Alibaba recently reported a mixed financial performance. For the 2026 fiscal year, the company's revenue historically surpassed the one trillion mark, reaching 1.02 trillion yuan, a 3% year-over-year increase. However, its net profit attributable to ordinary shareholders saw its first negative growth in nearly four fiscal years, falling 18.2% to 105.94 billion yuan.
Beyond significant "burn rate" spending in the "food delivery wars," Alibaba's substantial investments in its AI business have also placed some pressure on the company's cash flow.
Nevertheless, these high investments have yielded high returns. For the full year, the company's instant retail revenue grew 47% to 78.52 billion yuan. Revenue from the Cloud Intelligence Group, which houses the AI business, grew 34% to 158.13 billion yuan, both posting impressive growth rates.
Focusing on the single-quarter performance, Alibaba's AI-related product revenue maintained strong momentum, reaching 8.97 billion yuan, marking the eleventh consecutive quarter of triple-digit year-over-year growth.
Alibaba's CEO, Wu Yongming, made a bold statement regarding the company's five-year goals, indicating that Alibaba's investment in AI infrastructure will far exceed the previously announced 380 billion yuan.
However, amidst the intense competition where major internet giants are heavily investing in AI, whether Alibaba will ultimately emerge victorious remains to be seen over time.
**Revenue Breaks One Trillion, Profits Face Short-Term Pressure**
On the evening of May 13, Alibaba released its performance announcement for the 2026 fiscal year (April 1, 2025, to March 31, 2026) and the fourth fiscal quarter (January 1, 2026, to March 31, 2026).
For the 2026 fiscal year, Alibaba's revenue reached 1.02 trillion yuan, a 3% year-over-year increase. Excluding revenue from disposed businesses like Sun Art Retail and Intime, the comparable revenue growth would have been 11%.
However, with continuous increased investment in instant retail, user experience, and technology businesses, Alibaba's profitability showed a significant decline.
For the 2026 fiscal year, Alibaba's operating profit was 50.15 billion yuan, down 64% year-over-year. Adjusted EBITA decreased 56% to 76.42 billion yuan. Net profit attributable to ordinary shareholders was 105.9 billion yuan, down 18% year-over-year.
The company's non-GAAP net profit for the 2026 fiscal year was 60.66 billion yuan, a 62% decrease compared to 158.12 billion yuan in the 2025 fiscal year.
Simultaneously, Alibaba's cash flow faced some pressure. Net cash flow from operating activities for the 2026 fiscal year was 76.21 billion yuan, halving compared to the previous fiscal year. Free cash flow shifted from a net inflow of 73.87 billion yuan in the 2025 fiscal year to a net outflow of 46.61 billion yuan in the 2026 fiscal year.
Alibaba stated that the annual decline in free cash flow was primarily attributable to investments in instant retail and increased cloud infrastructure expenditure.
Focusing on the fourth fiscal quarter of 2026, Alibaba's single-quarter revenue was 243.38 billion yuan, a 3% year-over-year increase. Excluding disposed businesses, the comparable revenue growth would have been 11%.
However, Alibaba's single-quarter operating profit rarely turned negative, recording a loss of 848 million yuan, compared to a profit of 28.47 billion yuan in the same period last year.
Alibaba pointed out this was mainly due to a decrease in adjusted EBITA.
In the fourth fiscal quarter, the company's adjusted EBITA decreased 84% year-over-year to 5.1 billion yuan. This was primarily attributed to investments in technology business, instant retail, and user experience, partially offset by improved operating performance from the continued growth of customer management services and cloud business, as well as enhanced operational efficiency across multiple businesses.
During the same period, Alibaba's single-quarter net profit attributable to ordinary shareholders was 25.48 billion yuan, more than doubling year-over-year. Net profit was 23.5 billion yuan, a 96% year-over-year increase, mainly due to a year-over-year increase in net gains from fair value changes of equity investments held by the company, and losses from the disposal of Sun Art Retail and Intime in the same period last year, partially offset by the decrease in adjusted EBITA.
However, in the fourth fiscal quarter, Alibaba's non-GAAP net profit was only 86 million yuan, far below the 29.85 billion yuan in the same period of 2025.
Simultaneously, Alibaba's single-quarter net cash flow from operating activities was 9.41 billion yuan, down 66% year-over-year. Free cash flow was a net outflow of 17.3 billion yuan, compared to a net inflow of 3.74 billion yuan in the same period last year.
Alibaba stated that the single-quarter decline in free cash flow was mainly due to investments in instant retail, user acquisition for the Qianwen App, and increased cloud infrastructure expenditure.
Additionally, as of March 31, 2026, Alibaba's cash and other liquid investments amounted to 520.82 billion yuan.
**Food Delivery and AI Bring New Growth Under Massive Investment**
Despite overall profit pressure, Alibaba's heavily invested businesses have become new growth engines for the company, with the substantial growth of AI-related business being the most surprising.
In this earnings report, Alibaba divided its business into four major segments: Alibaba China E-commerce Group, Alibaba International Digital Commerce Group, Cloud Intelligence Group, and All Other segments.
For the 2026 fiscal year, these four segments contributed revenues of 554.22 billion yuan, 144.17 billion yuan, 158.13 billion yuan, and 254.37 billion yuan to Alibaba, representing year-over-year changes of +9%, +9%, +34%, and -25%, respectively, accounting for 54%, 14%, 15%, and 25% of the company's total revenue.
The Alibaba China E-commerce Group, which accounts for half of Alibaba's revenue, mainly includes e-commerce business, instant retail, and China wholesale commerce.
Within this, the instant retail business achieved revenue of 78.52 billion yuan in the 2026 fiscal year, a 47% year-over-year increase, with growth breaking into double digits.
It is reported that Alibaba's instant retail business mainly includes Taobao Flash and Ele.me. Its rapid revenue growth is also largely attributed to order volume growth driven by the launch of Taobao Flash at the end of April last year.
However, while directly participating in the "food delivery wars" brought incremental growth for Alibaba, it also somewhat squeezed the company's profit margin.
For the 2026 fiscal year, the adjusted EBITA for Alibaba China E-commerce Group was 107.51 billion yuan, down 44% year-over-year, mainly due to investments in instant retail, user experience, and technology.
In contrast, Alibaba's Cloud Intelligence Group successfully achieved synchronous growth in both revenue and profit.
For the 2026 fiscal year, Cloud Intelligence Group's revenue grew 34% to 158.13 billion yuan. Overall external customer revenue grew 33% year-over-year, primarily driven by growth in public cloud business revenue, including increased adoption of AI-related products.
During the same period, the Cloud Intelligence Group's adjusted EBITA was 14.27 billion yuan, a 35% year-over-year increase, mainly due to revenue growth and improved operational efficiency, partially offset by increased investment in customer growth and technological innovation.
Looking solely at the fourth fiscal quarter, Alibaba Cloud Intelligence Group's revenue was 41.63 billion yuan, a 38% year-over-year increase, with external commercial revenue growth accelerating to 40% year-over-year.
Alibaba stated that this growth momentum was primarily driven by public cloud business revenue growth, including increased adoption of AI-related products. AI-related product revenue this quarter maintained strong momentum, reaching 8.97 billion yuan, achieving the eleventh consecutive quarter of triple-digit year-over-year growth.
Regarding the impressive performance of the AI business, Alibaba Group CEO Wu Yongming stated, "Alibaba's full-stack AI technology investment has officially moved beyond the initial cultivation stage and entered a positive cycle of scaled commercial returns."
Wu Yongming pointed out that in the fourth fiscal quarter, Alibaba achieved accelerated breakthroughs at the model, cloud infrastructure, and application layers. The growth rate of external commercial cloud revenue increased to 40%, with AI-related revenue accounting for 30%.
"Our strategic investments continue to translate into business growth," said Alibaba Group CFO Toby Xu. "Looking ahead, we are confident in our business and will continue to invest in AI+cloud to strengthen our strategic advantages."
**Giants Spending Lavishly; Who Can Seize the AI Window?**
During the post-earnings conference call, Wu Yongming stated that the negative free cash flow this quarter stemmed from investments in AI over the past year. However, investments over the next two years will remain firm and continuous, as this is a critical window period for Alibaba.
It is noted that Wu Yongming announced last year that over the next three years, Alibaba would invest over 380 billion yuan in building cloud and AI hardware infrastructure, a total exceeding the sum of the past ten years.
Now, discussing the company's subsequent plans, Wu Yongming revealed that for the five-year goals ahead, Alibaba's investment in AI infrastructure will far exceed 380 billion yuan.
CFO Toby Xu also stated that looking ahead to the next two years, Alibaba will continue to invest firmly, as this opportunity window only lasts a few years.
In his view, cloud infrastructure investment will drive continued accelerated growth in AI+cloud business revenue while continuously improving gross margin. This will further enhance the net cash flow of the cloud segment, feeding back into the continuous investment in cloud infrastructure.
Xu also pointed out that as of March 31, the company's net cash (excluding debt maturing beyond five years) was approximately $38 billion, and about $59 billion after excluding all long-term debt, providing strong support for cloud infrastructure investment.
In fact, while Alibaba seizes the AI window, other domestic internet giants are also gearing up, not daring to slack off in the slightest.
On the evening of May 13, Tencent disclosed its first-quarter 2026 report. In the first quarter of this year, Tencent's capital expenditure was 31.9 billion yuan, a significant increase from 27.5 billion yuan in the same period last year, mainly used to support AI-related investments.
Affected by this, Tencent's first-quarter revenue grew 9% year-over-year to 196.5 billion yuan. Non-IFRS operating profit was 75.6 billion yuan, a 9% year-over-year increase. Excluding the impact of revenue, costs, and expenses from new AI products, the company's IFRS operating profit grew 17% year-over-year to 84.4 billion yuan.
During the conference call, Tencent executives stated they see growing demand for AI-related services from both internal products and external model users. "We previously guided that capital expenditure this year would be higher than last year; now we are more certain and confident in this guidance. We expect capital expenditure to increase significantly, with more domestic AI chips arriving month by month in the second half of this year."
Meanwhile, ByteDance, already in the top tier of the domestic AI race, has been pouring heavy investments into AI consecutively.
According to media reports, in 2025, ByteDance's capital expenditure was approximately 160 billion yuan, with about 90 billion yuan used for AI computing power procurement.
In 2026, ByteDance is expected to invest another 160 billion yuan in the AI field, with up to 85 billion yuan for AI chip procurement.
Recently, media even reported that ByteDance has raised its 2026 AI capital expenditure plan to over 200 billion yuan, at least a 25% increase from the 160 billion yuan plan discussed at the end of last year.
In the increasingly fierce AI battle, whether Alibaba can successfully seize the window period in the future remains to be seen.
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