Alibaba 4QFY26 First Take: As widely expected, this quarter’s results were weak. The key drag was heavy spending around Lunar New Year on the Qianwen app’s cash handouts and related promotions, which pushed group adj. EBITA down to RMB 5.1bn, even below profits during the peak food-delivery war in 3Q last year.

That said, the print landed toward the low end of top brokers’ ranges, so the miss vs. expectations was not severe. Specifically:

1) Marketplace CMR rose 1.2% YoY, in line with the Street. This reflects an accounting change that reclassified merchant subsidies from marketing expense to a contra-revenue item. On a like-for-like basis, CMR growth would have been ~8%.

Consistent with consensus, ecommerce growth has rebounded from the trough in 4Q last year. Adj. EBITA for the domestic ecommerce segment was RMB 24.0bn, near the lower bound of sell-side estimates.

Implied losses in food delivery remain elevated; we estimate roughly RMB 17.0bn vs. ~RMB 25.0bn in the prior quarter. Similar to last quarter, losses were near the top end of the market range, suggesting Flash Purchase is narrowing losses but Alibaba has not materially dialed back investment or its focus on delivery share.

2) Cloud revenue rose 38% YoY, in line with Bloomberg consensus but below top brokers’ ~40% view, hence a slight miss. External revenue grew 40%, showing more compute was allocated to third-party monetization, but that did not change the overall undershoot.

Segment margin was 9.1%, up 10bps QoQ. It did not deteriorate as some feared, a small positive.

Management disclosed AI-related revenue of nearly RMB 9.0bn for the quarter, or ~RMB 36.0bn annualized, now over one-fifth of total cloud revenue and still growing triple digits. Overall, cloud performance this quarter was just middling.

3) The biggest swing factor was Other Biz., which still houses Qianwen and related units under current reporting. The Lunar New Year cash giveaways on the Qianwen app and free-delivery tie-ins with Flash Purchase alone cost over RMB 5.0bn by some foreign bank estimates, and combined with model R&D and other AI investments, drove segment losses to over RMB 21.1bn, above the already-raised sell-side expectation of RMB 20.0bn.

New-biz losses increased by over RMB 11.0bn QoQ, while delivery narrowed by only ~RMB 8.0bn. Combined with seasonally weak profits in the Jan–Mar quarter, this pushed Alibaba’s overall profit to the lowest level in recent years.$Alibaba(BABA.US) $BABA-W(09988.HK)