Alibaba Reports Cloud Growth Amid Sharp Profit Decline

Alibaba Group Holding Limited reported second-quarter revenue of 247.8 billion yuan (approximately $34.8 billion), exceeding market expectations of 242.6 billion yuan. The company saw a 15% year-over-year increase in total revenue, fueled by a 34% surge in its cloud intelligence division and a 16% rise in China e-commerce.

Management attributed the cloud acceleration to increased demand for artificial intelligence computing, model training, and enterprise solutions. AI-related product revenues have grown at a triple-digit pace for nine consecutive quarters, with these products now constituting over 20% of external cloud sales. Quick commerce also saw a 60% surge during the period.

Despite the revenue growth, profitability declined sharply as the company prioritized long-term ecosystem growth and market share. GAAP net income fell 53% to 20.6 billion yuan, and free cash flow turned negative at negative 21.8 billion yuan due to aggressive investments in AI and quick commerce. The company noted a 50% reduction in per-order losses since mid-summer to improve operational efficiency.

Investors initially reacted positively to the stabilizing operating trends, leading to a 4% rise in shares during premarket trading. Jefferies analyst Thomas Chong maintained a Buy rating and named the company a top pick for 2026, despite adjusting the price target to $225.