The Investor
13 May 2026, 16:05
Alibaba Surges 6% as Cloud AI Momentum Overwhelms Profit Compression
May 13, 2026 | NYSE: BABA
Alibaba is jumping 6% today after a quarter that presents two very different stories simultaneously — collapsing near-term profitability and accelerating AI-driven cloud growth — with the market firmly choosing to focus on the latter.
Headline revenue of RMB243.4 billion (US$35.3 billion) grew just 3% year-on-year, but that figure is distorted by the disposal of Sun Art and Intime. On a like-for-like basis, stripping out those divested businesses, revenue grew 11% — a meaningfully healthier picture. The standout segment is Cloud Intelligence Group, which grew 38% to RMB41.6 billion, with external customer revenue accelerating to 40% growth. AI-related product revenue delivered its eleventh consecutive quarter of triple-digit year-on-year growth, now accounting for 30% of cloud external revenue and reaching RMB8.97 billion in the quarter alone. Cloud adjusted EBITA jumped 57% to RMB3.8 billion. This is the number driving today's rally.
The profitability story elsewhere is far less flattering. Consolidated adjusted EBITA collapsed 84% to RMB5.1 billion from RMB32.6 billion a year ago. China E-commerce Group's adjusted EBITA fell 40% as the company poured investment into quick commerce, user experience, and AI integration. The "All Others" segment swung to a RMB21.2 billion adjusted EBITA loss from RMB3.4 billion a year ago, driven primarily by aggressive spending on Qwen app user acquisition and technology businesses. Non-GAAP net income was essentially zero at RMB86 million, down 100% year-on-year. Free cash flow swung to a RMB17.3 billion outflow from a RMB3.7 billion inflow a year ago.
GAAP net income of RMB23.5 billion looked strong on paper, up 96%, but this is almost entirely attributable to mark-to-market investment gains rather than operating performance — a point the market understands well enough to look past.
What is resonating with investors today is the strategic clarity. Alibaba is explicitly building a full-stack AI platform — models, cloud infrastructure, inference chips, and agentic applications — and the Cloud segment is beginning to demonstrate that this investment is converting into real revenue acceleration. The Qwen model family is gaining traction, the Model Studio customer base grew eight-fold year-on-year, and proprietary Zhenwu inference chips are now deployed at scale across cloud infrastructure with over 30 automakers using them for autonomous driving R&D.
Quick commerce is also showing signs of maturation. Revenue surged 57% to RMB20 billion, unit economics improved sequentially, and average order value is rising through order mix optimization. The international commerce business approached breakeven, with adjusted EBITA loss narrowing from RMB3.6 billion to just RMB138 million.
With US$75.5 billion in cash and liquid investments, Alibaba has the balance sheet to sustain this investment cycle. The board also declared an annual dividend of US$1.05 per ADS. Today's 6% move reflects investors beginning to price in the possibility that Alibaba's AI cloud bet is working — and that the current profit trough is the cost of building something much larger.
May 13, 2026 | NYSE: BABA
Alibaba is jumping 6% today after a quarter that presents two very different stories simultaneously — collapsing near-term profitability and accelerating AI-driven cloud growth — with the market firmly choosing to focus on the latter.
Headline revenue of RMB243.4 billion (US$35.3 billion) grew just 3% year-on-year, but that figure is distorted by the disposal of Sun Art and Intime. On a like-for-like basis, stripping out those divested businesses, revenue grew 11% — a meaningfully healthier picture. The standout segment is Cloud Intelligence Group, which grew 38% to RMB41.6 billion, with external customer revenue accelerating to 40% growth. AI-related product revenue delivered its eleventh consecutive quarter of triple-digit year-on-year growth, now accounting for 30% of cloud external revenue and reaching RMB8.97 billion in the quarter alone. Cloud adjusted EBITA jumped 57% to RMB3.8 billion. This is the number driving today's rally.
The profitability story elsewhere is far less flattering. Consolidated adjusted EBITA collapsed 84% to RMB5.1 billion from RMB32.6 billion a year ago. China E-commerce Group's adjusted EBITA fell 40% as the company poured investment into quick commerce, user experience, and AI integration. The "All Others" segment swung to a RMB21.2 billion adjusted EBITA loss from RMB3.4 billion a year ago, driven primarily by aggressive spending on Qwen app user acquisition and technology businesses. Non-GAAP net income was essentially zero at RMB86 million, down 100% year-on-year. Free cash flow swung to a RMB17.3 billion outflow from a RMB3.7 billion inflow a year ago.
GAAP net income of RMB23.5 billion looked strong on paper, up 96%, but this is almost entirely attributable to mark-to-market investment gains rather than operating performance — a point the market understands well enough to look past.
What is resonating with investors today is the strategic clarity. Alibaba is explicitly building a full-stack AI platform — models, cloud infrastructure, inference chips, and agentic applications — and the Cloud segment is beginning to demonstrate that this investment is converting into real revenue acceleration. The Qwen model family is gaining traction, the Model Studio customer base grew eight-fold year-on-year, and proprietary Zhenwu inference chips are now deployed at scale across cloud infrastructure with over 30 automakers using them for autonomous driving R&D.
Quick commerce is also showing signs of maturation. Revenue surged 57% to RMB20 billion, unit economics improved sequentially, and average order value is rising through order mix optimization. The international commerce business approached breakeven, with adjusted EBITA loss narrowing from RMB3.6 billion to just RMB138 million.
With US$75.5 billion in cash and liquid investments, Alibaba has the balance sheet to sustain this investment cycle. The board also declared an annual dividend of US$1.05 per ADS. Today's 6% move reflects investors beginning to price in the possibility that Alibaba's AI cloud bet is working — and that the current profit trough is the cost of building something much larger.
