Alibaba's revenue in the second fiscal quarter increased by 4.8% year-on-year, with cloud business revenue surging by 34% and instant retail business revenue growing by 60% | Financial Report Insights
Alibaba's second-quarter revenue exceeded expectations, with cloud intelligence business revenue surging by 34%. AI products continue to grow rapidly, ranking first in the domestic AI cloud market share. The "Qianwen" App reached over 10 million downloads in just one week of public testing, becoming the fastest-growing AI application. However, massive investments and expenses dragged net profit down by 72%, highlighting uncertainties in future valuations
Alibaba Group's revenue for the second quarter was RMB 247.8 billion, a year-on-year increase of 4.8%, slightly above market expectations, but the adjusted net profit plummeted 72% year-on-year to RMB 10.35 billion, significantly under pressure on profitability.
The Cloud Intelligence Group became a highlight, with revenue surging 34% year-on-year to RMB 39.82 billion, exceeding the market estimate of RMB 37.99 billion. Alibaba Group's Chief Financial Officer Xu Hong stated in the financial report that over the past four quarters, Alibaba's capital expenditure on AI and cloud infrastructure was approximately RMB 120 billion. The revenue from instant retail business was RMB 22.906 billion, a year-on-year increase of 60%, mainly due to the increase in order volume brought by the "Taobao Flash Purchase" launched at the end of April 2025.
On the 25th, Alibaba announced its financial report for the second fiscal quarter ending September 30:
- Revenue was RMB 247.8 billion, a year-on-year increase of 4.8%. Estimated at RMB 245.2 billion.
- Adjusted net profit was RMB 10.35 billion, a year-on-year decrease of 72%. Estimated at RMB 16.8 billion.
- Adjusted EBITDA was RMB 17.26 billion, a year-on-year decrease of 64%. Below the estimated RMB 19.3 billion.
- Adjusted earnings per ADS were RMB 4.36, lower than RMB 15.06 in the same period last year. Estimated at RMB 6.34.
Alibaba's Q3 Revenue Exceeds Expectations, Driven by AI and Cloud Computing Business Growth
The performance shows that Alibaba's various business segments exhibit a clear differentiation trend. The China E-commerce Business Group, as the largest source of revenue for the group, contributed RMB 132.58 billion, a year-on-year increase of 16%, exceeding the estimated RMB 128.53 billion. The Cloud Intelligence Group led all business segments with a year-on-year growth rate of 34%, with revenue reaching RMB 39.82 billion. Among them, revenue from external customers grew by 29%, mainly driven by public cloud business and AI-related products.
The financial report specifically pointed out that revenue from AI-related products achieved triple-digit year-on-year growth for the ninth consecutive quarter and is being rapidly adopted by a wide range of enterprise customers. According to a report by Omdia, Alibaba Cloud ranks first in the Chinese AI cloud market, accounting for 35.8%. In terms of profitability, the adjusted EBITA of the Cloud Intelligence Group grew by 35% year-on-year to RMB 3.6 billion, indicating that this business maintains healthy profitability while experiencing rapid growth.
CFO Xu Hong revealed that over the past four quarters, the company has spent approximately RMB 120 billion on AI and cloud infrastructure. Alibaba's CEO Eric Wu stated in the financial report that the company is in the "investment phase" to build AI technology infrastructure and a large consumer platform that integrates life services and e-commerceAlibaba accelerates the launch of AI products. This Monday, Alibaba officially announced that its "Qianwen" App has surpassed 10 million downloads just one week into its public beta. This growth rate has already outpaced ChatGPT, Sora, and DeepSeek, making it the fastest-growing AI application to date. Industry insiders view Alibaba's move as a key strategic layout in the battle for AI entry points. Kenny Ng, a strategist at Everbright Securities International, stated that whether Alibaba can leverage the Qianwen App to drive its consumer-facing business will be "an important factor affecting the company's future valuation."
"User First" Reshapes E-commerce, Instant Retail Takes the Lead
The most significant signal in the financial report is the sharp decline in profit metrics. For the quarter ending September 30, Alibaba's operating profit fell 85% year-on-year to 5.37 billion yuan, and adjusted EBITA dropped 78% year-on-year to 9.07 billion yuan. Free cash flow turned from a net inflow of 13.74 billion yuan in the same period last year to a net outflow of 21.84 billion yuan.
The company attributes this to investments in instant retail, user experience, and technology. Data shows that sales and marketing expenses doubled year-on-year this quarter, with the proportion of revenue soaring from 13.7% in the same period last year to 26.8%, primarily used for enhancing user experience in Alibaba's China e-commerce group. Meanwhile, product development expenses also increased by 21% year-on-year.
To promote the "User First" strategy, Alibaba has completed structural adjustments, integrating Taotian Group, Ele.me, and Fliggy into the "Alibaba China E-commerce Group." This group saw a 16% year-on-year revenue increase to 132.6 billion yuan this quarter, but adjusted EBITA fell 76% year-on-year to 10.5 billion yuan due to massive capital expenditures.
Under this new structure, the instant retail business performed outstandingly, with revenue growing 60% year-on-year to 22.9 billion yuan, mainly driven by order growth from "Taobao Flash Sale." Core customer management revenue (mainly from advertising and commissions on Taobao and Tmall) increased by 10% year-on-year, indicating that the fundamentals of the e-commerce main business remain solid. As of October 31, approximately 3,500 Tmall brands have connected their offline stores to the instant retail business, reflecting the initial results of ecological synergy.
International Business Turns Profitable, Efficiency Improvements Show Results
The performance of Alibaba's International Digital Commerce Group (AIDC) is another positive signal. This division achieved adjusted EBITA profit of 162 million yuan this quarter, compared to a loss of 2.91 billion yuan in the same period last year, successfully turning around. The company stated that this was mainly due to significant improvements in the operational efficiency of AliExpress.
In terms of revenue, AIDC grew 10% year-on-year to 34.8 billion yuan. The improvement in profit margins indicates that the group is enhancing its financial situation while maintaining growth through optimized logistics and improved input efficiency. The unit economics of the AliExpress Choice business continue to improve, making a key contribution to the group's profitabilityAfter the earnings report was released, Alibaba rose more than 4% in pre-market trading.
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