Alibaba’s latest earnings report shows exactly where the company is betting its future: artificial intelligence, cloud computing and ultra‑fast “one‑hour” delivery. Those bets are driving strong revenue growth — but also hammering margins.
On Tuesday, 25 November 2025, Alibaba reported results for the quarter ended 30 September 2025 (its fiscal second quarter), beating revenue expectations thanks to surging demand for AI-powered cloud services and rapid expansion of instant commerce in China. [1]
Revenue beats forecasts, but profits plunge
Alibaba posted quarterly revenue of about 247.8 billion yuan (roughly US$34.8 billion), up 5% year over year and slightly above analysts’ expectations of around 242.7 billion yuan compiled by LSEG — a beat of just over 2%. [2]
- On a like‑for‑like basis (excluding the disposed Sun Art and Intime chains), revenue growth would have been about 15%, highlighting the strength of the core businesses. [3]
- Net income fell sharply to around 20.6 billion yuan, down more than 50% from a year earlier, as the company poured money into AI infrastructure and quick commerce logistics. [4]
- Non‑GAAP net income for the quarter dropped about 72%, reflecting the pressure from heavy investment despite solid top‑line growth. [5]
For the six months ended 30 September 2025, Alibaba generated 495.4 billion yuan (US$69.6 billion) in revenue, up 3% year over year, again held back by the divestment of low‑margin legacy retail assets. [6]
In other words: the revenue engine is humming, but profits are taking a deliberate hit as Alibaba leans hard into its next growth phase.
AI + Cloud: Alibaba’s fastest‑growing pillar
The star of the quarter was Alibaba Cloud, bundled inside the company’s Cloud Intelligence Group.
According to the company’s results announcement:
- Cloud Intelligence Group revenue reached 39.8 billion yuan (US$5.6 billion) for the quarter, up 34% year over year, significantly faster than the group’s overall growth. [7]
- Excluding Alibaba’s own consolidated subsidiaries, cloud revenue still jumped around 29%, underlining strong demand from external enterprise customers. [8]
- AI‑related cloud products delivered triple‑digit growth for the ninth consecutive quarter, and now make up a rising share of external cloud sales. [9]
Over the last four quarters, Alibaba has deployed roughly 120 billion yuan in capital expenditure on AI and cloud infrastructure — from servers and high‑performance networking to storage and training platforms. [10]
The company also highlighted its Qwen AI model family and ecosystem:
- More than 180,000 derivative models based on Qwen have been published on Hugging Face, more than double the second‑place provider, according to figures cited from Omdia’s AI cloud market report. [11]
- Alibaba Cloud is estimated to hold around 35.8% of China’s AI cloud market, reinforcing its position as the country’s leading AI‑cloud provider. [12]
Just ahead of the earnings release, Alibaba also said its newly relaunched Qwen AI app surpassed 10 million downloads in its first week, making it one of the fastest‑growing AI apps in the world and giving investors another reason to focus on the company’s AI roadmap. [13]
The message from management: AI + Cloud is no longer a side bet — it’s the core growth engine.
Quick commerce & one‑hour delivery: growth now, profits later
While AI and cloud powered the revenue beat, consumer‑facing businesses told a more nuanced story.
Alibaba has been racing into instant commerce — offering one‑hour delivery of groceries and everyday goods through its Taobao app. Those investments are doing exactly what they’re supposed to:
- Reuters notes that spending on one‑hour delivery helped drive more users to Alibaba’s shopping apps, boosting engagement in a fiercely competitive market. [14]
- The company said its quick commerce unit significantly improved unit economics in recent months, helped by better logistics efficiency, rising average order value and stronger customer retention. [15]
- Customer management revenue — the fees Alibaba earns from merchants advertising and selling on its platforms — grew about 10% year over year, helped by higher take rates and stronger Taobao activity. [16]
But the bill is steep:
- Sales and marketing expenses in the quarter more than doubled versus a year earlier, climbing to about 66.5 billion yuan, or 26.8% of revenue, largely due to spending to upgrade the user experience and scale quick commerce. [17]
- Free cash flow swung to an outflow of roughly 21.8 billion yuan, compared with an inflow in the same quarter last year, as Alibaba ramped up both logistics and cloud capex. [18]
Alibaba has also been benefitting from Beijing’s appliance trade‑in subsidies, which let shoppers swap old fridges, TVs and other big‑ticket items for discounted new models — a program scheduled to end on 31 December 2025. [19]
That policy tailwind, combined with instant delivery, is helping Alibaba defend share against JD.com and Meituan in China’s fast‑moving online retail market. [20]
What CEO Eddie Wu and CFO Toby Xu are saying
In the company’s earnings release, Alibaba’s leadership framed the results as part of a deliberate “investment phase”:
- CEO Eddie Wu said Alibaba is building long‑term strategic value in AI technologies and infrastructure and a consumption platform that blends daily‑life services with e‑commerce, with both AI + Cloud and consumption delivering strong growth this quarter. [21]
- CFO Toby Xu emphasized that Alibaba is re‑investing profits and free cash flow into AI and cloud infrastructure, warning that near‑term profitability will remain volatile as these investments ramp. [22]
In short, management is clearly willing to sacrifice margin today to lock in leadership across AI infrastructure, cloud services and on‑demand retail.
Market reaction: BABA stock jumps on the revenue beat
Investors welcomed the better‑than‑expected top line and the ongoing proof that AI and cloud spending is translating into real growth:
- Before the opening bell in New York, U.S.-listed Alibaba shares (NYSE: BABA) were up about 2.5% in premarket trading, according to Reuters. [23]
- As of late morning U.S. time on 25 November, BABA was trading around US$160.73, roughly 5% higher on the day.
- Despite a pullback earlier in November, Alibaba remains up more than 80% year to date, driven largely by optimism about its AI push and easing regulatory pressure in China. [24]
At the same time, some market commentary still highlights concerns:
- Alibaba’s earnings history has been uneven, and the sharp drop in non‑GAAP profit underscores how expensive it is to stay ahead in AI and instant commerce. [25]
- Valuation debates continue as investors weigh high growth in AI‑linked businesses against macro headwinds in China’s economy and intensifying competition. [26]
For now, the market reaction suggests investors are willing to tolerate weaker margins as long as AI and cloud growth remains as strong as it is today.
How Alibaba compares with its previous AI‑driven quarter
This isn’t a one‑off AI growth story — it’s an acceleration.
In the previous quarter (ended 30 June 2025), Alibaba reported:
- Overall revenue growth of about 2%, or 10% excluding divested businesses.
- Cloud revenue up 26% to 33.4 billion yuan, with AI‑related products accounting for over 20% of revenue from external cloud customers. [27]
By contrast, the latest quarter shows:
- Overall revenue growth of 5%, or 15% on a like‑for‑like basis. [28]
- Cloud revenue growth accelerating to 34%, with AI products delivering another quarter of triple‑digit growth. [29]
For investors trying to decide whether Alibaba’s massive AI spending is “actually paying off,” the trend lines in cloud clearly strengthen the bullish case.
Key numbers from Alibaba’s September 2025 quarter
Here’s a quick snapshot of the most important metrics for the quarter ended 30 September 2025:
- Total revenue: 247.8 billion yuan (US$34.8 billion), +5% YoY, above consensus 242.7 billion yuan. [30]
- Revenue ex‑disposed businesses: would have been +15% YoY. [31]
- Net income: 20.6 billion yuan (US$2.9 billion), −53% YoY. [32]
- Non‑GAAP net income: 10.4 billion yuan (US$1.45 billion), −72% YoY. [33]
- Diluted EPS (ADS): 8.75 yuan (US$1.23); non‑GAAP diluted EPS: 4.36 yuan (US$0.61). [34]
- Operating margin: down from 15% to 2% year over year. [35]
- Cloud Intelligence Group revenue: 39.8 billion yuan (US$5.6 billion), +34% YoY. [36]
- Sales & marketing expense: 66.5 billion yuan, 26.8% of revenue, versus 13.7% a year earlier. [37]
- Free cash flow: outflow of 21.8 billion yuan, vs. inflow a year ago, reflecting higher cloud capex and quick commerce investment. [38]
What to watch next
Looking ahead, several questions will shape Alibaba’s stock story after this earnings beat:
- Can cloud growth stay above 30%?
If AI‑driven demand keeps cloud revenue growing in the mid‑30% range, Alibaba’s valuation case strengthens materially. - When do margins stabilize?
Investors will look for signs that quick commerce and AI infrastructure spending are moving from “investment mode” into scale and operating leverage. - Regulation and macro in China
Macro softness or new regulatory surprises would hit both consumer sentiment and tech valuations, even as AI optimism remains high. - Global AI competition
As Alibaba positions Qwen and its AI stack globally, competition with U.S. and other Chinese AI players will intensify. User growth and monetization outside China will be key indicators.
For now, the earnings story on 25 November 2025 is clear: Alibaba’s AI and cloud bets are lifting revenue above expectations, even as the company willingly absorbs a painful hit to profits to stay ahead in one of the world’s most important AI races.
References
1. markets.ft.com, 2. www.reuters.com, 3. markets.ft.com, 4. markets.ft.com, 5. markets.ft.com, 6. markets.ft.com, 7. markets.ft.com, 8. markets.ft.com, 9. markets.ft.com, 10. markets.ft.com, 11. markets.ft.com, 12. markets.ft.com, 13. stocktwits.com, 14. www.reuters.com, 15. www.businesswire.com, 16. www.businesswire.com, 17. www.businesswire.com, 18. www.businesswire.com, 19. www.reuters.com, 20. en.wikipedia.org, 21. markets.ft.com, 22. markets.ft.com, 23. www.reuters.com, 24. markets.chroniclejournal.com, 25. www.investors.com, 26. markets.chroniclejournal.com, 27. www.pymnts.com, 28. markets.ft.com, 29. markets.ft.com, 30. www.reuters.com, 31. markets.ft.com, 32. markets.ft.com, 33. markets.ft.com, 34. www.businesswire.com, 35. www.businesswire.com, 36. markets.ft.com, 37. www.businesswire.com, 38. www.businesswire.com
