Shares of Alibaba (BABA) jumped in Thursday’s premarket trading after the company topped Wall Street estimates for revenue growth in its first real test since an AI-fueled surge in the stock price. Shares rose over 6% in the premarket session as the company beat on the top and bottom lines after the stock’s Hong Kong listing (HK:9988) slipped ahead of the results.
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Revenues in the Fiscal third quarter rose 8% to $38.38 billion as a strong year-end from shoppers, promotional activity and strength in the cloud arm underpinned a robust improvement in performance. The revenue figure was a little above the consensus $38.26 billion. Diluted earnings per share of $2.79 beat the $2.67 forecast.
“This quarter’s results demonstrated substantial progress in our ‘user first, AI-driven’ strategies and the re-accelerated growth of our core businesses,” said CEO Eddie Wu.
AI Drives BABA Cloud Growth
It’s the first major test for BABA after a stunning 48% jump in the stock in 2025, fueled by expectations around Chinese AI. The Deep-Seek-inspired rally added about $110 billion in market cap, while there is growing excitement around Chinese AI capabilities in general. A tie-up with Apple (AAPL) and founder Jack Ma’s meeting with Beijing political leadership has also driven the shares higher this year.
The launch of DeepSeek’s cheaper-to-build AI models, which sparked wild gyrations in the stock prices of some U.S. tech giants earlier this year, has fostered hope that AI adoption can accelerate even faster than previously thought and boost demand for Alibaba Cloud’s services.
Earlier this year Alibaba launched a new version of its Qwen 2.5 AI model that it claims surpassed the DeepSeek-V3.
Cloud revenues rose 13% year-on-year to 31.7 billion yuan, $4.3 billion, which BABA said was primarily driven by double-digit public cloud revenue growth, including the growing adoption of AI-related products.
“Notably, AI-related product revenue maintained triple-digit year-over-year growth for the sixth consecutive quarter,” BABA said in its earnings update. “We will continue to invest in anticipation of customer growth and technology innovation, particularly in AI infrastructure, to increase cloud adoption for AI and maintain our market leadership.”
Promotions Help E-Commerce Arm
Promotional activity like the mammoth Singles Day event last November helped fuel domestic sales while there was also robust demand from international markets.
Revenues from Taobao and Tmall Group, the company’s core e-commerce division, rose 9% year-over-year to over 100 billion yuan, about $13.8 billion, BABA said.
Meanwhile revenue from the international e-commerce business grew 32% year-over-year to 37.8 billion yuan ($5.2 billion), primarily driven by strong performance of cross-border businesses, although BABA said investments in some European markets and the Gulf region to acquire users resulted in increased losses.
Is BABA a Good Stock to Buy?
On Wall Street, BABA has a Strong Buy consensus rating based on eight Buys and one Hold. The average BABA price target of $128.67 implies about 2% upside after the stock’s rapid ascent this year. The figures are liable to change in the wake of the earnings update.
