Alibaba’s latest earnings report gave investors two very different numbers to digest, and the market appeared more interested in the one tied to artificial intelligence.
The Chinese e-commerce and cloud giant reported revenue of RMB243.38 billion, or $35.28 billion, for the quarter ended March 31, 2026, up 3% from a year earlier. Alibaba said revenue would have grown 11% on a like-for-like basis after excluding revenue from the disposed Sun Art and Intime businesses.
That top-line growth was hardly the standout figure in the report, especially with profitability under pressure. Alibaba reported a loss from operations of RMB848 million, or $123 million, compared with income from operations of RMB28.47 billion in the year-ago quarter. Adjusted EBITA fell 84% to RMB5.10 billion, with the company pointing to spending on technology businesses, quick commerce and user experiences.
Investors, however, appeared willing to look beyond the near-term earnings hit because Alibaba’s cloud and AI business gave them a cleaner growth story.
Alibaba’s AI spending hits profit, but cloud growth accelerates
Alibaba has been trying to convince investors that its artificial intelligence push can become a growth engine rather than just another expensive tech investment cycle.
CEO Eddie Wu gave that argument more fuel in the latest quarter, saying Alibaba’s full-stack AI investments had moved from incubation to “commercialization at scale.” Wu also pointed to progress across models, cloud infrastructure, and applications, including deeper integration of e-commerce capabilities into the consumer-facing Qwen app.
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The numbers behind that message were harder to ignore than the earnings pressure. Alibaba’s Cloud Intelligence Group generated revenue of RMB41.63 billion, or $6.04 billion, up 38% from the same quarter last year. Revenue from external customers rose 40%, driven by public cloud growth and the increasing adoption of AI-related products.
AI-related product revenue reached RMB8.97 billion in the quarter, marking the 11th consecutive quarter of triple-digit year-over-year growth, Alibaba reported. The company said its cloud business is onboarding more customers across AI and cloud services, including model training, inference, distributed storage, and high-performance networking.
That cloud performance gave Alibaba a stronger story than the headline earnings figures alone. Cloud Intelligence Group adjusted EBITA rose 57% to RMB3.80 billion, even as the company continued spending on customer growth and technology innovation.
Alibaba’s cash flow shows the cost of the bet
Alibaba reported net cash provided by operating activities of RMB9.41 billion, down 66% from RMB27.52 billion in the same quarter last year. Free cash flow swung to an outflow of RMB17.30 billion, compared with an inflow of RMB3.74 billion a year earlier.
The company said the decline in free cash flow was mainly tied to investments in quick commerce, user acquisition for the Qwen app, and higher cloud infrastructure spending. Those are the same areas management is holding up as future growth drivers, which makes the current quarter a test of investor patience.
For the full fiscal year, the investment drag was even more visible. Alibaba reported revenue of RMB1.02 trillion, up 3%, while adjusted EBITA fell 56% to RMB76.42 billion. Free cash flow for the year was an outflow of RMB46.61 billion, compared with an inflow of RMB73.87 billion in fiscal 2025.
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BABA stock investors focus on the AI payoff
BABA stock rose after the report, even though Alibaba missed market expectations for fourth-quarter profit, according to Reuters. The stock’s U.S.-listed shares jumped 7% after executives said Alibaba had a clearer view of returns from AI spending over the next three to five years.
Wu also told investors that growth and market share remain the priority, with margin still secondary. That message may not satisfy every investor, especially after a quarter that showed a steep decline in adjusted profit and a sharp swing in free cash flow.
Alibaba’s latest quarter still gave bulls something they can point to. The company’s AI-related products are growing quickly, its cloud business is gaining traction, and management is tying those investments back to its e-commerce ecosystem through Qwen and agentic AI tools.
The challenge is that Alibaba now has less room for vague promises. After this report, the company’s AI message raised expectations for BABA stock, and investors will likely want future quarters to show that the spending can keep lifting cloud revenue without continuing to weigh heavily on profit and cash flow.
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