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    BABA
    Earnings call· Jun 2025(Q1 FY26)

    Alibaba Group Holding Ltd BABA

    Aug 29, 2025 Source

    Executive summary

    Alibaba Q1 FY26 — Strong Cloud Growth and Quick Commerce Expansion

    Alibaba delivered solid Q1 FY26 results, driven by accelerating cloud growth fueled by AI demand and robust performance in its international digital commerce. The company is embarking on a new entrepreneurial chapter with significant investments in AI + Cloud infrastructure and a comprehensive consumption platform, aiming to capture long-term growth opportunities despite short-term profitability impacts. Management is confident in the strategic value of these investments and their ability to drive future monetization and competitive advantage.

    Highlights

    5

    • Total revenue (excluding Sun Art and Intime) grew 10% year-over-year.

    • Cloud Intelligence Group revenue accelerated to 26% year-over-year.

    • AI-related product revenue maintained triple-digit growth for the eighth consecutive quarter, accounting for over 20% of external cloud revenue.

    • AIDC revenue grew 19% year-over-year, with adjusted EBITDA loss narrowing significantly to near breakeven.

    • Quick commerce monthly active consumers (MAC) reached 300 million in August, representing 200% growth compared to before April, and driving 20% growth in Taobao app's DAUs.

    Concerns

    3

    • Adjusted EBITDA decreased 14% year-over-year, primarily due to strategic investments in scaling quick commerce.

    • Free cash flow was an outflow of RMB 18.8 billion, mainly attributed to accelerated CapEx for AI + Cloud infrastructure (RMB 39 billion) and investment in Taobao Instant Commerce.

    • Alibaba China E-commerce Group's adjusted EBITDA decreased by 21%, impacted by investments in quick commerce.

    Guidance & targets

    5
    CategoryTargetConfidence
    Cloud and AI Infrastructure Investment
    RMB 380 billion
    high materiality
    High
    Consumption Investment
    RMB 50 billion
    high materiality
    High
    Quick Commerce Incremental GMV
    RMB 1 trillion
    high materiality
    High
    Quick Commerce UE Losses
    Reduced by half
    medium materiality
    Medium
    CMR Growth
    Relatively rapid growth
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Alibaba China E-commerce Group
    Revenue growth primarily driven by improvement of take rate and strong performance during the June 18 shopping festival. Quick commerce revenue increased due to order growth from Taobao Instant Commerce rollout. Adjusted EBITDA decreased by 21% due to investments in quick commerce, but would have grown year-over-year excluding these investments.
    Customer management revenue growth: 10%88VIP members: >53 millionQuick commerce revenue growth: 12%
    		RMB 140.1 billion10%——
    AIDC (Alibaba International Digital Commerce)
    Revenue growth primarily driven by strong performance in cross-border businesses. Adjusted EBITDA loss narrowed significantly, approaching breakeven, due to improved operating efficiency and improved unit economics for Trendyol's International business.
    		—19%—Approaching breakeven
    Cloud Intelligence Group
    Revenue growth primarily driven by public cloud revenue and a surge in AI demand, leading to increased adoption of compute, storage, and other public cloud services. Adjusted EBITA margin remained relatively stable year-over-year. The company continues to invest in customer growth and technological innovation, including AI products and services.
    AI revenue growth: triple-digitAI revenue as % of external revenue: >20%
    		—26%—8.8% adjusted EBITA margin
    All Others
    Revenue decrease primarily due to the disposal of Sun Art and Intime. Adjusted EBITDA loss due to increased investment in technology businesses, partly offset by improved results from businesses like Freshippo. This segment comprises innovative initiatives, including strategic AI-driven technology infrastructure and businesses.
    		—-28%—RMB 1.4 billion loss

    Operational metrics

    14
    Adjusted EBITDA
    Decreased 14%YoY
    Q1 FY26

    Primarily due to strategic focus on scaling quick commerce, partly offset by margin improvements across several businesses.

    GAAP Net Income
    Increased 76%YoY
    Q1 FY26

    Primarily due to mark-to-market changes from equity investments and gain from disposal of Trendyol's local consumer service business.

    Capital Expenditure
    RMB 39 billion
    Q1 FY26

    Ramped up for expanding AI + Cloud infrastructure.

    Cumulative AI Infrastructure & R&D Investment
    Over RMB 100 billion
    Past 4 quarters
    Share Repurchase
    7 million ADSs
    Q1 FY26

    Under share repurchase program.

    Total Revenue (like-for-like)
    10%YoY
    Q1 FY26
    Quick Commerce Monthly Active Consumers (MAC)
    300 million200% growth compared to before April
    August

    Achieved in August, contributing to Taobao app DAU growth.

    Taobao App Daily Active Users (DAU) Growth
    20%
    August

    Driven by quick commerce.

    Quick Commerce Peak Daily Order Volume
    120 million
    Recent
    Quick Commerce Weekly Average Daily Orders
    80 million
    August
    Daily Active Riders
    Over 2 million3x increase from April
    Recent

    Created over 1 million new jobs.

    Lightning Warehouses
    Over 50,000
    Recent

    Rapid expansion of supply in these warehouses.

    Freshippo Order Volume via Taobao Instant Commerce
    Over 2 million70% YoY
    Recent

    Following Freshippo's supply connection into Taobao Instant Commerce.

    Tmall Branded Offline Stores Onboarding
    Up to 1 million
    Over time

    Enabling unified online-offline O2O operations.

    Industry KPIs

    5
    MetricValueDetails
    Segment revenue mixRMB 140.1 billionRMB
    Ai cloud revenue backlog26%%
    Customer management revenue10%%
    Subscription membership programOver 53 millionmembers
    Operating income EBIT and adjusted EBITDA8.8%%

    Product announcements

    6
    ProductTypeDetails
    Qwen3update
    Wan2.2launch
    Qwen-Imagelaunch
    Amap 2025launch
    DingTalk AI Upgradeupdate
    AgentBaylaunch

    Deals & partnerships

    1
    SAPStrategic partnership focused on cloud and AI. Alibaba Cloud will support SAP customers to run and manage core software systems on Alibaba's platform. SAP will leverage Q1 models for AI transformation services.

    This partnership signifies recognition of Alibaba's cloud infrastructure and AI capabilities by global leading enterprises in the SAP ecosystem.

    Risks & headwinds

    2
    Short-term profitability impact from strategic investmentsQ1 FY26 and near term

    Adjusted EBITDA decreased 14% YoY; Free cash flow outflow of RMB 18.8 billion; Alibaba China E-commerce Group adjusted EBITDA decreased 21%.

    Mitigation: Focus on long-term strategic value, systematic pursuit of opportunities, and balancing short-term vs. long-term returns. Expect quick commerce UE losses to be reduced by half in the short term.

    Supply chain and policy changes for AI chipsOngoing

    CapEx may fluctuate quarter-to-quarter based on supply chain situation and changes in policies around AI chips.

    Mitigation: Backup plans in place to work with various different partners and respond to different situations in respect of supply chains. Commitment to planned RMB 380 billion CapEx investment.

    What to watch in Q2 FY26

    5

    Quick Commerce UE Losses

    Short term (next quarter/few quarters)
    CurrentSignificant losses
    TargetReduced by half

    Why it matters

    Improvement in quick commerce unit economics is crucial for overall profitability and validating the investment strategy.

    So in the short term, we expect that while continuing to maintain investment in consumer benefit through logistics and subsidy efficiency improvements and order structure optimization, our UE losses can be reduced by half.

    Q&A highlights

    7

    What is Alibaba's vision for quick commerce, the investment plan, its duration, and how it will bring long-term value to Taobao and China E-commerce? What are the latest progress and synergies, and how will it impact GMV and CMR?

    Quick commerce has achieved significant scale, with 300M MAC and 120M peak daily orders, exceeding initial goals. It drives user engagement and traffic for Taobao, leading to incremental advertising and CMR growth, and reduced marketing expenses. Short-term UE losses are expected to halve through optimization. Non-food categories are expanding, and quick commerce is projected to add RMB 1 trillion in annualized incremental GMV within 3 years.

    “Overall, we expect Taobao Instant commerce and quick commerce to add RMB 1 trillion in annualized incremental GMV to the platform within the next 3 years.”

    asked by Alicia Yap · answered by Yongming Wu

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Focus on AI + Cloud and Consumption

    Alibaba is strategically investing in two core pillars: AI + Cloud and a comprehensive consumption platform. The company has committed RMB 380 billion over the next three years for cloud and AI infrastructure and RMB 50 billion for consumption. These investments are aimed at capturing long-term growth opportunities and redefining consumer experience, with a focus on systematic pursuit and balancing short-term profitability with long-term returns.

    02

    Quick Commerce Expansion and Synergies

    The company's quick commerce business, including Taobao Instant Commerce, has achieved significant milestones since its launch four months ago. Peak daily order volume reached 120 million, with weekly average daily orders at 80 million in August. Monthly active consumers (MAC) for quick commerce reached 300 million in August, a 200% growth from April, driving a 20% increase in Taobao app's DAUs. This high-frequency engagement is expected to drive incremental income for the e-commerce business through increased traffic, advertising, and reduced marketing expenses.

    03

    Cloud Intelligence Group Acceleration and AI Demand

    Cloud Intelligence Group revenue accelerated to 26% year-over-year, driven by a surge in AI demand and increased customer adoption of public cloud services for AI workloads. AI-related product revenue maintained triple-digit growth for the eighth consecutive quarter, now comprising over 20% of external cloud revenue. The company sees strong demand from various sectors for training proprietary models using their own data, leveraging Alibaba's open-source Qwen models and cloud platform.

    04

    AI Model Development and Application

    Alibaba continues to advance its AI foundation models, releasing upgraded Qwen3 models (nonthinking, reasoning, AI coding) recognized as top performers. Open-sourcing models like Wan2.2 (video generation) and Qwen-Image (text-to-image) empowers customers to develop AI applications. Alibaba's own AI-native applications, such as Amap 2025 (AI-native location-based app) and DingTalk's AI upgrade (agent-driven work feeds), are also progressing, exploring new paradigms for lifestyle services and workplace applications.

    05

    Quick Commerce Unit Economics and Non-Food Categories

    Management expects quick commerce unit economics (UE) losses to be reduced by half in the short term through optimization of customer mix, order mix (targeting high-value and non-food orders), and fulfillment efficiency. The non-food category is expanding through a 'lightning warehouse' model (50,000 warehouses, 360% YoY order growth) and integration with Freshippo. Tmall Supermarket is upgrading to a quick commerce model, and up to 1 million branded offline stores are expected to join Taobao Instant Commerce over time⏳.

    06

    Evolution to Agent-Centered AI

    The company sees the AI model evolution moving from chatbots to agent-centered AI, requiring larger context windows, multi-tool utilization, and access to enterprise systems. Alibaba Cloud is positioning itself as an infrastructure provider for this trend, offering virtual servers, browser windows, and sandbox environments through products like AgentBay. Strong coding capabilities in models are highlighted as crucial for connecting to various tools and enterprise systems to solve complex tasks.

    AI-generated summary of the company’s earnings call. Not investment advice.