Alibaba Q3 Earnings Miss Estimates, Revenues Rise Y/Y
Alibaba Group BABA reported non-GAAP diluted earnings of $1.01 per ADS in the third quarter of fiscal 2026, which missed the Zacks Consensus Estimate by 47.12%. In domestic currency, the company reported non-GAAP diluted earnings of RMB 7.09, down 67% year over year.
It posted third-quarter fiscal 2026 revenues of $40.7 billion. The top line missed the Zacks Consensus Estimate by 1.95%. In domestic currency, revenues of RMB 284.8 billion increased 2% year over year. Excluding disposed businesses of Sun Art and Intime, revenues increased 9% on a like-for-like basis.
The revenue growth was driven by accelerated performance in Cloud Intelligence Group and continued expansion of the quick commerce business, while aggressive investments in user experience, technology and quick commerce significantly pressured margins. The company continues focusing on two strategic pillars: consumption and AI + Cloud.
Alibaba Group Holding Limited Price, Consensus and EPS Surprise
Alibaba Group Holding Limited price-consensus-eps-surprise-chart | Alibaba Group Holding Limited Quote
Revenues by Segments
Alibaba China E-commerce Group (55.9% of Total Revenues): Alibaba generated RMB 159.3 billion ($22.8 billion) of revenues from the segment, which increased 6% from the year-ago quarter. Customer management revenues grew 1% year over year, driven primarily by an improvement in take rate. During the quarter, the company rebranded “Ele.me” to “Taobao Instant Commerce” to closely align it with the Taobao app and strengthen brand identity. The Taobao app achieved a double-digit year-over-year increase in monthly active consumers during the quarter.
The number of 88VIP members, BABA’s highest-spending consumer group, continued to increase by double digits year over year, surpassing 59 million, demonstrating strong platform momentum to attract and retain a high-spending and loyal consumer base.
E-commerce Business (82.6% of China E-commerce Revenues): The core e-commerce vertical generated revenues of RMB 131.6 billion ($18.8 billion), reflecting a 1% increase from the year-ago quarter.
Quick Commerce (13.1% of China E-commerce Revenues): The quick commerce business generated revenues of RMB 20.8 billion ($3 billion), which grew 56% year over year, driven by order growth from the expanded rollout of “Taobao Instant Commerce.” The business continued to improve unit economics and increase average order value month over month during the quarter, driven by fulfillment logistics efficiency enhancement, order mix optimization and strong customer retention.
China Commerce Wholesale (4.3% of China E-commerce Revenues): The China wholesale business generated revenues of RMB 6.9 billion ($990 million), up 5% year over year, primarily due to an increase in revenues from value-added services provided to paying members.
Alibaba International Digital Commerce Group (13.8% of Total Revenues): The segment comprises AliExpress, Trendyol, Lazada and other international businesses. BABA generated RMB 39.2 billion ($5.6 billion) in revenues from the segment, which grew 4% from the year-ago quarter. AIDC narrowed its losses significantly year over year, driven by logistics optimization and investment efficiency enhancement.
International Commerce Retail (82.5% of International Revenues): Revenues were RMB 32.4 billion ($4.6 billion), up 3% from the year-ago quarter, driven by revenue increases contributed by AliExpress and other international businesses, partly offset by a decrease in Lazada revenues.
International Commerce Wholesale (17.5% of International Revenues): The business generated revenues of RMB 6.9 billion ($980 million), which rose 10% year over year, primarily due to an increase in revenues from cross-border related value-added services.
Cloud Intelligence Group (15.2% of Total Revenues): The segment generated revenues of RMB 43.3 billion ($6.2 billion), up 36% from the year-ago quarter. Revenues excluding Alibaba-consolidated subsidiaries grew 35% year over year, primarily driven by public cloud revenue growth and the increasing adoption of AI-related products and services.
AI-related product revenues maintained triple-digit growth for the 10th consecutive quarter. The company continues advancing its AI capabilities with the Qwen family of models, which surpassed 1 billion cumulative downloads on Hugging Face as of Jan. 21, 2026. In February, the company launched Qwen3.5, further strengthening its multimodal AI leadership in reasoning, coding and agentic tasks. T-Head Semiconductor, Alibaba’s chip design subsidiary, brought its proprietary GPU into scaled production, supporting end-to-end AI workloads from training and fine-tuning to inference.
All Others (23.6% of Total Revenues): The segment’s revenues were RMB 67.3 billion ($9.6 billion), reflecting a 25% year-over-year decrease, primarily due to the disposal of Sun Art and Intime businesses, as well as a decrease in Cainiao revenues, partly offset by growth in Freshippo and Alibaba Health.
Operating Details
In the fiscal third quarter, sales and marketing expenses were RMB 71.9 billion ($10.3 billion), up significantly from the year-ago quarter. As a percentage of total revenues, the figure expanded to 25.3% from 15.2%, reflecting heavy investment in user experience and quick commerce expansion.
General and administrative expenses were RMB 8.4 billion ($1.2 billion), down year over year. Product development expenses were RMB 15.5 billion ($2.2 billion), or 5.4% of revenues, reflecting continued investment in technology and innovation, particularly in AI.
Adjusted EBITDA was RMB 34.1 billion ($4.9 billion), down 45% year over year due to strategic investments in quick commerce, user experience and technology, partly offset by strong revenue growth and improving operating efficiencies across the Cloud business. The adjusted EBITDA margin contracted to 12% from 22% in the prior year. Adjusted EBITA fell 57% to RMB 23.4 billion ($3.3 billion), with the adjusted EBITA margin declining to 8% from 20%.
Balance Sheet & Cash Flow
As of Dec. 31, 2025, cash and other liquid investments were RMB 560.2 billion ($80.1 billion), up from cash and cash equivalents of RMB 188.4 billion ($26.5 billion) as of Sept. 30, 2025.
Alibaba generated RMB 36 billion ($5.2 billion) in cash from operations, down 49% from RMB 70.9 billion in the prior-year quarter, primarily due to increased investments in quick commerce operations. Free cash flow was RMB 11.3 billion ($1.6 billion), a decrease of 71% compared to RMB 39 billion in the same quarter a year ago, mainly attributed to investments in quick commerce.
The company repurchased approximately $1.1 billion (RMB 7.6 billion) worth of ordinary shares during the quarter.
Zacks Rank & Stocks to Consider
Alibaba currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Zacks Retail-Wholesale sector are Kingfisher KGFHY, Hennes & Mauritz HNNMY and Sportsman’s Warehouse SPWH, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kingfisher, Hennes & Mauritz and Sportsman’s Warehouse are scheduled to report their respective fourth-quarter 2025 results on March 24, March 26 and March 31.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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