BABA Q2 Earnings Miss Estimates, Revenues Increase Y/Y

Alibaba BABA reported non-GAAP earnings of 61 cents per ADS in the second quarter of fiscal 2026, which lagged the Zacks Consensus Estimate by 7.58%. In domestic currency, the company reported non-GAAP diluted earnings of RMB 4.36, down 71% year over year.It posted second-quarter fiscal 2026 revenues of $34.8 billion. The top line beat the Zacks Consensus Estimate by 1.09%. In domestic currency, revenues of RMB 247.8 billion increased 5% year over year. Excluding disposed businesses of Sun Art and Intime, revenues increased 15% on a like-for-like basis.The revenue growth was driven by accelerated performance in Cloud Intelligence Group and strong expansion of the domestic e-commerce platform, while aggressive investments in quick commerce significantly pressured margins. The company continues focusing on two strategic pillars: consumption and AI + Cloud.Alibaba Group Holding Limited Price, Consensus and EPS Surprise Alibaba Group Holding Limited price-consensus-eps-surprise-chart | Alibaba Group Holding Limited QuoteRevenues by SegmentsAlibaba China E-commerce Group (53.5% of Total Revenues): Alibaba generated RMB 132.6 billion ($18.6 billion) of revenues from the segment, which increased 16% from the year-ago quarter. Customer management revenues grew 10% year over year, driven primarily by improved take rates and growing adoption of AI-powered marketing solutions.The number of 88VIP members, BABA's highest-spending consumer group, continued to increase year over year, demonstrating strong platform momentum to attract and grow a high-spending and loyal consumer base.E-commerce Business (77.6% of China E-commerce Revenues): The core e-commerce vertical generated revenues of RMB 102.9 billion ($14.5 billion), reflecting a 9% increase from the year-ago quarter.Quick Commerce (22.4% of China E-commerce Revenues): The quick commerce business generated revenues of RMB 29.7 billion ($4.2 billion), which grew 60% year over year. This explosive growth was driven by the rollout of "Taobao Instant Commerce," significantly contributing to user engagement and order volume growth. The business showed significant improvement in unit economics, with approximately 50% reduction in per-order losses since mid-2025.Alibaba International Digital Commerce Group (13.1% of Total Revenues): The segment comprises AliExpress, Trendyol, Lazada and other international businesses. BABA generated RMB 32.4 billion ($4.6 billion) in revenues from the segment, which grew 10% from the year-ago quarter.International Commerce Retail (78.4% of International Revenues): Revenues were RMB 25.4 billion ($3.6 billion), up 11% from the year-ago quarter, driven by revenue increases from diversified product offerings and enhanced local merchant partnerships.International Commerce Wholesale (21.6% of International Revenues): The business generated revenues of RMB 7.0 billion ($980 million), which increased 6% year over year, supported by AI-powered B2B procurement solutions.Cloud Intelligence Group (16.1% of Total Revenues): The segment generated revenues of RMB 39.8 billion ($5.6 billion), up 34% from the year-ago quarter. Revenues from external customers grew 29% year over year, driven by accelerated growth in public cloud revenues and surging adoption of AI-related products and services.AI-related product revenues maintained triple-digit growth for the ninth consecutive quarter, now representing more than 20% of revenues from external customers. The strong AI demand is driving increased utilization of compute, storage and other cloud services.The company continues advancing its AI capabilities with the Qwen family of models, which has become the most popular open-source model among global developers, with more than 90,000 derivative models created. The Qwen App, launched in November, surpassed 10 million downloads within four days.All Others (23.3% of total revenues): The segment's revenues were RMB 57.6 billion ($8.1 billion), reflecting a 25% year-over-year decrease, primarily due to the disposal of Sun Art and Intime businesses.Operating DetailsIn the fiscal second quarter, Sales and marketing expenses were RMB 75.0 billion ($10.5 billion), up significantly from the year-ago quarter. As a percentage of total revenues, the figure expanded to 30.3%, reflecting heavy investment in quick commerce user acquisition and retention initiatives.General and administrative expenses were RMB 8.1 billion ($1.1 billion), relatively stable. Product development expenses were RMB 15.4 billion ($2.2 billion), reflecting continued investment in technology and innovation, particularly in AI.Adjusted EBITDA was RMB 9.1 billion ($1.3 billion), down 78% year over year due to strategic investments in quick commerce and AI infrastructure, partly offset by strong revenue growth and improved operating efficiencies across the Cloud business. The adjusted EBITDA margin contracted significantly to 3.7% from 17.4% in the prior year.Balance Sheet & Cash FlowAs of Sept. 30, 2025, cash and cash equivalents were RMB 188.4 billion ($26.5 billion), up from RMB 183.1 billion ($25.6 billion) as of June 30, 2025. Total liquid investments were RMB 573.8 billion ($80.6 billion), including short-term investments and other treasury investments.Alibaba generated RMB 10.1 billion ($1.4 billion) in cash from operations, down 68% from RMB 31.4 billion in the prior-year quarter, primarily due to increased investments in quick commerce operations and cloud infrastructure.BABA's free cash flow was an outflow of RMB 21.8 billion ($3.1 billion) against an inflow of RMB 13.7 billion in the prior-year quarter, mainly attributed to accelerated CapEx investment of RMB 31.9 billion ($4.5 billion) in AI and cloud infrastructure and strategic investment in quick commerce expansion.The company repurchased $1.3 billion worth of shares during the quarter, representing a net reduction of total shares outstanding by 5% year to date.Zacks Rank & Stocks to ConsiderAlibaba currently carries a Zacks Rank #5 (Strong Sell).Some better-ranked stocks in the broader Zacks Retail-Wholesale sector are American Eagle Outfitters AEO, Five Below FIVE and Stitch Fix SFIX, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.American Eagle Outfitters, Five Below and Stitch Fix are scheduled to report their respective third-quarter 2025 results on Dec. 2, Dec. 3 and Dec. 4.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report Five Below, Inc. (FIVE): Free Stock Analysis Report Alibaba Group Holding Limited (BABA): Free Stock Analysis Report Stitch Fix, Inc. (SFIX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks