Mrzorro
03-22 10:11

Alibaba Earnings Review: Cloud Segment Fails to Offset Pressure from Other Businesses


$Alibaba(BABA)$   Group announced revenue and profit figures lower than market expectations, reflecting the pressure from its e-commerce business and investments in other innovative businesses.


Core Financial Indicators

- Revenue was RMB 284.84 billion, up 1.67% year over year, compared with the estimate of RMB 289.73 billion.

- Net income plummeted by 66.65% year-on-year to RMB 16.32 billion, indicating continuing pressure of China e-commerce business on profitability.

- Non-GAAP diluted earnings per ADS was RMB7.09 (US$1.01), a decrease of 67% year-over-year. 


Business Segment Breakdown

Alibaba China E-commerce Group

Customer Management Revenue is the main metric for Alibaba China's traditional retail software. CMR grew 0.8% year-on-year this quarter, a significant slowdown compared with the previous quarter's 10%. On one hand, this is due to the decline in government's Chinese consumer subsidies in 2025; additionally, the Chinese New Year was relatively late, causing domestic shopping to be more concentrated in the first quarter of 2026.

However, the company has previously communicated sufficiently with the market, and actual performance is roughly in line with expectations.

Quick Commerce continues to run at a loss. Although Alibaba has not explicitly disclosed the loss amount, considering the nearly zero growth in CMR and assuming traditional retail profits remain largely unchanged, the net loss for quick commerce this quarter is about ¥25 billion, higher than the market's expected loss range of around ¥20 billion. The year-on-year growth rate of quick commerce reached 56%.


International E-commerce Losses Again

This quarter, international e-commerce revenue growth slowed to less than 4% year-on-year, lower than the already downward-adjusted market expectation of about 7%, mainly dragged down by Lazada's year-on-year negative revenue growth. In the Southeast Asian market, Alibaba International faces significant competitive pressure from Sea and TikTok Shop, both of which are expanding their investments.

International e-commerce adjusted EBITA returned to a loss of 2 billion.


Alibaba Cloud Accelerates Growth

On the AI front, Alibaba's performance exceeded expectations. Cloud business revenue grew 36%, continuing a slight upward acceleration. External revenue grew 35% this quarter compared with 29% in the previous quarter, showing a notable acceleration.

Additionally, the company stated that over the past three months, token consumption in the public model service market on the MaaS platform increased sixfold (the evolution of AI from Chatbot to Agent will double the demand for tokens and computing power).

Alibaba Cloud's profit margin this quarter is 9%, unchanged from the previous quarter, indicating that the increased proportion of AI business has not dragged down profitability.

Capital expenditure this quarter was ¥29.9 billion, down from the previous quarter. Given Alibaba's previously aggressive investments and the market's stronger emphasis on investment ROI, the reduction in investment may not be a bad thing. Therefore, Alibaba's free cash flow returned to positive this quarter.


Other Business Losses Increased

Losses in other businesses this quarter expanded significantly to about ¥9.8 billion, which is roughly in line with what we mentioned in our Alibaba earnings preview, primarily due to customer acquisition and development investments in AI applications such as AMap and Qwen applications.


Summary

Overall, the earnings report generally fell short of expectations. The only bright spot lies in AI and cloud services: as the industry leader, Alibaba Cloud has delivered solid performance in both growth and profitability. However, as its core Chinese e-commerce business generates less cash flow, while other business segments have entered a phase of heavy investment, the company's profits continue to face persistent pressure.


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