By Adam Clark
Alibaba Group Holding stock was falling early Thursday. The Chinese internet company's earnings failed to reassure the market that its artificial-intelligence progress would outweigh headwinds in other parts of its business.
Alibaba reported a December-quarter net profit of 15.63 billion yuan ($2.24 billion), down 66% from the previous year. Alibaba and rivals JD.com and Meituan have been waging a price war, especially in food delivery, which has hampered profits across the sector.
Revenue rose 2% to 284.84 billion yuan, narrowly below consensus forecasts. Alibaba noted that revenue on a like-for-like basis rose 9%, excluding businesses it exited during the year, with AI a particular bright spot.
"AI is and will continue to be one of our primary growth engines. Our Cloud Intelligence Group's revenue is up 36% with AI-related product revenue delivering triple-digit growth for the tenth consecutive quarter, " CEO Eddie Wu wrote in a statement.
Alibaba's American depositary receipts were down 4.7% in premarket trading.
Alibaba shares are down in both Hong Kong and U.S. trading this year so far. The company has lost some key AI researchers in recent months and this week announced that it would bring all its AI businesses under a single unit led by CEO Eddie Wu in an effort to sharpen its focus.
The drop is a sharp contrast to other Chinese AI companies like recently listed MiniMax and Zhipu AI -- which trades under the name Knowledge Atlas Technology -- which have soared in recent weeks amid excitement over the adoption of AI agents, or programs which can carry out tasks independently.
In particular the rise of OpenClaw, the popular software that allows users to command and interact with personalized AI agents through messaging apps, has transformed the Chinese AI sector. China's AI companies, including Alibaba, have built dozens of tools designed for integration with OpenClaw.
"OpenClaw's rising popularity marks a meaningful shift in the AI form factor from chat to execution, and we believe this change matters for equities," wrote J.P. Morgan analyst Alex Yao in a research note.
However, Alibaba stock hasn't benefited much from the OpenClaw shift. Yao argues that MiniMax and Zhipu will get the immediate boost due to increased use of their AI models, but larger Chinese technology companies such as Alibaba, Tencent and Baidu will eventually benefit due to the use of their infrastructure.
"As the market moves from installation heat towards monetization validation, we would rotate more meaningfully into Alibaba, Tencent and Baidu, where the key question will be which name captures cloud billing, enterprise deployment and downstream workflow economics," Yao wrote.
There are some early signs of the shift toward monetization. Alibaba's cloud unit said Wednesday it plans to raise prices for its T-head AI computing chips, such as Zhenwu 810E, by 5% to 34%. Prices of its storage service will increase by 30%, according to The Wall Street Journal.
"Experts project Alibaba Cloud's revenue growth in 2026 to reach 35 -- 45%, driven by strong expansion in AI cloud services and market share gains in traditional cloud offerings," wrote Eric Shen, Senior Analyst at Third Bridge.
That would be comparable with U.S. cloud-computing giants Microsoft and Google. However, it's not clear if that will be enough to outweigh difficult e-commerce trends in China and heavy spending in the competitive food-delivery sector.
Write to Adam Clark at adam.clark@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 19, 2026 06:33 ET (10:33 GMT)
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