Alibaba misses revenue forecasts as AI spending weighs profits

Wednesday 13 May 2026 - 11:00

By: Dakir Madiha

Alibaba misses revenue forecasts as AI spending weighs profits

Alibaba reported fourth-quarter revenue of 243.38 billion yuan for fiscal year 2026, marking a 3 percent year-on-year increase but falling short of market expectations of around 246.5 billion yuan. The result highlights continued pressure from heavy investment in artificial intelligence infrastructure and rapid commerce expansion, which is weighing on short-term profitability despite steady top-line growth.

The miss marks the second consecutive quarter in which the Chinese technology group has failed to meet revenue forecasts. Investor sentiment weakened in premarket trading as markets reacted to concerns over rising costs and diminishing operational margins. The company’s ongoing shift toward an AI-driven business model continues to reshape expectations around its near-term financial performance.

Alibaba’s cloud intelligence division delivered a strong counterpoint to broader weakness. Revenue in the segment rose 38 percent year-on-year, supported by sustained triple-digit growth in AI-related services for the eleventh consecutive quarter. The expansion reflects increasing integration of the company’s Qwen AI model across both enterprise and consumer platforms.

Despite cloud strength, profitability came under significant strain. Adjusted EBITA plunged 84 percent to 5.1 billion yuan, driven by heavy spending on cloud infrastructure, AI expansion, consumer incentives, and rapid commerce investments. Net profit nearly doubled to 23.5 billion yuan, but this increase was largely attributed to investment gains rather than core operational improvement.

The company has signaled that elevated capital expenditure will continue at least through March 2027 as it scales its AI and cloud ecosystem. Alibaba has also set a long-term target of more than 100 billion yuan in combined AI and cloud revenue within five years. The results underscore a growing tension between long-term technological positioning and short-term earnings pressure, as investors assess how long sustained spending can continue before stronger operational leverage emerges.