Alibaba's third quarter revenue was 284.84 billion yuan, versus an estimate of 289.79 billion yuan, with shares falling over 4% in pre-market trading.

What are the reasons behind Alibaba’s earnings report falling short of expectations?

On March 19, Alibaba released its earnings announcement for the third quarter (ending December 2025), reporting revenue of 284.84 billion RMB, up 2% year-over-year, compared to an estimate of 289.79 billion RMB; adjusted net profit was 16.71 billion RMB, down 67% year-over-year, versus an estimated 31.6 billion RMB.

Alibaba’s third-quarter adjusted EBITA was 34.06 billion RMB, compared to an estimated 39.62 billion RMB.

The cloud intelligence group’s revenue for the third quarter was 43.28 billion RMB, versus an estimated 42.36 billion RMB.

Alibaba’s US stock pre-market trading dropped over 4% at one point.

Performance Overview

For the quarter ending December 31, 2025:

Revenue was 284.843 billion RMB (USD 40.732 billion), up 2% year-over-year. Excluding the disposed businesses of Gaoxin Retail and Intime, the comparable revenue grew 9%.

Operating profit was 10.645 billion RMB (USD 1.522 billion), down 74% year-over-year.

Adjusted EBITA declined 57% year-over-year to 23.397 billion RMB (USD 3.346 billion).

Net profit attributable to ordinary shareholders was 16.322 billion RMB (USD 2.334 billion).

Net profit was 15.631 billion RMB (USD 2.235 billion), down 66% year-over-year.

Non-GAAP net profit was 16.710 billion RMB (USD 3.889 billion), down 67%.

Diluted EPS for American Depositary Shares was 5.93 RMB (USD 0.85); non-GAAP diluted EPS was 7.09 RMB (USD 1.01), down 67% year-over-year.

Net cash flow from operating activities was 36.032 billion RMB (USD 5.152 billion), down 49%.

Free cash flow was 11.346 billion RMB (USD 1.622 billion), down 71%, mainly due to investments in instant retail.

As of December 31, 2025, the company’s cash and other liquid investments totaled 560.175 billion RMB (USD 80.104 billion).

Business and Strategic Developments

Consumer Business

Alibaba China E-commerce Group:

Customer management revenue increased 1% year-over-year to 102.664 billion RMB (USD 14.681 billion).

Instant retail revenue grew 56% year-over-year to 20.842 billion RMB (USD 2.980 billion), driven by increased orders from “Taobao Flash Sale.”

The number of 88VIP members grew double digits year-over-year, exceeding 59 million.

Alibaba International Digital Commerce Group (AIDC):

International retail commerce revenue increased 3% year-over-year to 32.351 billion RMB (USD 4.626 billion).

International wholesale commerce revenue increased 10% to 6.850 billion RMB (USD 980 million).

Losses narrowed significantly year-over-year, mainly due to logistics optimization and efficiency improvements.

Cloud Intelligence Group

Revenue was 43.284 billion RMB (USD 6.190 billion), up 36% year-over-year. Total revenue and revenue excluding Alibaba’s consolidated businesses accelerated to 36% and 35%, respectively.

AI-related product revenue achieved triple-digit year-over-year growth for the tenth consecutive quarter.

Qwen Family of Models

Launched Qwen 3.5, consolidating a leading position in multimodal AI.

As of January 21, 2026, the Qwen models had over 1 billion downloads on Hugging Face.

Chip Design – Pingtouge

Self-developed GPU has achieved mass production, supporting end-to-end AI workloads.

Qwen App

By January 15, 2026, integrated deeply with Alibaba ecosystem services like Taobao Tmall, Taobao Flash Sale, Amap, Fliggy, and Alipay.

By February, the app’s monthly active users exceeded 300 million. Nearly 140 million users experienced AI shopping for the first time via Qwen App by the end of February.

Segment Performance Summary

For the quarter ending December 31, 2025:

Alibaba China E-commerce Group: Total revenue of 159.347 billion RMB (USD 22.786 billion), up 6%.

Alibaba International Digital Commerce Group: Total revenue of 39.201 billion RMB (USD 5.606 billion), up 4%.

Cloud Intelligence Group: Revenue of 43.284 billion RMB (USD 6.190 billion), up 36%.

All other segments: Revenue of 67.340 billion RMB (USD 9.629 billion), down 25%.

Adjusted EBITA for the quarter:

Alibaba China E-commerce Group: 34.613 billion RMB (USD 4.949 billion), down 43%.

Alibaba International Digital Commerce Group: Loss of 2.016 billion RMB (USD 288 million), compared to a loss of 4.952 billion RMB in the same period last year.

Cloud Intelligence Group: 3.911 billion RMB (USD 559 million), up 25%.

All other segments: Loss of 9.792 billion RMB (USD 1.400 billion), compared to a loss of 3.176 billion RMB last year.

As of December 31, 2025, Alibaba Group’s total employee count was 128,197.