Alibaba is entering a more distinct phase of growth restructuring: Cloud and AI have become the strongest engines, with AI products maintaining triple-digit growth for 11 consecutive quarters, signaling that AI commercialization has entered an accelerated release stage.

Alibaba announced its financial results for the fourth quarter of fiscal year 2026 on Wednesday: For the quarter ended March 31, 2026, the company's revenue was RMB 243.38 billion, a year-on-year increase of 3%, compared to a market estimate of RMB 246.51 billion. Excluding the impact of disposed businesses such as RT-Mart and Intime, revenue on a comparable basis increased by 11% year-on-year. Annual revenue exceeded RMB 1 trillion for the first time, reaching RMB 1.0237 trillion, a year-on-year increase of 3%, with an 11% increase on a comparable basis.

The biggest highlights of the earnings report came from Cloud and AI. In the March quarter, revenue from the Cloud Intelligence Group was RMB 41.626 billion, a year-on-year increase of 38%, with the growth rate of external commercial revenue accelerating to 40%. Revenue from AI-related products reached RMB 8.971 billion, achieving triple-digit year-on-year growth for the eleventh consecutive quarter, with annualized recurring revenue (ARR) exceeding RMB 35.8 billion. Management emphasized that Alibaba's full-stack AI investment has moved beyond the initial cultivation phase and entered a "positive cycle of scaled commercial returns."

Pressure on the profit side was also evident. In the March quarter, Alibaba reported an operating loss of RMB 848 million, compared to an operating profit of RMB 28.465 billion in the same period last year. Adjusted EBITA decreased by 84% year-on-year to RMB 5.102 billion. Quarterly net profit increased by 96% year-on-year to RMB 23.502 billion, primarily driven by increased fair value gains on equity investments and a low base effect from losses on the disposal of RT-Mart and Intime in the same period last year. Excluding investment income, share-based compensation, impairment, and other items, non-GAAP net profit was only RMB 86 million, a decrease of nearly 100% year-on-year.

CEO Eddie Wu stated in the earnings report that Alibaba's full-stack AI technology investment has "officially moved beyond the initial cultivation stage and entered a positive cycle of scaled commercial returns." This statement provides context for understanding the strategic logic behind the company's current active compression of profits. Meanwhile, the board of directors announced the distribution of an annual cash dividend of $1.05 per ADS, with a total dividend amount of approximately $2.5 billion.

**Revenue: Low Apparent Growth, Double-Digit Growth on Comparable Basis**

From a group perspective, Alibaba's revenue grew by 3% this quarter and 3% for the full year, indicating a seemingly low growth rate. However, the earnings report specifically emphasized that, excluding the revenue from disposed businesses like RT-Mart and Intime, both quarterly and annual revenue on a comparable basis increased by 11% year-on-year. This suggests that the disposal of offline retail assets significantly dragged down reported revenue, while the resilience of core business revenue was stronger.

By segment, in the March quarter, revenue from Alibaba's China Commerce Group was RMB 122.220 billion, a year-on-year increase of 6%. Revenue from the International Digital Commerce Group was RMB 35.429 billion, a year-on-year increase of 6%. Revenue from the Cloud Intelligence Group was RMB 41.626 billion, a year-on-year increase of 38%. Revenue from "All other" segments was RMB 65.459 billion, a year-on-year decrease of 21%, primarily due to the disposal of RT-Mart and Intime, as well as a decline in Cainiao's revenue.

On an annual basis, revenue from the China Commerce Group was RMB 554.217 billion, a year-on-year increase of 9%. Revenue from International Digital Commerce was RMB 144.170 billion, a year-on-year increase of 9%. Revenue from Cloud Intelligence was RMB 158.132 billion, a year-on-year increase of 34%. Revenue from "All other" segments was RMB 254.367 billion, a year-on-year decrease of 25%.

**Profit: Operating Loss Coexists with High Net Profit Growth, Core Profitability Diluted by Investment**

This quarter, Alibaba reported an operating loss of RMB 848 million, compared to an operating profit of RMB 28.465 billion in the same period last year. The operating margin decreased from 12% to nearly 0. The primary reason was the concentrated release of strategic investments: increased spending on technology businesses, instant retail, and user experience offset the positive contributions from growth in customer management services and cloud business, as well as efficiency improvements in multiple businesses.

Adjusted EBITA better reflects the operational pressure on the main business. This quarter, adjusted EBITA was RMB 5.102 billion, a year-on-year decrease of 84%, with an adjusted EBITA margin of only 2%. For the full year, adjusted EBITA was RMB 76.416 billion, a year-on-year decrease of 56%, with the margin decreasing from 17% in the previous fiscal year to 7%.

At the same time, quarterly net profit increased by 96% year-on-year to RMB 23.502 billion, and net profit attributable to ordinary shareholders was RMB 25.476 billion, a year-on-year increase of 106%. This was not primarily driven by improved operating profit but by changes in investment income: net interest income and investment gains this quarter were RMB 33.823 billion, compared to a net loss of RMB 7.516 billion in the same period last year. In other words, the high growth in net profit was more attributable to year-on-year changes in fair value gains on investments and disposal transactions. The decline in non-GAAP net profit to RMB 86 million better reflects the squeeze on profits from current operational investments.

**China Commerce: Customer Management Revenue Up 8% on Comparable Basis, Instant Retail Grows Rapidly but Drains Profit**

China Commerce remains Alibaba's most core profit source but is also one of the sectors with the most intensive investment in this round.

In the March quarter, revenue from the China Commerce Group was RMB 122.220 billion, a year-on-year increase of 6%. Within this, e-commerce business revenue was RMB 96.292 billion, a year-on-year decrease of 1%. Customer management revenue was RMB 73.024 billion, a year-on-year increase of 1%. However, Alibaba explained that starting this quarter, it updated marketing development plans for some merchants, and some subsidies were reclassified from sales and marketing expenses to deductions from customer management revenue in accounting treatment. Excluding this impact, customer management revenue increased by 8% year-on-year on a comparable basis.

This indicates that the commercial capabilities of Taobao and Tmall, such as advertising and commissions, are still improving. For the full year, customer management revenue was RMB 343.867 billion, a year-on-year increase of 5%. Excluding the impact of the new marketing development plans, it grew by 7% on a comparable basis, primarily driven by an increase in Take rate.

Instant retail is one of the fastest-growing businesses. In the March quarter, instant retail revenue was RMB 19.988 billion, a year-on-year increase of 57%, mainly driven by order volume growth from the launch of "Taobao Flash Sale" at the end of April 2025. For the full year, instant retail revenue was RMB 78.520 billion, a year-on-year increase of 47%. The company stated that the unit economics of instant retail continue to improve, with the average order value increasing sequentially, primarily due to order structure optimization and further expansion into high-value food and non-food categories.

However, the high growth comes with pressure on profits. In the March quarter, adjusted EBITA for the China Commerce Group was RMB 24.010 billion, a year-on-year decrease of 40%. For the full year, adjusted EBITA was RMB 107.509 billion, a year-on-year decrease of 44%. The earnings report explained that this was mainly due to increased investment in instant retail, user experience, and technology, partially offset by positive contributions from customer management services.

Additionally, the number of 88VIP members continued to grow at a double-digit rate year-on-year, exceeding 62 million. For Alibaba, this remains a core asset for increasing purchase frequency, cross-selling, and member retention.

**Cloud Intelligence: AI Drives Revenue Acceleration, Profitability Improves Simultaneously**

Cloud Intelligence is the clearest growth engine in this quarter's earnings report.

In the March quarter, revenue from the Cloud Intelligence Group was RMB 41.626 billion, a year-on-year increase of 38%. Revenue from external customers increased by 40% year-on-year, primarily driven by growth in the public cloud business, including increased adoption of AI-related products. Revenue from AI-related products reached RMB 8.971 billion, achieving triple-digit year-on-year growth for the eleventh consecutive quarter.

For the full year, Cloud Intelligence revenue was RMB 158.132 billion, a year-on-year increase of 34%. Revenue from external customers increased by 33% year-on-year. Despite high investment, cloud business profits continued to grow: this quarter, adjusted EBITA for Cloud Intelligence was RMB 3.796 billion, a year-on-year increase of 57%. For the full year, adjusted EBITA was RMB 14.265 billion, a year-on-year increase of 35%. This indicates that the cloud business, while expanding revenue and improving operational efficiency, can still absorb some of the costs associated with customer growth and technological innovation investments.

Alibaba Cloud's strategic focus has shifted from traditional cloud resource sales to "AI + Cloud" full-stack capabilities: including high-performance networks, distributed storage, cloud operating systems, model training and inference services, and heterogeneous chip cluster orchestration software. Management stated that it aims to compete for dominance in China's AI cloud market by leveraging capabilities in models, cloud infrastructure, and self-developed dedicated inference chips.

**AI: From Models, MaaS to Applications, Alibaba Aims to Close the Commercial Loop**

This quarter, Alibaba's AI narrative further shifted from "investment" to "commercialization."

At the model level, the company released Qwen3.6-Plus in March, highlighting its outstanding performance in programming, agent programming, front-end web development, and complex warehouse-level tasks. It natively supports a context window of up to 1 million tokens and has enhanced multimodal perception and reasoning capabilities. Additionally, Alibaba is conducting gray-scale testing of the world model HappyOyster and the video generation model HappyHorse to expand its multimodal model matrix.

At the platform level, Alibaba is advancing its MaaS strategy. The Bailian platform launched a model matrix including Qwen3.6-Plus, enterprise token solutions, and agent product portfolios. In March 2026, the number of customers on the Bailian platform increased eightfold year-on-year, reflecting rapid growth in enterprise demand for model services.

At the application level, Alibaba integrated Taobao and Tmall with the Qianwen App and launched the Qianwen AI Shopping Assistant within the Taobao App, covering the entire customer journey from discovery and product search to purchase support, order management, and after-sales service. For merchants, it launched the enterprise-level AI-native agent "Wukong," embedding intelligent capabilities into operational processes.

At the chip level, T-Head's self-developed AI chips have achieved industrial application, with over 100,000 Zhenwu PPU cards deployed on Alibaba Cloud's public cloud platform. More than 30 automotive and autonomous driving companies are conducting R&D for intelligent driving based on these chips. Alibaba aims to form an integrated technology stack of "chip-cloud-model-application" to improve training and inference efficiency.

**International Business: Losses Narrow Significantly, Approaching Breakeven**

Revenue from Alibaba's International Digital Commerce Group this quarter was RMB 35.429 billion, a year-on-year increase of 6%. For the full year, revenue was RMB 144.170 billion, a year-on-year increase of 9%.

Within this, international retail commerce revenue in the March quarter was RMB 28.917 billion, a year-on-year increase of 5%, mainly driven by growth in AliExpress and other international businesses, partially offset by a decline in Lazada's revenue. International wholesale commerce revenue was RMB 6.512 billion, a year-on-year increase of 9%, primarily due to growth in value-added services related to cross-border business.

More noteworthy is the significant narrowing of losses. This quarter, the International Digital Commerce Group reported an adjusted EBITA loss of RMB 138 million, compared to a loss of RMB 3.574 billion in the same period last year, showing substantial year-on-year improvement and approaching breakeven. For the full year, the loss was RMB 2.051 billion, compared to a loss of RMB 15.137 billion in the previous fiscal year.

The improvement mainly stemmed from enhanced operational efficiency at AliExpress, logistics optimization, and efficiency gains in multiple businesses. The unit economics of AliExpress Choice business continued to improve sequentially. The "Brand+" program accelerated brand onboarding, with the penetration rate of "Brand+" quarterly active buyers exceeding 30% this quarter. Alibaba.com continued to promote the AI procurement assistant Accio and launched the intelligent business platform Accio Work for global SMEs, attempting to embed AI tools into the entire cross-border trade process.

**Expenses and Cash Flow: Sales Spending and Cloud Capex Are Main Pressure Points**

The most significant change on the expense side was in sales and marketing expenses.

In the March quarter, Alibaba's sales and marketing expenses were RMB 53.415 billion, accounting for 21.9% of revenue, compared to 15.3% in the same period last year. For the full year, sales and marketing expenses were RMB 245.023 billion, accounting for 23.9% of revenue, compared to 14.5% last year. The earnings report stated this was mainly due to increased investment in instant retail business, user experience, and user acquisition for the Qianwen App.

Product development expenses also increased. In the March quarter, product development expenses were RMB 18.957 billion, accounting for 7.8% of revenue, compared to 6.3% in the same period last year. For the full year, product development expenses were RMB 66.533 billion, accounting for 6.5% of revenue, compared to 5.7% last year, primarily related to investments in R&D personnel and technology infrastructure.

Regarding cash flow, net cash from operating activities for the full year was RMB 76.213 billion, a year-on-year decrease of 53%. Free cash flow was a net outflow of RMB 46.609 billion, compared to a net inflow of RMB 73.870 billion last year. Capital expenditure for the full year was RMB 126.063 billion, significantly higher than the RMB 85.972 billion in the previous fiscal year, primarily related to equipment purchases for cloud and e-commerce businesses, data center construction, logistics, and directly operated retail facilities. As of the end of March, capital expenditure commitments that have been signed but not yet accrued amounted to RMB 54.136 billion.

This indicates that AI and cloud infrastructure construction have become core variables for Alibaba's cash flow. In the short term, they suppress free cash flow and profit margins; in the medium to long term, they determine whether Alibaba can establish a scale advantage in the AI cloud market.

**"All Other": Investments in Qianwen and Other Technologies Widen Losses**

The "All other" segment includes businesses such as Freshippo, Cainiao, Alibaba Health, Hupan Entertainment, Amap, Qianwen C-End Business Group, Lingxi Games, and DingTalk.

In the March quarter, revenue for this segment was RMB 65.459 billion, a year-on-year decrease of 21%, mainly due to the disposal of RT-Mart and Intime, and a decline in Cainiao's revenue, partially offset by growth in Freshippo and Amap. For the full year, revenue was RMB 254.367 billion, a year-on-year decrease of 25%.

Pressure on the profit side was greater. This quarter, this segment reported an adjusted EBITA loss of RMB 21.160 billion, compared to a loss of RMB 3.413 billion in the same period last year. For the full year, the loss was RMB 35.737 billion, compared to a loss of RMB 9.499 billion last year. The earnings report explicitly stated that this was mainly due to increased investment in technology businesses, including user acquisition for the Qianwen App, partially offset by operational improvements in other businesses.

This also explains the sharp decline in the group's profit this quarter: traditional e-commerce is still contributing profits, cloud business profitability is improving, and international business losses are narrowing, but new investments in Qianwen, instant retail, and AI infrastructure are collectively consuming profits and cash flow.

**Shareholder Returns: Maintaining Annual Dividend, Share Repurchase Scale Relatively Moderate**

Alibaba's board of directors approved the distribution of a 2026 fiscal year annual regular cash dividend of $0.13125 per ordinary share, or $1.05 per American Depositary Share (ADS), with a total dividend amount of approximately $2.5 billion. The dividend for ordinary shares is expected to be paid around July 6, 2026, and for ADSs around July 13, 2026.

Regarding share repurchases, for the year ended March 31, 2026, the company repurchased approximately 72.73 million ordinary shares on the NYSE for a total consideration of approximately $1.046 billion, and all related shares have been cancelled.

From a capital allocation perspective, while making large-scale investments in AI, instant retail, and cloud infrastructure, Alibaba still maintained dividends and share repurchases, but the scale clearly needs to be matched with the negative free cash flow. As of the end of March, the company's cash and other liquid investments still amounted to RMB 520.824 billion. Meanwhile, the ratio of total debt to adjusted EBITDA increased from 1.14 at the end of the previous fiscal year to 2.29, and the ratio of total debt to total capital was 18.86%. This provides room for future investments but also means the market will continue to focus on whether AI commercialization can cover capital expenditures and customer acquisition costs as soon as possible.

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