Alibaba Group (BABA), the Chinese e-commerce and cloud company, reported weaker-than-expected Q4 FY26 earnings results as aggressive spending on AI, cloud expansion, and quick commerce continued to weigh on profitability. Following the earnings release, Alibaba stock fell over 2% in premarket trading on Wednesday.
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For the quarter ended March 31, 2026, Alibaba reported revenue of 243.38 billion yuan ($35.28 billion), up 3% year-over-year but slightly below analyst expectations of $36.35 billion. Adjusted diluted earnings per ADS came in at $0.09, down 95% from the prior year and well below the consensus estimate of $0.90 per share.
Looking ahead, Alibaba said it will continue investing aggressively in AI and cloud infrastructure. Management reaffirmed the company’s 380 billion yuan ($53 billion) AI spending plan through 2027 as it aims to expand its position in China’s growing AI market.
AI and Cloud Remain the Bright Spot
The company’s cloud and AI business remained a bright spot during the quarter. Revenue from Cloud Intelligence Group rose 38% year-over-year to 41.63 billion yuan, while revenue from external customers accelerated to 40% growth.
Alibaba said AI-related product revenue delivered triple-digit growth for the 11th consecutive quarter, with AI products now contributing roughly 30% of cloud revenue.
CEO Eddie Wu said Alibaba’s AI strategy is moving from “incubation to commercialization at scale” as the company pushes deeper into enterprise AI services and consumer applications built around its Qwen platform.
Spending Pressures Hurt Margins
However, the strong cloud momentum was offset by a sharp decline in profitability as Alibaba continued increasing investments across several businesses. Adjusted EBITA fell 84% year-over-year to 5.1 billion yuan as the company spent heavily on AI infrastructure, quick commerce, and user acquisition.
At the same time, sales and marketing expenses surged to 53.4 billion yuan from 36.2 billion yuan a year ago, driven largely by subsidies in its e-commerce business and spending tied to the Qwen AI app.
The company’s free cash flow also turned negative during the period, with an outflow of 46.61 billion yuan ($6.76 billion), compared with an inflow of 73.87 billion yuan in fiscal year 2025. Meanwhile, net cash provided by operating activities declined 53% year-over-year to 76.21 billion yuan ($11.05 billion).
Is Alibaba Stock a Buy Now?
Wall Street remains constructive on the stock. Alibaba carries a Strong Buy consensus rating based on 14 Buy ratings and two Holds over the past three months. The average BABA price target stands at $184.07, suggesting roughly 36.57% upside from current levels.
However, it’s worth noting that estimates will likely change following today’s earnings report.
