E-commerce giant Alibaba (BABA) heads into Friday’s Q1 FY2026 report with strong momentum. For FY2025 (ended this past March), the company posted a record 7% year-on-year revenue boost, while earnings per share surged 72% on the back of efficiency gains, tighter cost control, and strategic investments in AI and cloud. When compared to U.S. benchmarks like the S&P 500 (SPX), BABA stock has outperformed so far this year, rallying almost 50%.
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With Taobao and Tmall showing renewed e-commerce growth and Alibaba Cloud benefiting from rising AI-driven demand, the company is firing on all cylinders. Looking ahead, AI should further accelerate growth into FY2026 and beyond, while today’s valuation leaves the stock looking attractive.
On balance, I’m turning Bullish on Alibaba given the confluence of positive factors and the growing probability of BABA trading above its key upside handle of $145 per share — a key ceiling to open the door to further gains in the months ahead.
What Fueled FY2025’s Record Results
The March 2025 quarter capped a year where Alibaba delivered a 36% jump in adjusted EBITA to $4.5 billion and a 93% surge in operating income to $3.9 billion. Revenue for the quarter rose 7% to $32.6 billion, with strength across its core e-commerce and cloud businesses.
Taobao and Tmall, the group’s most significant revenue contributor, grew customer management revenue by 12% YoY. That came as investments in user experience and monetization tools like Quanzhantui paid off, lifting merchant engagement and transaction volumes. Cross-border commerce through AliExpress and Trendyol expanded 22%, while Alibaba Cloud accelerated to 18% growth on the back of soaring AI demand.
On the company’s earnings call, management highlighted how AI adoption is spilling into new industries (from financial services to manufacturing), helping drive demand for both public cloud and AI products. The Qwen3 AI models, launched in April and already open-sourced globally, are expected to anchor further growth.
Profitability Bounces Back
If FY2024 was about stabilizing margins, FY2025 was about expanding them. Operating margins rose to 12% from 7% a year ago, helped by tighter cost controls, a shift away from low-margin direct sales, and the fading impact of share-based compensation expenses. Cloud Intelligence Group saw EBITA jump 69% as operating efficiency improved even with heavy AI infrastructure investments.
It’s also worth noting that Digital Media & Entertainment turned profitable for the first time, and loss-making international e-commerce units narrowed losses significantly. Accordingly, earnings per share for FY2025 rose to $7.38, up sharply from $4.29 the prior year, reflecting both profit growth and a 5.1% drop in share count thanks to $11.9 billion in buybacks.
Lastly, management reiterated that AI applications in e-commerce, including search and recommendation engines to advertising optimization, should keep lifting monetization rates and profitability over time, and we should start witnessing some of these effects in Q1 2026.
What Could Drive This Quarter’s Results
Now, analysts expect Alibaba to post around $35.4 billion in revenue and $2.16 in adjusted EPS for FQ1 2026 this Friday. Management had pointed to accelerating growth earlier, to be led by AI, Cloud, and improving international e-commerce margins. Cloud remains the crown jewel. AI product revenue has now seen seven straight quarters of triple-digit growth.
Clearly, more enterprises are shifting workloads to Alibaba Cloud to leverage AI capabilities, and this is a trend management expects will continue as companies modernize their IT infrastructure. In e-commerce, Taobao and Tmall are doubling down on user engagement tools and AI-driven personalization, all while international commerce aims for overall profitability in FY2026. And, with 88VIP members surpassing 50 million and growing at double-digit rates, Alibaba’s premium consumer base offers another lever for higher-margin revenue growth.
BABA’s Unignorable Valuation
But despite the improving fundamentals, Alibaba trades at just 14.1x this year’s expected earnings, which is well below global tech peers. Also, note that the company ended last quarter with a net cash position of $24.8 billion, giving it ample room for aggressive buybacks at these depressed valuations.
Buybacks, in fact, cut the share count by over 5% last year, boosting EPS and signaling management confidence in intrinsic value. If earnings continue to grow at the forecasted double-digit pace, today’s multiple looks unsustainably low, especially for a business with Alibaba’s cash generation and strategic AI optionality.
Is Alibaba Stock a Buy, Sell, or Hold?
Wall Street remains extremely bullish on BABA, despite shares having yet to experience an extended rally. The stock carries a Strong Buy consensus rating based on 12 Buy and one Hold recommendations over the past three months. Notably, not a single analyst rates the stock a Sell. BABA’s average stock price target of $148.55 suggests ~19% upside from current levels.
Alibaba’s Return to Growth Creates a Bullish Setup
Alibaba’s performance last year signaled a return to growth, margin expansion, and a stronger foothold in the AI revolution. With FQ1 2026 estimates pointing to sustained revenue and earnings acceleration, a rock-solid balance sheet, and shares trading at just 14.1x earnings, the risk-reward profile looks highly attractive.
For investors ready to lean into AI, cloud, and e-commerce tailwinds, Alibaba offers a rare combination of growth, profitability, and deep value heading into the new fiscal year.