TLDR
- Alibaba stock closed up more than 8% on Wednesday despite a Q4 earnings miss, with profits coming in below expectations.
- President Trump’s visit to China for talks with President Xi Jinping lifted sentiment across China tech stocks.
- Nvidia CEO Jensen Huang joined the U.S. delegation, raising hopes for improved chip trade between the two countries.
- Alibaba’s cloud revenue rose 38% year-over-year to $6.13 billion, with AI-related products posting triple-digit growth for the 11th straight quarter.
- CEO Eddie Wu said more than half of Alibaba’s cloud revenue will come from AI within a year.
Alibaba (BABA) closed at $145.81 on Wednesday, up more than 8%, even after its fourth-quarter results came in below Wall Street expectations.
Alibaba Group Holding Limited, BABA
The stock actually dipped about 2% in premarket trading following the earnings release. But it turned sharply higher once markets opened, driven by a combination of positive trade signals and strong cloud and AI numbers.
Q4 revenue rose 3% year-over-year. The numbers were weighed down by heavy spending on AI infrastructure, cloud expansion, and investment in Alibaba’s rapid-delivery business, which targets one-hour order fulfillment.
Despite the earnings miss, investors looked past the near-term profit pressure.
Trade Talks Lift the Mood
A big catalyst for Wednesday’s move was President Trump traveling to China to meet with President Xi Jinping. The high-profile visit sparked optimism that U.S.-China trade tensions could ease.
It also helped that Nvidia CEO Jensen Huang joined the U.S. delegation. Markets read that as a potential signal of progress on AI chip trade between the two countries — something that would directly benefit Chinese cloud and AI companies.
Any loosening of chip restrictions could give Alibaba and its peers a meaningful boost as they build out their AI infrastructure.
Cloud and AI Still the Bright Spot
Cloud revenue jumped 38% year-over-year to 41.63 billion yuan, roughly $6.13 billion. Revenue from external customers grew 40%.
AI-related products posted triple-digit growth for the 11th consecutive quarter. That kind of consistency is hard to ignore, even when the headline numbers disappoint.
CEO Eddie Wu told analysts during the earnings call that Alibaba is now shifting its AI business from development into larger-scale commercial use. He also said more than half of Alibaba’s cloud revenue will come from AI within a year.
The company earlier split its AI operations from its cloud computing division, appointing Wu to head the newly formed Alibaba Token Hub unit.
Bloomberg Intelligence’s Catherine Lim noted that Alibaba “effectively redeployed more than 90% of its March-quarter China e-commerce profit into Qwen user acquisition and adoption” — a pace expected to continue into fiscal 2027.
Alibaba reaffirmed its 380 billion yuan ($53 billion) AI spending plan through 2027.
The company also expects its quick commerce business to turn profitable by fiscal 2027.
Wall Street remains constructive on the stock. BABA carries a Strong Buy consensus rating based on 15 Buy ratings and two Hold ratings over the past three months. The average price target sits at $186.32, implying about 30% upside from Wednesday’s close.
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