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Will Accelerating Cloud & International Growth Lift Alibaba Stock Now?
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Key Takeaways
Alibaba Cloud's AI and compute revenues surged 45%, while segment-adjusted EBITA jumped 133%.
International E-commerce revenues fell 1% as tariffs and geopolitical pressure weighed on sales.
Alibaba's capex rose 75%, driving a RMB44.7 billion free cash outflow and compressing margins.
Alibaba Group (BABA - Free Report) is doubling down on cloud and AI to reignite growth, but the payoff remains uneven. At its Apsara Conference, Alibaba Cloud targeted more than 20 gigawatts of global data center capacity by 2032, lined up new regions in Türkiye, Finland and the Netherlands and unveiled the Zhenwu V900 chip, due in early 2027. In commerce, AliExpress turned an operating profit in the first quarter of fiscal 2027 on logistics optimization and cost efficiencies.
The cloud momentum is real. AI Cloud and Compute Services revenues jumped 45% year over year to RMB48.4 billion, with AI-related product revenues of RMB12.4 billion posting a 12th straight quarter of triple-digit growth. Segment adjusted EBITA surged 133% to RMB5.6 billion. International momentum is weaker. International E-commerce revenues slipped 1% to RMB27.8 billion amid tariff and geopolitical pressure, so profitability gains are not yet lifting sales.
The AI push is costly. Capital expenditure climbed 75% to RMB67.7 billion, driving a free cash outflow of RMB44.7 billion versus RMB18.8 billion a year ago. Group adjusted EBITA fell 30%, with margin compressing to 10% from 16%, as AI Labs and Applications losses widened to RMB13.9 billion from RMB3.2 billion. Net income plunged 75%.
Guidance offers only partial comfort. Management expects cloud growth to keep accelerating and margins to expand, with model-as-a-service annual recurring revenues topping RMB16 billion in August against a year-end target of RMB30 billion. Alibaba also targets RMB100 billion in external cloud revenues by 2030. Yet spending shows no sign of easing. RMB190 billion of the three-year RMB380 billion capex plan is already deployed, and quick commerce is not expected to turn profitable until fiscal 2029.
Until cash flow stabilizes and international revenues return to growth, cloud strength alone may not be enough to lift BABA stock meaningfully.
How AMZN & MSFT Compare on Cloud Growth and Spending
Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) are pursuing similar AI-led cloud expansion. Amazon's AWS segment sales rose 37% year over year to $42.2 billion in the second quarter of 2026, its fastest growth in 18 quarters, while operating income climbed 64% to $16.6 billion. However, Amazon's trailing 12-month capital expenditure rose 64% to $169 billion, turning free cash flow negative. Microsoft's Azure and other cloud services revenues grew 43% in the fourth quarter of fiscal 2026, with commercial remaining performance obligation jumping 84% to $678 billion. Microsoft invested $35.8 billion in property and equipment during the June quarter.
BABA shares have plunged 25.8% year to date, underperforming the Zacks Internet – Commerce industry’s 1.6% decline and the Zacks Retail-Wholesale sector’s 3.8% decline.
BABA’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, BABA stock is currently trading at a trailing 12-month Price/Earnings ratio of 47.7X compared with the sector’s 27X. BABA has a Value Score of C.
BABA’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2027 EPS is pegged at $6.41, reflecting a 1.7% downward revision over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Will Accelerating Cloud & International Growth Lift Alibaba Stock Now?
Key Takeaways
Alibaba Group (BABA - Free Report) is doubling down on cloud and AI to reignite growth, but the payoff remains uneven. At its Apsara Conference, Alibaba Cloud targeted more than 20 gigawatts of global data center capacity by 2032, lined up new regions in Türkiye, Finland and the Netherlands and unveiled the Zhenwu V900 chip, due in early 2027. In commerce, AliExpress turned an operating profit in the first quarter of fiscal 2027 on logistics optimization and cost efficiencies.
The cloud momentum is real. AI Cloud and Compute Services revenues jumped 45% year over year to RMB48.4 billion, with AI-related product revenues of RMB12.4 billion posting a 12th straight quarter of triple-digit growth. Segment adjusted EBITA surged 133% to RMB5.6 billion. International momentum is weaker. International E-commerce revenues slipped 1% to RMB27.8 billion amid tariff and geopolitical pressure, so profitability gains are not yet lifting sales.
The AI push is costly. Capital expenditure climbed 75% to RMB67.7 billion, driving a free cash outflow of RMB44.7 billion versus RMB18.8 billion a year ago. Group adjusted EBITA fell 30%, with margin compressing to 10% from 16%, as AI Labs and Applications losses widened to RMB13.9 billion from RMB3.2 billion. Net income plunged 75%.
Guidance offers only partial comfort. Management expects cloud growth to keep accelerating and margins to expand, with model-as-a-service annual recurring revenues topping RMB16 billion in August against a year-end target of RMB30 billion. Alibaba also targets RMB100 billion in external cloud revenues by 2030. Yet spending shows no sign of easing. RMB190 billion of the three-year RMB380 billion capex plan is already deployed, and quick commerce is not expected to turn profitable until fiscal 2029.
Until cash flow stabilizes and international revenues return to growth, cloud strength alone may not be enough to lift BABA stock meaningfully.
How AMZN & MSFT Compare on Cloud Growth and Spending
Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) are pursuing similar AI-led cloud expansion. Amazon's AWS segment sales rose 37% year over year to $42.2 billion in the second quarter of 2026, its fastest growth in 18 quarters, while operating income climbed 64% to $16.6 billion. However, Amazon's trailing 12-month capital expenditure rose 64% to $169 billion, turning free cash flow negative. Microsoft's Azure and other cloud services revenues grew 43% in the fourth quarter of fiscal 2026, with commercial remaining performance obligation jumping 84% to $678 billion. Microsoft invested $35.8 billion in property and equipment during the June quarter.
BABA’s Share Price Performance, Valuation & Estimates
BABA shares have plunged 25.8% year to date, underperforming the Zacks Internet – Commerce industry’s 1.6% decline and the Zacks Retail-Wholesale sector’s 3.8% decline.
BABA’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, BABA stock is currently trading at a trailing 12-month Price/Earnings ratio of 47.7X compared with the sector’s 27X. BABA has a Value Score of C.
BABA’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2027 EPS is pegged at $6.41, reflecting a 1.7% downward revision over the past 30 days.
Alibaba Group Holding Limited Price and Consensus
Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote
Alibaba currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.