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Further Reading from MarketBeat Alibaba Stock Is Getting Hit Again, but Qwen and Cloud Growth Are SurgingReported by Leo Miller. Publication Date: 3/20/2026. 
Key Points - Alibaba’s latest quarter showed modest revenue growth but a sharp drop in adjusted profit as the company continued spending heavily to defend its China commerce position.
- Cloud revenue growth accelerated, reflecting strong demand for AI-related products, even as broader concerns persist about talent retention and longer-term AI execution.
- Alibaba’s outlook hinges on whether near-term margin pressure from fast delivery and other initiatives can be balanced by sustained cloud and AI monetization.
- Special Report: Elon's "Hidden" Company
For Chinese e-commerce giant and cloud provider Alibaba Group (NYSE: BABA), the past six months have been challenging. Over that period, Alibaba shares have fallen more than 30%. Market-share losses in Chinese e-commerce and questions about the firm's artificial intelligence (AI) leadership have been major headwinds. San Francisco is the strangest city in America right now—you can hop into a self-driving car and be chauffeured by a robot, but out the window you see addicts slumped in doorways, open-air drug markets, the mentally ill screaming at the sky, and entire city blocks consumed by homeless encampments. It's ground-zero for the most disruptive technological forces of our age, and Erez lives in the Bay Area plugged into the capital, the connections, and the companies reshaping the world—the advancements in AI, blockchain, computing, and biosciences are unlike anything the world has seen before, and a tsunami of disruption is coming for everything all at once. During our most recent broadcast, we exposed what we're calling the most asymmetric opportunity of our careers: an overlooked financial company hiding a multi-billion-dollar blockchain asset Wall Street hasn't priced in—it's one of those rare situations Warren Buffett would describe as raining gold when all you have to do is step outside if you want to get rich. Watch the broadcast before the window closes now The decline accelerated after BABA's most recent earnings report, which pushed shares down roughly 7%. Still, Alibaba remains one of China's most important companies and a serious AI contender through its cloud business. That combination is hard to ignore even after a rough stretch for the stock. The latest quarter clarified the strategy: Alibaba is spending aggressively to defend its commerce franchise now, betting that accelerating cloud and AI demand can rebuild profitability over time. Margin Pressure Deepens as Fast Delivery Spending Rises In fiscal Q3 2026, Alibaba reported revenue of $40.73 billion, a 2% year-over-year (YOY) increase. That moderately missed estimates of $40.95 billion, which implied roughly 3% growth. Earnings were the bigger issue. Alibaba posted adjusted earnings of $1.01 per ADR, missing the analyst estimate of $1.65 and falling 67% from a year earlier. An ADR, or American depositary receipt, is a bank-issued U.S. security that represents Alibaba's underlying shares and lets U.S. investors trade the stock in dollars on U.S exchanges. Management attributed the profit decline to heavier spending on quick commerce, user-experience initiatives and technology, with improved cloud performance only partially offsetting the impact. The company is also facing a tougher competitive environment in Chinese e-commerce, which has raised the cost of defending market share. PDD (NASDAQ: PDD) has been gaining traction in the value-shopping segment, while ByteDance's Douyin (the Chinese version of TikTok) has become a leader in discovery-based shopping, where users buy after seeing products in social feeds. Meanwhile, Meituan (OTCMKTS: MPNGF) remains dominant in food delivery and adjacent services. Alibaba is still the largest player, but it must invest significantly to defend that position, which is weighing on profitability. Quick commerce — delivering products in one hour or less — has become a "cornerstone" of its e-commerce strategy. There were some encouraging signs this quarter: quick-commerce revenue rose 56% YOY. The company added 150 million annual active customers (AAC) in 2025 — defined as users who made at least one purchase during the year — but these new users tend to be lower quality, making smaller and less frequent purchases. Alibaba is betting on a long-term win and does not expect its quick-commerce business to be profitable until fiscal 2029. Cloud Growth Accelerates as Qwen Sees Strong Developer Adoption Alibaba's Cloud Intelligence Group was a clear bright spot. Revenue rose 36% YOY to $6.19 billion, marking the unit's ninth consecutive quarter of accelerating growth and its fastest pace in three years. Management cited AI demand as a key driver, noting that AI-related product revenue grew at a triple-digit rate for the 10th straight quarter. The segment also remained profitable, with an adjusted EBITA margin that was "relatively stable" at 9%. Alibaba's foundational model, Qwen, is the most widely used open-source model, with over 1 billion downloads on Hugging Face. Hugging Face is a platform where developers can download and fine-tune models to build applications. That open-source adoption matters because broader developer usage can translate into demand for inference and tooling within Alibaba's cloud ecosystem. As more developers build on Qwen, more usage shifts to running and serving those models at scale through inference and related services. Hugging Face also shows Qwen is a popular base for customization: developers have created more than 113,000 derivative models tuned from Qwen. That is more than the next two closest competitors, Alphabet (NASDAQ: GOOGL) and Meta Platforms (NASDAQ: META), combined. The takeaway is straightforward: Qwen has gained significant traction with developers, and that traction can support Alibaba's cloud growth as more applications are deployed and scaled. Alibaba has set aggressive targets for its cloud and AI push. CEO Eddie Wu said the company is aiming for more than $100 billion in combined external cloud and AI revenue within five years, underscoring how central AI monetization is to the long-term plan. Alibaba's Solid Balance Sheet Helps Fund Longer-Term Priorities Notably, Alibaba's free cash flow has been negative in several recent quarters. Over the past nine months, free cash flow was negative $4.2 billion. However, the company generated positive free cash flow this quarter, reporting $1.62 billion. Despite recent cash outflows, Alibaba's balance sheet remains strong. The company reports cash and other liquid investments of $80.1 billion against roughly $37 billion of debt, providing substantial flexibility to continue investing in strategic priorities. The company did not address the recent resignation of Qwen's head of artificial intelligence, Lin Junyang. Any further changes in top AI leadership will be important to monitor as they could affect the firm's ability to maintain its position. Alibaba clearly has high hopes for its long-term future. Near-term challenges are pressuring its e-commerce business, but its progress in AI supports a constructive outlook. With AI monetization still in the early stages and shares down substantially, the risk-reward for BABA shares looks attractive going forward, though meaningful execution risks remain. | 
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