Alibaba (BABA) Stock Declines 4% Following Revenue Miss and 66% Income Drop

TLDR

• Alibaba’s third-quarter revenue was 284.8 billion yuan ($41.4B), falling short of the 290.7 billion yuan analysts predicted.
• Year-over-year net income plunged 66–67%, representing the company’s poorest performance since the start of 2024.
• Substantial expenditures on marketing, quick commerce, and AI infrastructure were responsible for the profit decrease.
• Cloud revenue increased by 36%, while revenue from AI-related products saw triple-digit growth for a tenth straight quarter.
• Alibaba has committed to investing more than $53 billion in AI and recently increased cloud prices by up to 34%.

(SeaPRwire) –   Alibaba disclosed a difficult December quarter on Thursday, falling short of revenue forecasts and recording a sharp profit decline. The news triggered a 4% drop in its U.S.-listed shares during premarket activity.

$BABA (Alibaba) #earnings are out: pic.twitter.com/TJ7lHW3jnD

— The Earnings Correspondent (@earnings_guy) March 19, 2026

Revenue for the quarter ending December 31, 2025, totaled 284.8 billion yuan ($41.4 billion). This missed the analyst consensus of 290.7 billion yuan, representing only a 2% sales increase that had minimal impact.

Alibaba Group Holding Limited, BABA

The net income figure delivered a greater surprise. It plummeted 66% compared to the previous year to 15.6 billion yuan, a decline from 46.4 billion yuan. The company attributed this to a 74% fall in operating income, caused by significant investments in quick commerce, user experience, and technology.

These results constitute Alibaba’s weakest profit showing since early 2024.

CEO Eddie Wu offered an optimistic perspective. “This quarter, Alibaba maintained strong investments across our core pillars of AI and consumption,” he stated, labeling AI “one of our primary growth engines.”

Cloud Is Still the Bright Spot

A true growth narrative exists within the financials. Alibaba’s Cloud Intelligence Group achieved 36% revenue growth, generating 43.3 billion yuan for the quarter. Revenue from AI-related products continued its streak of triple-digit growth, now for ten consecutive quarters.

The company has committed to investing over $53 billion in AI across several years. This significantly outpaces Chinese competitors, though it is a small portion of the $650 billion that U.S. cloud leaders intend to spend in 2026.

This week, Alibaba introduced an enterprise-focused agentic AI service named Wukong. It also increased prices for cloud computing and storage by as much as 34%, a step analysts interpret as a shift towards profiting from its AI assets instead of competing on cost.

Morgan Stanley analyst Gary Yu described the introduction of Alibaba Token Hub—a new division bringing nearly all AI activities under CEO Wu’s control—as an indicator of “explosive AI demand from strong token usage.”

Challenges Piling Up

The quarter faced numerous obstacles.

Alibaba’s e-commerce division is experiencing genuine pressure from local competitors. The company invested heavily during China’s Lunar New Year, distributing coupons with Tencent, ByteDance, and Baidu to boost usage of its consumer AI app. Although rivals achieved significant user increases, Morgan Stanley estimates indicate Qwen’s usage remained elevated above levels seen before the campaign.

Tencent is perceived to have an early advantage in agentic AI, owing to its WeChat ecosystem and extensive user data. This presents a difficult structural challenge for Alibaba to address swiftly.

A surprising departure also occurred. Junyang Lin, the principal developer of Alibaba’s Qwen AI models and a crucial person in the firm’s AI shift, departed during the quarter. The reasons were not revealed, but the exit prompted concerns about the consistency of Alibaba’s research trajectory.

Alibaba has reacted by concentrating more on corporate customers. The new Alibaba Token Hub unit combines its AI product offerings under one framework, providing Wu with direct supervision of the company’s efforts to commercialize AI.

Alibaba’s cloud price increase of up to 34% coincided with a similar action by Baidu, which raised its AI cloud prices by up to 30%.