Alibaba Q4 revenue increased by 2% year-over-year, non-GAAP net profit decreased by 67%, AI-related revenue grew triple-digit for 10 consecutive quarters | Earnings Report Insights

Questioning AI · What are the driving factors behind Alibaba AI’s ten consecutive quarters of triple-digit revenue growth?

Alibaba announced its Q4 financial results on Thursday, confirming that the rapid growth of AI + cloud services remains a new main driver, but group profits and cash flow are under significant pressure due to investments in instant retail.

The most notable growth this quarter comes from cloud and AI. Alibaba Cloud’s revenue increased 36% year-over-year to 43.284 billion yuan, with AI-related product revenue maintaining triple-digit YoY growth for the tenth consecutive quarter; management stated that the MaaS platform is growing strongly and is becoming a new engine for cloud business. On the consumer side, the Qianwen app is deeply integrated with Taotian, instant retail, Amap, Fliggy, Alipay, and other ecosystem services, driving the deployment of AI Agents that move “from conversation to task execution,” with monthly active users surpassing 300 million across the platform by February.

Another main line in consumer business is the accelerated expansion of instant retail: revenue grew 56% YoY to 20.842 billion yuan this quarter, with improvements in fulfillment efficiency, order structure, and retention driving quarter-over-quarter improvements in unit economics and a continuous increase in average order value; Ele.me was renamed “Taobao Instant Business” within the quarter and further integrated with the Qianwen app in January to expand reach.

The cost of this growth is reflected in profits and cash flow:

Group revenue increased only 2% YoY to 284.843 billion yuan (comparable basis, excluding disposal of RT-Mart, Intime, etc., +9%), falling short of market expectations of 290.7 billion yuan. Operating profit plummeted 74% YoY to 10.645 billion yuan, non-GAAP net profit declined 67% YoY to 16.710 billion yuan, versus market expectations of 31.6 billion yuan.

Operating cash flow decreased 49% YoY, free cash flow down 71% YoY, mainly due to investments in instant retail.

After the earnings release, Alibaba’s US stock pre-market decline widened to 4%.

The earnings pressure underscores Alibaba’s urgency to “turn AI into a business.” This week, the company launched enterprise agentic AI service Wukong, established a token division, and raised prices for cloud computing and storage services, with increases up to 34%, aiming to more directly convert computing power and model capabilities into revenue.

Revenue +2% YoY, cloud revenue accelerates growth

• Quarterly revenue: 284.843 billion yuan, +2% YoY
• Comparable basis (excluding disposed RT-Mart, Intime): +9% YoY

Segment-wise, growth is mainly driven by cloud and domestic e-commerce (including instant retail), while “other businesses” are significantly dragged down by asset disposals and business adjustments:

• Taotian Group: 159.347 billion yuan, +6%
• International Digital Commerce: 39.201 billion yuan, +4%
• Cloud Intelligence Group: 43.284 billion yuan, +36%
• Other businesses: 67.340 billion yuan, -25% (affected by disposal of RT-Mart, Intime, and decline in Cainiao revenue)

Instant retail drags down profit, non-GAAP net profit down 67% YoY

• Operating profit: 10.645 billion yuan, -74% (operating margin 4%, vs. 15% last year)
• Adjusted EBITA: 23.397 billion yuan, -57% (margin 8%, vs. 20% last year)
• Net profit: 15.631 billion yuan, -66%
• Non-GAAP net profit: 16.710 billion yuan, -67%

The core reason for profit decline is “strategic increased spending”: expansion of instant retail, user experience upgrades, and increased technology investments, partially offset by growth in cloud business and efficiency improvements. Segment-adjusted EBITA clearly shows “cloud profits are being spent on new battlegrounds”:

• Taotian Group: 34.613 billion yuan, -43%
• International Digital Commerce: -2.016 billion yuan (significantly narrowed from -4.952 billion last year)
• Cloud Intelligence Group: 3.911 billion yuan, +25%
• Other businesses: -9.792 billion yuan (widened from -3.176 billion last year)

Domestic e-commerce: customer management revenue only +1%, 88VIP surpasses 59 million

In this quarter, Taotian Group’s growth was weak, with instant retail becoming the main driver:

• E-commerce revenue: 131.583 billion yuan, +1%
  • Customer management revenue: 102.664 billion yuan, +1%
    • Slower growth due to weaker transaction activity and phased exit of software service fees; however, the company mentioned “take rate improvements” offset some pressure.
• Taobao app’s monthly active users grew double digits YoY (company data), linked to increased mindshare from expanding instant retail.
• 88VIP members exceeded 59 million, with double-digit YoY growth.
• Instant retail revenue: 20.842 billion yuan, +56%, driven mainly by the large-scale promotion of “Taobao Instant Business” by April 2025, boosting orders.

Management emphasized that instant retail’s “unit economics continued to improve, and average order value increased month-over-month” driven by three actions: improved fulfillment efficiency, optimized order structure (focusing on high-value dining and non-food categories), and strong customer retention. However, at the group level, instant retail remains in a “scale through investment” stage, directly squeezing profits and cash flow.

Costs related to business adjustments are also reflected in expenses: equity incentive expenses increased 26% YoY, explained by renaming Ele.me and retention incentives (replacement awards).

International e-commerce: moderate growth, losses narrowed through logistics and efficiency

• International Digital Commerce revenue: 39.201 billion yuan, +4%
  • International retail: 32.351 billion yuan, +3% (growth in AliExpress offset declines in Lazada)
  • International wholesale: 6.850 billion yuan, +10%
• Adjusted EBITA loss: -2.016 billion yuan (vs. -4.952 billion last year)

The company attributes improvements to logistics optimization and efficiency gains, noting AliExpress’s Choice business unit economics improved quarter-over-quarter; also, partnerships with South Korea’s Shinsegae and the “Brand+” export solutions on AliExpress are accelerating brand onboarding, enhancing supply and monetization.

Cloud and AI: revenue +36% acceleration, AI products grow triple-digit for ten straight quarters

• Alibaba Cloud revenue: 43.284 billion yuan, +36%
• Cloud revenue excluding Alibaba’s consolidated subsidiaries: +35% YoY
• Adjusted EBITA: 3.911 billion yuan, +25%

The acceleration is driven by increased penetration of public cloud and AI-related products. The company disclosed that AI-related product revenue has maintained triple-digit YoY growth for ten consecutive quarters; MaaS platform growth is strong, positioned as a new engine for cloud expansion. Globally, as of December 31, 2025, Alibaba Cloud operates in 29 regions and 92 availability zones.

Qianwen evolves from “model” to “application”: platform monthly active users exceed 300 million, beginning to drive ecosystem transactions

This quarter’s AI consumer progress is centered on the integration of Qianwen app as an “ecosystem-level” platform:

• After the January 15 upgrade, Qianwen app can coordinate services like Taotian, Taobao Instant Business, Amap, Fliggy, Alipay, evolving into an “AI assistant capable of executing complex tasks.”
• Post-Lunar New Year, user engagement increased: by the end of February, about 140 million users had completed their first AI-driven shopping/lifestyle experience via Qianwen’s Agent; platform monthly active users exceeded 300 million in February.
• On the model side: in February, Qianwen 3.5 was released; as of January 21, the open-source Qianwen model had been downloaded over 1 billion times on Hugging Face.

The key here is not just user acquisition but the potential impact if AI interfaces are stably distributed across e-commerce, local services, transportation, and payments—directly affecting Alibaba’s conversion efficiency and customer acquisition costs in “transaction + service” scenarios.

Self-developed chips T-Head: mass production of GPUs to support long-term compute supply

Alibaba disclosed that its T-Head self-developed GPUs have achieved mass production, capable of supporting end-to-end AI workloads from training and fine-tuning to inference, compatible with mainstream AI frameworks.

The company states this business has made a “meaningful contribution” to cloud infrastructure supply and can be combined with Qianwen models and cloud services to offer more cost-effective AI services externally—this strategic layout is more valuable in the medium to long term amid tight compute resources and cost sensitivity.

“Other businesses”: asset disposals drag revenue, tech investments increase losses and impairments

“Other businesses” revenue was 67.34 billion yuan, down 25% YoY, mainly due to:

• Revenue gaps from disposals of RT-Mart and Intime
• Decline in Cainiao revenue
• Partial offset from growth in Hema and Alibaba Health

Profitability-wise, “other businesses” adjusted EBITA loss widened to -9.792 billion yuan (vs. -3.176 billion last year), attributed to increased investment in technology businesses; additionally, a goodwill impairment of 9.515 billion yuan was recognized this quarter (related to other businesses), further lowering GAAP profits.