Alibaba (Alibaba (BABA)) shares slipped Wednesday after the Chinese tech giant served up a mixed bag of earnings: revenue that squeaked past expectations, but profits that all but disappeared as the company went all-in on AI.
For its fiscal fourth quarter of 2026, Alibaba reported revenue of $35.28 billion, up 3% from a year ago and just ahead of the $35.23 billion analysts were looking for. Strip out the divested Sun Art and Intime businesses, and revenue grew a healthier 11% on a like-for-like basis.
The headline number that spooked investors, though, was adjusted earnings per American Depositary Share: just $0.09, versus the $1.12 consensus estimate. Adjusted net income cratered nearly 100% to $12 million, and adjusted EBITA fell 84% to $740 million. The culprit? Alibaba is spending heavily on AI initiatives, Taobao Instant Commerce, and user experience improvements.
Net income, however, rose 96% year over year, helped by gains from equity investments and the absence of prior-year disposal losses tied to Sun Art and Intime.
China Commerce Gets an AI Makeover
Alibaba's core China E-commerce Group revenue rose 6% to $17.72 billion, as the company rolled out AI-powered shopping tools and improved profitability in its quick-commerce operations. The company integrated Taobao and Tmall services into its Qwen app and launched the Qwen Shopping Assistant within Taobao to help with product discovery, purchase decisions, and post-sale services. It also introduced Wukong, an AI tool designed to help merchants automate workflows and boost efficiency.
The 88VIP membership program continued to grow at a double-digit annual rate, surpassing 62 million members during the quarter.
International Commerce Narrows Losses
Alibaba International Digital Commerce Group revenue increased 6% to $5.14 billion, as the unit moved closer to profitability through logistics optimization and operational efficiency improvements. AliExpress expanded its "Brand+" program, with more than 30% of transacting consumers purchasing through that segment. Alibaba.com launched Accio Work, an AI-powered platform aimed at helping small and medium-sized businesses manage cross-border commerce.
Cloud Business: The AI Star
The real standout was Alibaba's Cloud Intelligence Group, which posted 38% revenue growth to $6.04 billion, driven by surging demand for public cloud services and AI-related products. AI-related product revenue recorded its 11th consecutive quarter of triple-digit annual growth. Alibaba also expanded its Model Studio platform and introduced new AI models, including Qwen3.6-Plus. Its chip subsidiary, T-Head, broadened deployment of its Zhenwu AI chips in automotive and autonomous-driving applications.
As of March 31, Alibaba held $75.5 billion in cash and other liquid investments. But operating cash flow fell 66% to $1.36 billion, and free cash flow usage totaled $2.51 billion, reflecting investments in AI infrastructure, cloud expansion, and customer acquisition. The company's headcount grew to 131,462 employees, up from 128,197 at the end of December.
What Executives Said
CEO Eddie Wu said Alibaba's AI investments are now scaling commercially, driven by strong growth in cloud, AI models, and enterprise applications. He noted that the Cloud Intelligence Group posted 40% external revenue growth, with AI-related products contributing 30% of revenue. Wu also highlighted momentum in the company's Qwen large language models, including advances in reasoning, coding, video generation, and AI agents integrated with Alibaba's e-commerce ecosystem.
CFO Toby Xu added that AI and cloud investments continue driving business growth, with AI-related product revenue posting triple-digit growth for the 11th straight quarter. He also noted that China e-commerce customer management revenue rose 8% on a like-for-like basis, while quick commerce operations improved profitability and order values.
BABA Price Action: Alibaba shares were down 3.06% at $130.66 during premarket trading on Wednesday, according to market data.
