Key points:
- Strong earnings and AI push – Alibaba’s revenue and cloud growth highlight AI as its core focus, with major investments ahead, including a partnership with Apple.
- Chinese tech rally – Alibaba’s success is lifting Chinese tech stocks amid improving sentiment, but sustainability remains uncertain.
- Valuation risks – The stock trades above analyst targets, making future gains dependent on clear AI monetization and sustained business growth.
Alibaba just delivered a strong earnings report, sending its stock soaring and reigniting investor excitement. With AI taking centre stage, the company is making big bets on the future. But is this a real comeback, or just another short-term hype cycle?
Alibaba’s earnings: Strong results, AI-fuelled growth
Alibaba reported impressive numbers:
- Revenue: RMB 280.15 billion (USD 38.6 billion), up 8% year-over-year, surpassing estimates.
- Adjusted Net Profit: RMB 51.07 billion (USD 7.01 billion), up 6%.
- Cloud Intelligence Revenue: RMB 31.74 billion, up 13% – a sign AI is driving major business growth.
- E-commerce: Taobao and Tmall grew 5%, while international digital commerce surged 32%.
These strong results pushed Alibaba’s stock up 14%, and it’s now up around 60% year-to-date.
The AI story: Alibaba’s big bet on the future
Alibaba isn’t just riding the AI wave – it’s making AI the heart of its strategy. CEO Eddie Wu has declared Artificial General Intelligence (AGI) as the company’s “primary objective.” To cement its position in the AI race, Alibaba is developing a deep reasoning AI model aimed at competing with China’s emerging AI leader, DeepSeek. Additionally, its cloud business, which plays a crucial role in AI development, has achieved its fastest growth in over two years. The company has committed to investing more in AI and cloud over the next three years than it has in the past decade.
AI is rapidly transforming industries, from cloud computing to e-commerce personalization. Strengthening its foothold in this landscape, Alibaba recently announced a partnership with Apple to integrate AI into iPhones sold in China, further solidifying its growing influence in the space.
Chinese tech: A sector on the move
Alibaba’s earnings aren’t just a win for the company – they’re fuelling a broader rally in Chinese tech stocks. The resurgence is being driven by several factors, including the growing recognition of Chinese AI startups such as DeepSeek, which have positioned themselves as global players in the AI space. At the same time, regulatory shifts are signalling a new era for Chinese tech firms. After years of government crackdowns that weighed heavily on major tech companies, there are now indications of a more business-friendly environment. Jack Ma’s return to the public eye, alongside President Xi Jinping, is widely seen as a turning point, suggesting that Beijing may be willing to support its homegrown tech champions rather than restrict them.
Investor sentiment has turned notably bullish, with ETFs tracking Chinese tech stocks experiencing a significant surge as optimism around AI grows. This renewed confidence has led to strong inflows into the sector, reinforcing the idea that China’s tech industry is regaining its footing on the global stage. However, the key question for investors remains: How long will this rally last, and can Alibaba sustain its momentum amid growing competition and economic uncertainties?
Opportunities for Alibaba
- AI is becoming a core growth driver, boosting Alibaba’s cloud business and future potential.
- International e-commerce is expanding fast, with 32% growth in platforms like AliExpress.
- If China’s regulatory environment stays stable, Alibaba could regain lost investor confidence.
Risk factors and challenges ahead
- Trade tensions and geopolitical uncertainty. U.S.-China relations continue to be a risk factor, with the potential for new trade restrictions or tariffs on Chinese tech exports, which could impact Alibaba’s global ambitions, particularly in expanding its cloud services and e-commerce platforms.
- Competition is fierce – rivals like PDD Holdings (Pinduoduo, Temu) and ByteDance (Douyin, TikTok) are gaining ground.
- China’s economy is still sluggish, which could slow down e-commerce growth.
- Valuation concerns – the stock is currently trading above the average analyst 12-month price target. While AI enthusiasm and strategic partnerships have fuelled this rally, some analysts caution that the stock is now trading at technically overbought levels. Even though the forward P/E is currently lower than the long-term average, it’s significantly higher than last month’s multiple. Going forward, investors will be looking for Alibaba to not just sustain its growth but to present a clear path to monetizing AI and expanding its cloud revenue margins.
Where to go from here?
For investors, Alibaba’s strong earnings and AI push are promising. However, its rapid stock price appreciation raises questions about whether there is still room for further gains. Therefore, Alibaba must continue to demonstrate that its AI strategy can translate into meaningful revenue and profit growth. Investors should watch for clear signals on how the company plans to maintain its competitive edge in AI, fend off competition, and navigate regulatory uncertainties.
- If AI continues to deliver real revenue growth, Alibaba could sustain its rally.
- Investors should watch for continued momentum in cloud and e-commerce.
- If Beijing keeps supporting private tech firms, Chinese tech stocks could extend their recovery.
Final thoughts
Alibaba’s latest earnings report is a strong signal that it’s turning the corner. With AI at the core of its strategy, the company is positioning itself for long-term success. But competition is heating up, and China’s economy remains a wildcard. For investors, the key question is: Has all the good news already been priced in? For those with a long-term outlook, Alibaba remains a fascinating AI and e-commerce powerhouse. But after a massive rally, the next big test will be whether it can deliver on its AI ambitions without overpromising and underdelivering
