendyol, partly offset by lower operating income. Investors are paying closer attention to Alibaba’s cloud and AI initiatives. Cloud revenue accelerated 26% to $4.7 billion, exceeding market expectations of $4.5 billion. Management noted that strong AI demand is fueling growth at Cloud Intelligence Group, with AI-related product sales contributing a meaningful share of external customer revenue and maintaining triple-digit YoY growth for the eighth straight quarter. Looking ahead, Alibaba aims to sustain cloud revenue growth above industry averages, prioritizing scale over near-term margin expansion. Reports also suggest Alibaba has developed a new, more versatile AI chip, as U.S. chipmaker Nvidia faces sales restrictions in China. With Beijing’s renewed emphasis on advancing AI capabilities, Alibaba’s cloud business is positioned to benefit from sustained structural demand in China’s AI ecosystem. 2Q26recommended trading range: $125 to $155. Positive Outlook.
