Chinese e-commerce giant Alibaba (BABA) just reported its Q2 FY26 earnings results for the quarter ended September 30, 2025, showing a mixed performance. Though revenue came in ahead of Wall Street estimates, profit and cash flow fell sharply as the company poured more money into AI, cloud infrastructure, and quick commerce. Shares are trading more than 4% higher in pre-market today.
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Second Quarter Highlights
For the quarter, Alibaba posted revenue of 247.8 billion yuan ($34.8 billion), up 5% year-over-year and above analysts’ expectations of 242.65 billion yuan. Non-GAAP net income came in at RMB 10.4 billion, down 72% from a year ago.
Meanwhile, adjusted diluted EPS came in at 4.36 yuan per ADS versus the consensus estimate of 6.34 yuan. Non-GAAP diluted earnings per share came in at $0.08, a decrease of 71% year-over-year.
Alibaba’s Cloud Intelligence Group performed well, with revenue jumping 34% year-over-year to 39.8 billion yuan ($5.6 billion), and above analyst estimates of roughly RMB 38 billion. Management said AI-related product revenue delivered triple-digit growth for the ninth straight quarter, with more enterprises now using Alibaba’s AI tools for tasks such as coding assistants and other value-added applications.
At the same time, Alibaba’s core China commerce business, which includes Taobao and Tmall, posted solid top-line progress. Customer management revenue also climbed 10%, reflecting stronger monetization on the platforms.
Cash Flow Turns Negative as Spending Rises
Cash generation was weak this quarter. Operating cash flow fell 68% from last year to RMB 10.1 billion, showing the impact of higher spending. Free cash flow also turned negative, with an outflow of RMB 21.8 billion compared with an inflow of RMB 13.7 billion a year ago. This was mainly due to higher spending on cloud and the push into quick commerce.
Even with this spending, Alibaba still ended the quarter with RMB 573.9 billion (US$80.6 billion) in cash and liquid assets.
CFO Toby Xu said the company is putting profits and cash to work for future growth and cautioned that earnings may continue to move up and down as the company remains in its current investment cycle.
Share Repurchases
During the quarter, Alibaba repurchased 17 million ordinary shares (equivalent to 2 million ADSs) for a total of $253 million. As of September 30, 2025, Alibaba still had $19.1 billion remaining under its share repurchase program, which runs through March 2027.
Outlook
Alibaba did not issue revenue guidance for the year but said cloud and AI will remain key priorities, with plans to grow its presence in AI-driven cloud services.
Is Alibaba Stock a Good Buy Right Now?
Analysts remain bullish about Alibaba’s stock trajectory. With 19 Buy ratings and two Hold ratings, BABA stock commands a Strong Buy consensus rating on TipRanks. Also, the average Alibaba price target of $198.21 implies about 23.32% upside potential from current levels. However, it’s worth noting that estimates will likely change following today’s earnings report.
