Alibaba reports Q2 revenue up 9%, AI Cloud surges 45%

Earnings
โดย Kaohoon·CN·Read original
Summary · why it matters

Alibaba reported results for the quarter ended June 2026, with total revenue of 268.95 billion yuan, up 9% from a year earlier, close to market expectations of about 268.88 billion yuan. The main drivers were the AI Cloud and Compute Services business and China Quick Commerce, whose revenue grew 45% year on year. Short-term profit remained under pressure from accelerated AI investment, with adjusted EBITA down 30% to 27.33 billion yuan and non-GAAP net income down 38% to 20.72 billion yuan. Net profit fell 75% to 10.44 billion yuan. A key highlight was the Cloud business, which began to show clear operating leverage. Revenue from AI Cloud and Compute Services rose 45% to 48.44 billion yuan, while adjusted EBITA increased 133% to 5.63 billion yuan, lifting the EBITA margin to about 12%. Revenue from AI-related products reached 12.38 billion yuan and continued to grow at a triple-digit pace for the twelfth consecutive quarter. The E-commerce Group posted total revenue of 205.86 billion yuan, up 4% from a year earlier. China Quick Commerce revenue rose 45% to 53.30 billion yuan, while China E-commerce fell 8% to 110.90 billion yuan and customer management revenue declined 7% to 82.55 billion yuan. E-commerce remained the main profit base, with adjusted EBITA of 39.75 billion yuan, down only 1% from a year earlier. In contrast, AI Labs and Applications became the main drag, with an adjusted EBITA loss widening to 13.86 billion yuan from a loss of 3.22 billion yuan a year earlier. Alibaba's capital expenditure in the quarter was 67.68 billion yuan, up 75% from a year earlier, pushing free cash flow to negative 44.67 billion yuan, compared with negative 18.82 billion yuan a year earlier. Management signalled that AI investment will not slow in the near term, with plans to invest more than the original budget of 380 billion yuan over three years and a long-term goal of growing Cloud and AI revenue several-fold to about 100 billion US dollars within five years. Chief Executive Officer Eddie Wu prioritises AI growth over short-term profit, while Chief Financial Officer Toby Xu said Cloud is starting to see operating leverage and Quick Commerce has improving unit economics, giving the company enough financial flexibility to continue investing in AI. InnovestX Securities views the results as positive for Alibaba's medium- to long-term outlook, though near-term constraints remain. Cloud and AI showed clearer growth in both revenue and profit, while E-commerce continued to preserve the group's profit base. However, the 75% rise in capital expenditure and widening losses from AI development put significant pressure on total profit and free cash flow. Key issues for investors to monitor include Cloud revenue growth, Cloud margin expansion, and returns on AI investment. If Cloud continues to grow at a high level and margins keep improving, the market may start to re-rate Alibaba more as an AI-Cloud stock rather than mainly a Chinese E-commerce stock, which would be an important factor for the stock's valuation and Alibaba's medium- to long-term growth picture.

Impact on stocks 2

Artificial Intelligence▲ · 2 stocks
Alibaba Group Holding Ltd
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▲ PositiveDemandCapitalrelevance

AI Cloud revenue surged 45% and AI-related products grew triple-digit for 12th consecutive quarter, showing strong end-customer demand.

Theme Impact 3

Off-coverage companies 1

InnovestX Securities Company LimitedPrivate± Mixed
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