Alibaba's fourth-quarter financial results released on Thursday highlighted that high-speed growth in AI and cloud services continues to solidify as a new strategic focus, though group-level profits and cash flow faced substantial pressure due to investments in instant retail.

The most notable growth driver during the period came from cloud computing and AI. Alibaba Cloud revenue increased 36% year-over-year to RMB 43.284 billion, with AI-related product revenue growing triple digits annually for the tenth consecutive quarter. Management noted that the MaaS platform showed strong growth and is becoming a new engine for cloud services. On the consumer side, the Qianwen app was deeply integrated with services across Taotian Group, instant retail, Amap, Fliggy, and Alipay, advancing the implementation of AI agents capable of moving "from conversation to task execution." By February, monthly active users across all platforms exceeded 300 million.

Another key area in the consumer business was the accelerated expansion of instant retail: revenue in this segment grew 56% year-on-year to RMB 20.842 billion. Improved unit economics and higher average spending per customer were driven by enhanced fulfillment efficiency, optimized order structure, and better customer retention. During the quarter, Ele.me was rebranded as "Taobao Instant Commerce" and further integrated with the Qianwen app in January to expand its reach.

The cost of these initiatives was reflected in the income statement and cash flow: Group revenue increased just 2% year-over-year to RMB 284.843 billion (or 9% on a comparable basis after excluding disposed businesses such as RT-Mart and Intime). This fell short of market expectations of RMB 290.7 billion. Operating profit dropped 74% to RMB 10.645 billion, while non-GAAP net profit declined 67% to RMB 16.710 billion, missing the consensus forecast of RMB 31.6 billion. Operating cash flow decreased 49% year-over-year, and free cash flow dropped 71%, which the company attributed primarily to investments in instant retail. Following the earnings release, Alibaba's U.S.-listed shares fell more than 4% in pre-market trading.

The earnings pressure has intensified Alibaba's urgency to "turn AI into a business." This week, the company launched Wukong, an agentic AI service for enterprises, established a token business unit, and raised prices for cloud computing and storage services by up to 34%, aiming to more directly monetize computing power and model capabilities.

Revenue up 2% year-over-year, cloud revenue growth accelerates

Quarterly revenue: RMB 284.843 billion, up 2% year-over-year Comparable revenue (excluding disposed RT-Mart and Intime): up 9% year-over-year

By segment, growth was mainly driven by cloud services and domestic e-commerce (including instant retail), while the "Others" segment was a significant drag due to asset disposals and business adjustments:

Taotian Group: RMB 159.347 billion, up 6% year-over-year International Digital Commerce: RMB 39.201 billion, up 4% year-over-year Cloud Intelligence Group: RMB 43.284 billion, up 36% year-over-year Others: RMB 67.340 billion, down 25% (impacted by disposal of RT-Mart and Intime, as well as lower Cainiao revenue)

Instant retail weighs on profits, non-GAAP net profit down 67%

Operating profit: RMB 10.645 billion, down 74% (operating margin 4%, compared to 15% a year earlier) Adjusted EBITA: RMB 23.397 billion, down 57% (adjusted EBITA margin 8%, compared to 20% a year earlier) Net profit: RMB 15.631 billion, down 66% Non-GAAP net profit: RMB 16.710 billion, down 67%

The main reason for the profit decline was "strategically increased spending": expansion in instant retail, user experience upgrades, and higher technology investments, partially offset by cloud business growth and operational efficiency improvements. Segment-adjusted EBITA clearly reflected that "profits from cloud are being spent on new battlegrounds":

Taotian Group adjusted EBITA: RMB 34.613 billion, down 43% International Digital Commerce adjusted EBITA: -RMB 2.016 billion (compared to -RMB 4.952 billion a year earlier, narrowing losses significantly) Cloud Intelligence Group adjusted EBITA: RMB 3.911 billion, up 25% Others adjusted EBITA: -RMB 9.792 billion (compared to -RMB 3.176 billion a year earlier, with losses widening)

Domestic e-commerce: Customer management revenue up only 1%, 88VIP members exceed 59 million

In Taotian Group this quarter, traditional e-commerce growth was relatively weak, while instant retail served as the main growth driver:

E-commerce business revenue: RMB 131.583 billion, up 1% year-over-year Customer management revenue: RMB 102.664 billion, up 1% year-over-year

Reasons for slower growth included weak transaction activity and the gradual phase-out of software service fees; however, the company noted that "take rate improvement" partially offset the pressure.

Monthly active consumers on the Taobao app: Achieved double-digit year-over-year growth (company data), linked to increased user engagement driven by the expansion of instant retail. 88VIP membership: Grew double digits year-over-year, exceeding 59 million members. Instant retail revenue: RMB 20.842 billion, up 56% year-over-year, mainly driven by order growth following the scaled promotion of "Taobao Instant Commerce" by the end of April 2025.

Management emphasized that instant retail continued to show "improved unit economics and higher average spending per customer sequentially," resulting from three factors: enhanced fulfillment efficiency, optimized order structure (focus on higher-value餐饮 and non-food categories), and strong customer retention. However, at the group level, instant retail remains in an "investment-for-scale" phase, directly and noticeably pressuring profits and cash flow. Costs related to business adjustments also began to appear in expenses: Share-based compensation expense increased 26% year-over-year, which the company attributed to the Ele.me rebranding and talent retention incentives.

International e-commerce: Moderate revenue growth, narrowing losses through logistics and efficiency

International Digital Commerce revenue: RMB 39.201 billion, up 4% year-over-year International retail: RMB 32.351 billion, up 3% (growth from AliExpress offsetting decline in Lazada) International wholesale: RMB 6.850 billion, up 10% year-over-year

Adjusted EBITA loss: -RMB 2.016 billion (compared to -RMB 4.952 billion a year earlier)

The company attributed the improvement to logistics optimization and better investment efficiency, noting that AliExpress's Choice business showed sequential improvement in unit economics. Partnerships, such as with South Korea's Shinsegae, and the AliExpress "Brand+" cross-border solution also accelerated brand onboarding, enhancing supply and monetization capabilities.

Cloud and AI: Revenue up 36% with acceleration, AI products triple-digit growth for 10th straight quarter

Alibaba Cloud revenue: RMB 43.284 billion, up 36% year-over-year Cloud revenue excluding consolidated subsidiaries: up 35% year-over-year Adjusted EBITA: RMB 3.911 billion, up 25% year-over-year

The acceleration in growth was primarily due to increased penetration of public cloud and AI-related products. The company disclosed that AI-related product revenue grew triple digits year-over-year for the tenth consecutive quarter, with the MaaS platform showing strong growth and positioned as a new growth engine for cloud services. Regarding overseas expansion, as of December 31, 2025, Alibaba Cloud operated in 29 regions and 92 availability zones globally.

Qianwen transitions from "model" to "application": Monthly active users exceed 300 million, beginning to drive ecosystem transactions

Progress on the consumer AI front this quarter was highlighted by the "ecosystem-level integration" of the Qianwen app:

After a January 15 upgrade, the Qianwen app can coordinate services across Taotian, Taobao Instant Commerce, Amap, Fliggy, and Alipay, evolving into an "AI assistant capable of executing complex tasks." User engagement increased following Spring Festival activities: By the end of February, approximately 140 million users completed their first AI-driven shopping or lifestyle service experience using Qianwen's agent capabilities; monthly active users across all platforms exceeded 300 million in February. On the model side: Qianwen 3.5 was released in February; as of January 21, downloads of Qianwen's open-source models on Hugging Face exceeded 1 billion cumulative times.

The significance of this development lies not only in user acquisition but also in the potential for AI entry points to steadily direct traffic to e-commerce, local services, travel, and payment scenarios—directly influencing Alibaba's conversion efficiency and customer acquisition cost structure in "transaction + service" contexts.

In-house chip T-Head: GPU mass production addresses long-term computing supply

Alibaba disclosed that its in-house chip unit T-Head has achieved mass production of self-developed GPUs, which support end-to-end AI workloads from training and fine-tuning to inference, and are compatible with mainstream AI frameworks. The company stated that this business has made a "meaningful contribution" to cloud infrastructure supply and can be combined with Qianwen models and cloud services to offer more cost-effective AI solutions to external customers—a strategic move with medium- to long-term value amid ongoing computing constraints and cost sensitivity.

"Others" segment: Disposals drag revenue, tech investments widen losses and impairments

Revenue in the "Others" segment was RMB 67.340 billion, down 25% year-over-year, which the company attributed mainly to:

Revenue gap from the disposal of RT-Mart and Intime; Decline in Cainiao revenue; Partially offset by growth from Freshippo and AliHealth.

In terms of profitability, adjusted EBITA loss for the "Others" segment widened to -RMB 9.792 billion (compared to -RMB 3.176 billion a year earlier), which the company linked to "increased investment in technology businesses." Additionally, the quarter included goodwill impairment of RMB 9.515 billion (all related to the Others segment), further reducing GAAP profit.