Key takeaway
In FY2026Q4, Alibaba recorded revenue of RMB243.38bn, up 2.93% YoY, while Non-GAAP net profit was RMB86mn, down 99.71% YoY. China commerce group recorded revenue of RMB122.22bn, up 5.96% YoY, with adjusted EBITA of RMB24.01bn, down 39.59% YoY; among which CMR revenue was RMB73.024bn, up 1.17% YoY. Subsidies were netted against revenue (similar to the OMS practice of PDD), and after adding back subsidies CMR grew 8% YoY. Cloud intelligence group recorded revenue of RMB41.626bn, up 38.17% YoY, with growth further accelerating QoQ; external revenue growth accelerated to 40%. Adjusted EBITA of cloud intelligence reached RMB3.796bn, corresponding to a margin of 9.12%. AIDC recorded revenue of RMB35.429bn, up 5.51% YoY, with adjusted EBITA of -RMB138mn, and losses narrowed significantly both YoY and QoQ. All Others recorded revenue of RMB65.459bn, down 21.40% YoY, mainly due to the deconsolidation of Sun Art Retail. Adjusted EBITA was -RMB21.16bn, with losses expanding significantly both YoY and QoQ, mainly due to investment in AI businesses such as Qwen.
Event
On May 13, 2026, Alibaba disclosed its FY2026Q4 earnings. In FY2026Q4, Alibaba recorded revenue of RMB243.38bn, up 2.93% YoY, while Non-GAAP net profit was RMB86mn, down 99.71% YoY.
Brief analysis
FY2026Q4 key results: Total revenue was RMB243.38bn, up 2.93% YoY, while Non-GAAP net profit was RMB86mn, down 99.71% YoY. China commerce group recorded revenue of RMB122.22bn, up 5.96% YoY, with adjusted EBITA of RMB24.01bn, down 39.59% YoY; among which CMR revenue was RMB73.024bn, up 1.17% YoY. Subsidies were netted against revenue (similar to the OMS practice of PDD), and after adding back subsidies CMR grew 8% YoY. Cloud intelligence group recorded revenue of RMB41.626bn, up 38.17% YoY, with growth further accelerating QoQ; external revenue growth accelerated to 40%. Adjusted EBITA of cloud intelligence reached RMB3.796bn, corresponding to a margin of 9.12%. AIDC recorded revenue of RMB35.429bn, up 5.51% YoY, with adjusted EBITA of -RMB138mn, and losses narrowed significantly both YoY and QoQ. All Others recorded revenue of RMB65.459bn, down 21.40% YoY, mainly due to the deconsolidation of Sun Art Retail. Adjusted EBITA was -RMB21.16bn, with losses expanding significantly both YoY and QoQ, mainly due to investment in AI businesses such as Qwen.
Alibaba Cloud + Qwen + T-Head: Full-stack AI begins to show results. (1) For Alibaba Cloud, revenue growth accelerated to 38% this quarter, while external revenue growth accelerated to 40%. AI-related products achieved triple-digit YoY growth for 11 consecutive quarters. AI revenue reached RMB9bn this quarter (ARR RMB36bn), accounting for 30% of external cloud revenue and expected to increase to 50% within one year. External cloud revenue growth is expected to further accelerate next quarter, and AI-related revenue growth is expected to maintain triple-digit growth. (2) At the model level, after the establishment of the ATH business group, multiple models have been released, including Qwen3.6-Plus (coding flagship), HappyOyster (world model), and HappyHorse (multimodal). Alibaba’s model capabilities continue to validate themselves. Compared with multimodal capabilities, the market may pay more attention to coding capabilities in the short term. The upcoming Qwen3.6-Max flagship is expected to further improve coding performance. Currently, MaaS revenue mainly comes from Qwen and the Bailian platform. MaaS-related revenue exceeded RMB8bn (about USD1.2bn) this quarter. ARR is expected to reach RMB10bn (about USD1.5bn) in the June quarter and exceed RMB30bn (about USD4.5bn) by year-end. (3) Regarding T-Head, the self-developed Zhenwu PPU has deployed more than 100,000 cards on Alibaba Cloud’s public cloud platf orm. Internal pricing follows a cost-plus model, while external pricing follows market competition. The gross margin for internal supply is about 20–30 pcts lower than that for external customers. This year, the share of T-Head’s external revenue has increased significantly. In March, the company also mentioned during a callback that Alibaba Cloud could reach USD100bn in external revenue in five years and achieve a steady-state margin of 20%, but the market did not accept this view at that time. During this earnings call and callback, the company provided a more detailed breakdown of how full-stack AI and long-term margins could reach 20%. Alibaba’s primary goal is currently growth and consolidating its market leadership, while the secondary goal is profit improvement. Benefiting from the full-stack AI strategy, cost reductions at T-Head and a higher share of high-margin MaaS revenue, cloud business margin is expected to improve significantly over the next 2–4 quarters.
QC commentary turns more positive, expectations for easing competition strengthen further. During the earnings call, management stated that the FY2027 QC UE breakeven means achieving positive monthly UE in certain months of that fiscal year, rather than a positive full-year average. The company maintains its target of halving QC losses in FY2027 and FY2028 and achieving overall profitability in FY2029. Overall, management expressed a more positive view on narrowing losses in instant retail, further strengthening expectations that the flash sale competition will ease. In the medium term, repairing the competitive landscape requires resonance between internal and external variables: It depends on continued regulatory standardization and proactive cost reduction and efficiency improvement by platforms, and it also requires more group resources to shift from food delivery toward AI.
Earnings forecast and valuation:Revenue growth for Alibaba is expected to reach 11.10% and 13.22% in FY2027– 2028. Non-GAAP net profit is projected at RMB139.98bn and RMB179.97bn, with YoY growth of 130.77% and 28.57%, respectively. Using the sum-of-the-parts valuation method, the implied valuation per ADS for the China commerce group and the cloud intelligence group is USD90.86 and USD122.38, respectively. The target price is USD213.24/ADS, corresponding to HKD208.71/share in Hong Kong.
Risks:New model release pace below expectations, new model capability below expectations, coding capability below expectations; flash purchase loss reduction below expectations, flash purchase order volume and market share below expectations, flash purchase user retention below expectations, flash purchase cross-selling ROI below expectations; cloud business revenue growth below expectations, profit margin improvement below expectations, AI revenue contribution below expectations; T-head progress below expectations; US chip sanctions on China affecting the company’s cloud business growth; core business recovery pace below expectations, macro economy and retail sales growth weak, CMR growth below expectations, domestic e-commerce market share declines more than expected; intense competition in overseas e-commerce markets, AIDC losses exceed expectations; overseas tariff policy adjustments affect AIDC growth; industry regulatory risks; the Fed’s rate-cutting process below expectations; uncertainty in China-US relations; delisting risk of Chinese ADRs.