TLDR
- Alibaba reported Q3 revenue of 284.8 billion yuan ($41.4B), missing analyst estimates of 290.7 billion yuan.
- Net income collapsed 66–67% year-over-year, its worst result since early 2024.
- Heavy spending on promotions, quick commerce, and AI infrastructure drove the profit decline.
- Cloud revenue rose 36%, with AI-related product revenue posting triple-digit growth for the 10th consecutive quarter.
- Alibaba has pledged over $53 billion in AI investment and recently hiked cloud prices by up to 34%.
Alibaba reported a rough December quarter on Thursday, missing revenue expectations while posting a dramatic drop in profit. The results sent its U.S.-listed stock down 4% in premarket trading.
$BABA (Alibaba) #earnings are out: pic.twitter.com/TJ7lHW3jnD
— The Earnings Correspondent (@earnings_guy) March 19, 2026
Revenue for the three months ended December 31, 2025, came in at 284.8 billion yuan ($41.4 billion). Analysts had expected 290.7 billion yuan. That’s a 2% rise in sales — barely moving the needle.
Alibaba Group Holding Limited, BABA
Net income was the bigger shock. It fell 66% year-over-year to 15.6 billion yuan, down from 46.4 billion yuan in the same period last year. The company pointed to a 74% drop in operating income, driven by heavy investments in quick commerce, user experience, and technology.
The results mark Alibaba’s worst profit performance since early 2024.
CEO Eddie Wu put a positive spin on it. “This quarter, Alibaba maintained strong investments across our core pillars of AI and consumption,” he said. He called AI “one of our primary growth engines.”
Cloud Is Still the Bright Spot
There’s a genuine story of growth buried in the numbers. Alibaba’s Cloud Intelligence Group posted 36% revenue growth, bringing in 43.3 billion yuan for the quarter. AI-related product revenue delivered triple-digit growth for the tenth quarter in a row.
The company has pledged more than $53 billion in AI investment over several years. That’s far ahead of Chinese rivals, though a fraction of the $650 billion U.S. cloud giants plan to spend in 2026 alone.
This week, Alibaba launched an enterprise-facing agentic AI service called Wukong. It also raised prices on cloud computing and storage by as much as 34%, a move analysts say signals a push toward monetizing its AI portfolio rather than competing on price.
Morgan Stanley analyst Gary Yu called the launch of Alibaba Token Hub — a new unit consolidating almost all AI operations under CEO Wu — a sign of “explosive AI demand from strong token usage.”
Challenges Piling Up
The quarter wasn’t short on headwinds.
Alibaba’s e-commerce business is under real pressure from domestic rivals. The company spent heavily during China’s Lunar New Year holiday period, handing out coupons alongside Tencent, ByteDance, and Baidu to drive adoption of its consumer-facing AI app. While competitors saw sharp user gains, Qwen’s usage stayed above pre-campaign levels, per Morgan Stanley estimates.
Tencent is seen as holding an early edge in agentic AI, thanks to its WeChat ecosystem and vast user data. That’s a tough structural problem for Alibaba to solve quickly.
There was also a surprise departure to deal with. Junyang Lin, the lead developer of Alibaba’s Qwen AI models and a key figure in the company’s AI transition, left during the quarter. The reasons haven’t been disclosed, but the exit raised questions about continuity in Alibaba’s research direction.
Alibaba has responded by refocusing on enterprise clients. The new Alibaba Token Hub unit consolidates its AI product lines under a single structure, giving Wu direct oversight of the company’s AI commercialization push.
Alibaba’s cloud price hike of up to 34% came alongside a similar move by Baidu, which raised AI cloud prices by up to 30%.
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