Alibaba (BABA) stock dropped around 4.5% in premarket trading Thursday after the company reported first-quarter earnings that missed Wall Street expectations.
Alibaba Group Holding Limited, BABA
BABA ADRs were down about 4.7% ahead of the open, adding to a year-to-date decline of roughly 12%.
Net profit came in at 10.54 billion yuan ($1.57 billion), a 76% drop from the same quarter a year ago. Analysts had expected 21.8 billion yuan.
ALIBABA $BABA Q1’27 EARNINGS HIGHLIGHTS
🔹 Revenue: ¥269B (Est. ¥269.3B) 🟡; +9% YoY
🔹 Adj ADS: ¥8.52 (Est. ¥11.26) 🔴; -42% YoY
🔹 AI revenue tripled for the 12th straight qtr
🔹 CapEx: ¥67.7B (Est. ¥29.22B) 🔴; +75% YoY
🔹 Free Cash Flow: -¥44.7B (Est. -¥12.80B) 🔴Segment… pic.twitter.com/f6M53PU46z
— Wall St Engine (@wallstengine) August 20, 2026
Revenue rose 9% to 268.95 billion yuan, just above the Bloomberg consensus of 268.52 billion yuan.
Non-GAAP net income fell 38% to 20.72 billion yuan, below the 25.58 billion yuan estimate. Non-GAAP diluted earnings per ADS came in at 8.52 yuan, down 42% year over year and short of the 11.28 yuan forecast.
Alibaba Cloud was the standout in an otherwise soft quarter. Revenue from AI Cloud and Compute Services rose 45% to 48.44 billion yuan, above the 47.5 billion yuan estimate.
AI-related product revenue hit 12.38 billion yuan, marking the 12th consecutive quarter of triple-digit growth.
Adjusted EBITA for the cloud segment more than doubled, with the company pointing to revenue growth and improved operating efficiency.
“We delivered a strong quarter, driven by the improving commercialization of our full-stack AI capabilities,” CEO Eddie Wu said. “Alibaba Cloud’s external revenue growth accelerated to 45%, with AI-related product revenue delivering triple-digit growth for the twelfth consecutive quarter.”
The earnings miss comes as Alibaba continues to pour money into AI infrastructure. Capital expenditure surged 75% year over year to 67.68 billion yuan.
Free cash flow swung to an outflow of 44.67 billion yuan, driven by higher cloud infrastructure spending.
To help fund its AI push, Alibaba recently agreed to sell its videogames unit Lingxi Games to Asian private-equity firm Trustar Capital for at least $1.5 billion.
Alibaba also reorganized its reporting structure this quarter, merging its China and international commerce operations with Freshippo under a new Alibaba E-commerce Group. It combined Cloud Intelligence Group with T-Head under AI Cloud and Compute Services.
The results come against a softening Chinese economy. July retail sales growth slowed to 0.6% and industrial output rose 4.5%, both weaker than the prior month.
Short interest on BABA stands at 1.83% of the total float, while the benchmark index has gained 12.6% year to date compared to BABA’s 12% decline.
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