China’s e-commerce and cloud giant Alibaba (BABA) will report Q1 FY26 earnings results on Friday, August 29, with investors watching to see if its big push into artificial intelligence (AI) is starting to pay off. However, analysts expect Alibaba’s quarterly results to mirror peers Tencent (TCEHY) and Baidu (BIDU), where heavy AI spending has yet to deliver meaningful revenue growth.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
To add context, Baidu posted weak Q2 results, with revenue of ¥32.71 billion ($4.56 billion), down 4% from a year earlier and slightly below analysts’ estimate of ¥32.76 billion. Meanwhile, Tencent reported stronger overall Q2 numbers, with revenue rising 15% year-on-year to RMB 184.5 billion ($25 billion). Yet even there, most of the gains came from gaming and marketing, while AI’s direct contribution remained limited.
Chinese Tech Struggles to Monetize AI Push
Chinese tech giants have rolled out large language models and built them into their top apps since the launch of ChatGPT. Alibaba has been one of the most aggressive investors, showing new AI features almost every week. But making money from these tools has been tough for the Chinese companies.
Unlike in the U.S., Chinese users have shown little interest in paid AI subscriptions. Baidu dropped fees for its Ernie chatbot after weak demand, and Tencent has said it is “very hard” to charge users directly.
As a result, companies are turning to enterprise customers by selling application programming interface (API) services through their cloud units. But intense price competition has eroded margins in this space too. For instance, Alibaba cut prices for its Qwen-Long API by 97% in May, and ByteDance soon followed with steep cuts to its Doubao model.
Analysts warn that these heavy discounts could limit near-term revenue gains.
Limited AI Gains Weigh on Alibaba’s Growth
Alibaba is already fighting price battles in the e-commerce space with rivals amid a sluggish Chinese economy. The limited boost from AI could dampen growth prospects further.
Revenue from Alibaba’s cloud division, which includes AI-related sales, is estimated to have risen just 4.3% sequentially to 31.4 billion yuan ($4.4 billion) in the April–June quarter, according to LSEG data. That would mark an 18% year-over-year gain but still points to slowing momentum.
What to Expect on Friday
Wall Street analysts expect Alibaba to report earnings of $1.98 per share for Q1, down 14% from the year-ago quarter. Meanwhile, analysts project Q1 revenues at $35.24 billion, according to the TipRanks Analyst Forecasts Page. The figure marks a year-over-year increase of about 5%.
Analysts believe that AI will remain more of a long-term story, while near-term results will depend on how well Alibaba can defend its e-commerce and cloud business in a tough market.
Is Alibaba Stock a Good Buy Right Now?
Analysts remain highly bullish about Alibaba’s stock trajectory. With 11 Buy ratings and one Hold rating, BABA stock commands a Strong Buy consensus rating on TipRanks. Also, the average Alibaba price target of $149.35 implies about 20.26% upside potential from current levels.
