Key Points
Alibaba is seeing strong cloud computing growth, but it's a much smaller segment compared to its e-commerce operations.
Meanwhile, its e-commerce business continues to deal with a competitive landscape.
- 10 stocks we like better than Alibaba Group ›
Alibaba (NYSE: BABA) shares sank after the company reported its fiscal third-quarter results (ending Dec. 31, 2025), as rising expenses ate into profitability and results fell shy of expectations. The company has been investing heavily in both AI infrastructure and quick commerce. The stock is down nearly 15% on the year, as of this writing.
Let's take a close look at its results and prospects to see if the stock is a rebound candidate.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Improved revenue growth, but heavy spending weighs on profits
Alibaba's cloud computing business continues to see strong revenue growth, fueled by demand for artificial intelligence (AI) products. Its cloud intelligence revenue jumped by 36% to $6.1 billion. AI product revenue more than doubled for the 10th straight quarter. The segment's adjusted EBITA (earnings before interest, taxes, and amortization), meanwhile, climbed by 25% to $559 million.
The company projected that it could reach $100 billion in AI revenue over the next five years. Before its report, the company said it would raise prices on some of its AI services by as much as 34%.
Alibaba's largest business remains its e-commerce operations, led by Tmall, which serves established brands, and Taobao, which allows both brands and individuals to sell on its platform. The company has worked hard to turn this business around, but the results were mixed in the quarter. E-commerce revenue rose by 6% to $22.8 billion. The growth was fueled by a 56% jump in quick-commerce revenue to $3 billion.
The company's important third-party business revenue, meanwhile, only edged up 1% to $14.7 billion, hurt by the phase-out of its software service fee implementation. Direct sales were flat at $4.1 billion, and wholesale sales rose 5% to $990 million. However, its investment in quick commerce led to a 43% decline in segment EBITA to $4.9 billion.
Overall, Alibaba's revenue rose by 2% to $40.7 billion, or 9% when excluding dispositions. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) plunged 45% to $4.9 billion, while its adjusted earnings per American depositary share (ADS) sank 67% to $1.01.
Image source: The Motley Fool.
Can Alibaba stock rebound?
Alibaba is seeing strong growth in its cloud computing unit, and the company still has a big opportunity ahead as AI demand grows. However, unlike its U.S. counterpart Amazon, whose cloud unit is its most profitable segment, Alibaba's business is still much more reliant on e-commerce. This segment is just a much bigger piece of the pie, and it has struggled in the face of a very competitive market in China. It's seeing nice revenue growth in quick commerce, but it is coming at a price.
As such, I'd remain on the sidelines for now.
Should you buy stock in Alibaba Group right now?
Before you buy stock in Alibaba Group, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alibaba Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $494,747!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,094,668!*
Now, it’s worth noting Stock Advisor’s total average return is 911% — a market-crushing outperformance compared to 186% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of March 21, 2026.
Geoffrey Seiler has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
