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Just For You Alibaba Stock Is Getting Hit Again, but Qwen and Cloud Growth Are SurgingWritten by Leo Miller. Date Posted: 3/20/2026. 
Key Points- Alibaba’s latest quarter showed modest revenue growth but a sharp drop in adjusted profit as the company continued spending heavily to defend its China commerce position.
- Cloud revenue growth accelerated, reflecting strong demand for AI-related products, even as broader concerns persist about talent retention and longer-term AI execution.
- Alibaba’s outlook hinges on whether near-term margin pressure from fast delivery and other initiatives can be balanced by sustained cloud and AI monetization.
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For Chinese e-commerce giant and cloud provider Alibaba Group (NYSE: BABA), the past six months have been rough. Over that period, Alibaba shares have fallen more than 30%. Market-share losses in Chinese e-commerce and doubts about the firm's artificial intelligence (AI) leadership have been major headwinds for the stock.
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Those pressures were amplified by BABA's latest earnings report, which sent shares down roughly 7%. Still, Alibaba remains one of China's most important companies and a serious AI player through its cloud business. That combination makes it hard to ignore despite the stock's rough stretch. The latest quarter sharpened the narrative: Alibaba is spending aggressively to defend its commerce franchise now, betting that accelerating cloud and AI demand can help rebuild profitability over time. Margin Pressure Deepens as Fast Delivery Spending RisesIn fiscal Q3 2026, Alibaba reported revenue of $40.73 billion, up 2% year over year — slightly below estimates of $40.95 billion (about 3% growth). The bigger issue was earnings. Alibaba posted adjusted earnings of $1.01 per ADR, well below the analyst estimate of $1.65 and down 67% from a year earlier. An ADR, or American depositary receipt, is a bank-issued U.S. security that represents Alibaba's underlying shares and lets U.S. investors trade the stock in dollars on U.S. exchanges. Management attributed the profit decline to heavier spending on quick commerce, user-experience initiatives and technology, with improved cloud performance only partially offsetting the impact. Alibaba also faces a tougher competitive environment in Chinese e-commerce, which has raised the cost of defending market share. PDD (NASDAQ: PDD) has been winning in the value-shopping market, while ByteDance's Douyin (the Chinese version of TikTok) has become a leader in discovery-based shopping, where users buy products after seeing them in the social feed. Meanwhile, Meituan (OTCMKTS: MPNGF) remains a dominant force in food delivery and related services. Alibaba is still the largest player, but it has had to invest significantly to defend that position — and at present that investment is coming at the expense of profitability. Quick commerce — delivering products in one hour or less — has become a "cornerstone" of its e-commerce business. There were some positive signs from this growth-focused strategy in the quarter, with quick commerce revenue up 56% year over year. The company added 150 million annual active customers (AAC) in 2025 — users who made at least one purchase during the year. However, many of these users are lower-quality customers, making smaller purchases and buying less frequently. Alibaba is betting on winning this battle over the long haul, and does not expect its quick commerce business to be profitable until fiscal 2029. Cloud Growth Accelerates as Qwen Sees Strong Developer AdoptionAlibaba's Cloud Intelligence Group delivered one of the clearest positives in the quarter. Revenue rose 36% year over year to $6.19 billion, marking the unit's ninth consecutive quarter of growth acceleration and its fastest pace in three years. Management pointed to AI demand as a key driver, with AI-related product revenue growing at a triple-digit rate for the 10th straight quarter. The segment also remained profitable, with an adjusted EBITA margin that was "relatively stable" at 9%. Alibaba's foundational model, Qwen, is the most widely used open-source model on Hugging Face, with over 1 billion downloads. Hugging Face is a platform where developers can download and tune models to build applications. That open-source adoption matters because broader developer usage can translate into demand for inference and tooling within Alibaba's cloud ecosystem. As more developers build on Qwen, usage shifts to running and serving those models at scale through inference and related tooling. Hugging Face also shows that Qwen is a popular base for customization, with developers creating more than 113,000 derivative models tuned from Qwen. That is more than the next two closest competitors — Alphabet (NASDAQ: GOOGL) and Meta Platforms (NASDAQ: META) — combined. The takeaway is straightforward: Qwen has gained significant traction with developers, and that traction can help support growth in Alibaba's cloud business as more applications are deployed and used. Alibaba has set aggressive goals for its cloud and AI push. CEO Eddie Wu said the company is targeting more than $100 billion in combined external cloud and AI revenue within five years, underscoring how central AI monetization has become to the long-term plan. Alibaba's Solid Balance Sheet Helps Fund Longer-Term PrioritiesNotably, Alibaba's free cash flow dipped into negative territory over several recent quarters: it was negative $4.2 billion over the past nine months. However, the figure returned to positive this quarter at $1.62 billion. Despite the cash burn, Alibaba's balance sheet remains strong. The company reports cash and other liquid investments of $80.1 billion versus roughly $37 billion of debt, giving it considerable capacity to continue investing in strategic priorities. The company did not address the recent resignation of Qwen's head of artificial intelligence, Lin Junyang. Any further changes to the firm's AI leadership will be important to watch, as they could indicate whether Alibaba can maintain its strong position. Alibaba clearly has high hopes for the long term. Near-term issues are weighing on its e-commerce business, but the company's progress in AI supports its outlook. With AI monetization still in the early stages and shares down considerably, the outlook for BABA shares may look attractive going forward. | 
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