Alibaba Misses Revenue, But AI Cloud Has Silver Lining

Benchmark analyst Fawne Jiang maintained Alibaba Group Holding BABA with a Buy and lowered the price target from $190 to $176 on Friday.

Alibaba reported its fiscal fourth-quarter revenue growth of 7% to $32.58 billion, missing the analyst consensus estimate of $33.08 billion. It clocked an adjusted earnings per ADS of $1.73, which beat the analyst consensus estimate of $1.48. 

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Revenue from Taobao and Tmall Group grew by 9% to $13.97 billion. Revenue from Alibaba International Digital Commerce Group increased by 22% to $4.63 billion, driven by the growth of cross-border businesses. In addition:

• Local Services Group revenue grew by 10% to $2.22 billion
• Orders for Amap and Ele.me grew
• Cainiao Smart Logistics Network Limited's revenue decreased 12% to $2.97 billion.
• Cloud Intelligence Group revenue grew by 18% to $4.15 billion.
• Digital Media and Entertainment Group rose 12% to $765 million.
• Customer management revenue (CMR) grew 12%
• Cloud revenue accelerated to high teens, fueled by strong demand for AI services.

Jiang blamed Alibaba International Digital Commerce Group’s soft performance and outdated consensus estimates.

Looking ahead, Jiang expects CMR to continue outpacing GMV growth through fiscal 2026, supported by sustained take rate gains, and Cloud to maintain momentum with new customer onboarding and cross-selling. AIDC growth may moderate amid evolving global trade dynamics. At the same time, Ele.me ramps up investment in food delivery and instant commerce in partnership with Taobao and Tmall Group to defend against JD.com, Inc JD and offensively drive engagement via Taobao app integration.

Jiang raised his revenue projections for CMR and TTG but lowered the group-level growth forecast to 6% (from 11% previously, excluding asset divestitures), reflecting AIDC resets and potential headwinds from Ele.me.

While the fiscal fourth quarter was not clean, and near-term margin pressure remains a concern, the analyst continues to view Alibaba as a leading beneficiary of accelerated AI adoption in China and a top structural player in the sector.

Jiang projected fiscal 2026 revenue of $134.44 billion and EPS of $8.50. He expects fiscal 2027 revenue of $146.03 billion and EPS of $11.01.

Price Action: BABA shares traded higher by 0.64% at $124.69 at the last check on Friday.

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