Nikkei Asia - Alibaba Q4 profit slides 66%, missing estimates

HONG KONG -- Alibaba's net profit for the October-December quarter plunged 66% to 15.63 billion yuan ($2.2 billion), as the Chinese conglomerate continues to invest massively in AI and burn through cash in its rivalry with Meituan in the "quick commerce" sector.

The Hangzhou-based company reported on Thursday that revenue came to 284.8 billion yuan, up 2% from the same period the year before, missing analysts' average estimate of 290.1 billion yuan surveyed by LSEG.

Though Alibaba spun off its lower-margin offline retail assets in China, including Intime Department Stores and Sun Art Retail, more than a year ago, their earnings were still included in the results for the period, a factor that likely weighed on the company's overall growth rate.

The company's Taobao app achieved a double-digit year-over-year rise in monthly active users during the quarter, driven by increased usage frequency and the expansion of its quick commerce business.

The figure for cloud computing, Alibaba's second-largest revenue source, was 43.3 billion yuan, a year-over-year increase of 36%.

In the past year, Alibaba has been stepping up its organizational overhaul to keep pace with rapid AI advances. This week, the company launched its Alibaba Token Hub unit, headed by CEO Eddie Wu, to build AI work platforms for enterprises. The unit is composed of existing units, including: Tongyi Laboratory; MaaS Business Line; its large language model Qwen; Wukong, an AI-native enterprise platform the company

launched this week; and AI Innovation.

During the 2026 Lunar New Year, Alibaba spent around 3 billion yuan to promote its Qwen AI app. During the February promotion peak, Qwen's daily active users (DAU) reached 22 million, but had fallen to below 15 million in March, according to MoonFox Data. The March number was well below ByteDance's Doubao at around 55 million and Tencent's Yuanbao at roughly 24 million.

Earlier this month, Alibaba suffered a blow with the departure of Junyang Lin, the chief architect of the Qwen models, raising questions about whether the company can maintain its technical lead in the AI race. In an internal letter, CEO Wu said the company will continue to adhere to its open-source model strategy while further increasing investment in AI research and development and intensifying efforts to attract top talent.

Alibaba said a year ago that it planned to invest at least 380 billion yuan over the next three years to advance its cloud computing and AI infrastructure, but that plan is expected to be hampered by U.S. export controls on Nvidia's advanced chips. Tencent, which reported earnings on Wednesday, said its capex of 79.2 billion yuan last year fell short of expectations due to U.S. chip restrictions.

Apart from capex related to chip purchases, competition in quick commerce continues to pressure Alibaba's free cash flow, which came in at 11.3 billion yuan in the quarter, a decrease of 71% on the year, leading the company to scale back its stock repurchase program during that period.

Driven by the skyrocketing costs of storage and computing resources, a number of Chinese cloud service providers including Tencent and Baidu have hiked prices on various products. Alibaba announced on Wednesday it would raise prices for its AI computing and storage products by as much as 34%.