Taobao Flash Sale has moved out of the peak investment phase, will Q4 focus on reducing losses?

Alibaba's latest financial report reveals a key strategic shift: after significant investments in the instant retail business "Flash Purchase," the company is shifting its focus from pursuing scale to controlling losses, which may provide crucial support for the group's future profit recovery.

According to the Q3 financial report disclosed on November 25, Alibaba's revenue grew by 4.8% year-on-year to 247.8 billion yuan, but its Non-GAAP net profit plummeted by 71.7% year-on-year to 10.35 billion yuan. The profit decline is mainly attributed to the Chinese e-commerce group, whose adjusted EBITA fell sharply by 76.3% year-on-year, primarily due to strategic investments in the Flash Purchase business.

Alibaba's management clearly stated at the earnings conference that the investment in Flash Purchase this quarter has reached a peak. CITIC Securities believes that the investment may have already peaked, and the future strategic focus may shift from pursuing scale to enhancing profitability. According to Huatai Research, the impact of this investment on EBITA is approximately 36.7 billion yuan. As the operational focus shifts, the average loss per transaction in this business has significantly narrowed, and the market is closely watching whether this change can bring a turning point for the company's mid-to-short-term profitability.

Despite the pressure on e-commerce profitability, Alibaba Cloud Intelligence Group performed strongly, with revenue growing by 34.5% year-on-year, becoming a highlight of the financial report, showcasing AI-driven growth momentum. However, for investors, the reduction in losses from the Flash Purchase business and its ability to successfully synergize with core e-commerce remains a core variable in assessing Alibaba's future value.

Flash Purchase Investment Peaks, Loss Reduction Becomes New Focus

The financial report shows that Alibaba's Chinese e-commerce group achieved a 15.5% revenue growth this quarter, reaching 132.6 billion yuan, but its adjusted EBITA profit fell sharply by 76.3% year-on-year to 10.5 billion yuan. The significant negative growth in profit is mainly dragged down by strategic investments in the instant retail business "Flash Purchase."

According to CITIC Securities analysis, if excluding the impact of the Flash Purchase business, Alibaba's core e-commerce business achieved a positive growth in EBITA in the mid-single digits (MSD) year-on-year. This data indicates that the profitability of the traditional e-commerce business remains robust.

In response, Alibaba's management confirmed that this quarter (FY26Q2) is the peak of investment in the Flash Purchase business. Looking ahead, management expects that with efficiency improvements and stable scale, the investment scale in the next quarter (FY26Q3) will significantly shrink compared to the previous quarter. This statement confirms the market's judgment on the company's strategic focus shift: after aiming to increase order volume in the third quarter of the calendar year, the primary task in the fourth quarter has shifted to reducing losses.

Initial Signs of Efficiency Improvement, UE Model Enhancement

With the shift in strategic focus, positive signals have emerged regarding the operational efficiency of the Flash Purchase business. According to Huatai Research, **since October, the average loss per transaction in Flash Purchase has narrowed by half compared to July-August, while the order share remains stable, and thanks to the increase in average transaction value, the GMV share has also seen growth **

CITIC Construction Investment's report also pointed out that since September, the unit economic model (UE) of flash sales has shown significant improvement. This indicates that the initial investments are beginning to yield returns at the operational level, laying the foundation for subsequent loss reduction.

More importantly, the synergy of the flash sales business with the main site has begun to manifest. CITIC Construction Investment analysts believe that flash sales not only boosted user activity but also drove transactions in related categories, positively impacting Customer Management Revenue (CMR). This quarter, CMR revenue grew by 10.1% year-on-year, achieving double-digit growth for three consecutive quarters, partly due to cross-selling brought by flash sales.

Alibaba Cloud Momentum Strong, AI Becomes New Growth Engine

While the e-commerce business is experiencing a painful investment period, Alibaba Cloud has become a highlight in Alibaba's financial report for this quarter. In this quarter, the Cloud Intelligence Group's revenue grew by 34.5% year-on-year to 39.82 billion yuan, exceeding market expectations. Among them, AI-related revenue has achieved triple-digit year-on-year growth for nine consecutive quarters, accounting for more than 20% of external commercialization revenue.

Management stated that customer demand for AI is "very strong," and the speed of AI server launches is still lagging behind the growth rate of orders, indicating strong growth potential. To seize opportunities, the company continues to invest heavily in AI computing power and cloud infrastructure, with capital expenditures reaching 31.5 billion yuan this quarter.

Strategically, Alibaba aims to become a world-leading full-stack AI service provider on the B-end, while on the C-end, it hopes to create user-facing AI super-native applications with leading models and rich ecological scenarios. This "cloud + AI + applications" closed-loop strategy is becoming another core engine driving the group's growth.

Investment Banks Raise Short-Term Profit Forecasts, Focus on Continuity of Loss Reduction

Based on the latest financial report performance and management guidance, investment banks have adjusted their profit forecasts for Alibaba. Huatai Research raised its FY26 non-GAAP net profit forecast for Alibaba by 10.1% to 105.8 billion yuan, mainly due to better-than-expected loss reduction progress in the flash sales business. However, the institution also lowered its profit forecasts for FY27-28 due to high base pressure faced by the e-commerce business.

CITIC Construction Investment expects Alibaba's FY26 Non-GAAP net profit to be 114.2 billion yuan and predicts a strong rebound of 40% in FY27, reaching nearly 160 billion yuan.

Although the short-term outlook is becoming optimistic, analysts also pointed out related risks, including intensified competition in the e-commerce industry and the possibility that the loss reduction progress of flash sales may not meet expectations. Whether the flash sales business can efficiently narrow losses along the established track will be key to determining the slope of Alibaba's short-term profit recovery and market confidence.