Our GAAP results and reconciliations of GAAP to non-GAAP measures is included in today's earnings press release and investor presentation. Over the past quarter, Alibaba's high-intensity investment in our two strategic priorities of AI plus cloud and consumption is rapidly translating into tangible business results, with group revenue growing 11% year-over-year. This quarter, Cloud Intelligence Group's external revenue growth accelerated to 40%, and AI-related product revenue achieved triple-digit growth for the 11th consecutive quarter. China E-commerce CMR grew 8% year-over-year on a like-for-like basis, and the quick commerce market achieved significant unit economics improvement while maintaining market share.

We are at a pivotal inflection point in the evolution from conversational chatbots to autonomous AI agents, which is directly driving explosive growth across three core workload categories: training, inference, and agent orchestration. This quarter, Cloud Intelligence Group's annualized AI-related product revenue has surpassed RMB 35.8 billion, continuing to maintain triple-digit growth. AI-related product revenue now accounts for 30% of Cloud Intelligence Group's external revenue. We expect that in about one year, AI-related product revenue will cross the 50% threshold, becoming the primary engine driving the cloud business's revenue growth.

As a result, Cloud Intelligence Group's external revenue growth is expected to continue accelerating beyond its current 40% rate over the coming quarters. Given the certainty of long-term AI demand and our full stack technology advantages, we expect this trajectory to sustain strong growth over the medium to long term. This reflects AI's role in driving a comprehensive upgrade of Alibaba Cloud's entire business as its growth engine fully pivots from traditional compute and storage to models AI compute and agent services. We're also seeing exponential growth in AI model and application services revenue, a new revenue engine driven jointly by foundation model services and AI native software.

What went well
  • Cloud Intelligence Group external revenue growth accelerated to 40% year-over-year, with AI-related product revenue delivering triple-digit growth for the 11th consecutive quarter and reaching an annualized run rate of RMB 36 billion (about $5.3 billion), now 30% of cloud external revenue.
  • China e-commerce CMR grew 8% year-over-year on a like-for-like basis (excluding a new contra-revenue reclassification), rebounding significantly as user experience and merchant operating efficiency improved.
  • GAAP net income rose 96% to RMB 23.5 billion, primarily from mark-to-market gains on equity investments and lapping prior-year Sun Art and Intime disposal losses.
  • Quick commerce revenue grew 57% to RMB 20 billion with significant unit economics improvement and higher AOV quarter-over-quarter while maintaining market scale.
  • AIDC revenue grew 6% and its adjusted EBITDA loss narrowed significantly, approaching break-even, driven by logistics optimization and AliExpress Choice unit-economics gains.
  • Model and application services (MaaS/Model Studio) ARR reached over RMB 8 billion with high-margin characteristics, on track to surpass RMB 10 billion in the June quarter.
What went wrong
  • Total adjusted EBITDA decreased 84%, primarily due to strategic investments in technology, quick commerce, and user experience.
  • Free cash flow was an outflow of RMB 17.3 billion as operating cash flow (inflow of RMB 9.4 billion) was reinvested into AI capacity.
  • China E-commerce Group adjusted EBITDA fell 40% to RMB 24 billion due to quick commerce, user experience, and technology investment.
  • All Other segment adjusted EBITDA was a loss of RMB 21.2 billion, driven by increased investment in foundation models and the consumer-facing Qwen app; segment revenue fell 21% to RMB 65.5 billion on Sun Art/Intime disposals and lower Cainiao revenue.
  • Reported CMR grew only 1% year-over-year because merchant subsidies tied to marketing spend were reclassified from sales and marketing expense to a contra-revenue item against CMR.

Guidance Changes

MetricPeriodCurrent guidance
Model and application services ARR (incl. Model Studio)June quarter FY2027surpass RMB 10 billion (increase)
Model and application services ARR (incl. Model Studio)By year-end (FY2027)RMB 30 billion (increase)
Cloud external revenue growthComing quartersexpected to continue accelerating beyond 40% (increase)
AI-related product revenue share of cloud external revenueIn about one yearcross the 50% threshold (increase)
Group CapEx (three-year plan)Multi-yearlikely to overshoot RMB 380 billion (increase)
Quick commerce unit economics (UE)End of FY2027turn positive (improve)
Annual dividend per ADSFY2026$1.05

Performance Breakdown

MetricYoYNote
Total revenue +11% on a like-for-like basis (RMB 243.4 billion) Growth in cloud and customer management service; like-for-like excludes Sun Art and Intime.
Cloud external revenue +40% AI-related products leading momentum; 11th consecutive quarter of triple-digit AI revenue growth.
AI-related product revenue triple-digit growth (RMB 9 billion in quarter; RMB 36 billion run rate) Shift from conversational chatbots to autonomous AI agents driving training, inference, and agent orchestration workloads.
China E-commerce Group revenue +6% (RMB 122 billion) Customer management revenue up 1% as reported; quick commerce revenue up 57%.
Customer management revenue (CMR) +1% reported / +8% like-for-like Merchant subsidy program reclassified to contra revenue; underlying growth 8%.
Total adjusted EBITDA -84% Strategic investment in technology, quick commerce, and user experience.
GAAP net income +96% (RMB 23.5 billion) Mark-to-market equity gains and lapping prior-year disposal losses, partly offset by lower EBITDA.
Cloud adjusted EBITDA margin relatively stable at 9.1% —

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
AI + cloud commercialization inflectioninitial investment phasecommercialization at scale; AI 30% of cloud external revenue, MaaS ARR over RMB 8 billionAccelerating
Cloud external revenue growth36% (prior quarter, per management)40%, expected to accelerate furtherUp
T-Head proprietary AI chipsscaled mass productionover 60% of compute serving external customers; only China AI cloud with self-developed chips at scaleExpanding
Quick commerce unit economicsloss-making, improvingsignificant UE and AOV improvement; targeting positive UE by end of FY2027Improving
CapEx / compute supplyRMB 380 billion three-year planlikely to overshoot; new-server cost up over 100% year-over-yearUp
Consumption / CMRweaker prior quarterCMR +8% like-for-like, reboundingRecovering

Q&A Summary

Goldman Sachs asked how much of the MaaS/applications ARR is driven by in-house models (Qwen) vs third-party, and the implications of token price hikes on MaaS and cloud margins.
Management said ARR comprises mainly API calls on the Bailian MaaS platform plus AI software subscriptions, with most revenue currently from proprietary models (Qwen, plus voice/video models). As AI shifts to agentic workloads needing more inference, customers accept higher per-token prices and demand exceeds supply. MaaS inherently carries higher gross margin than IaaS, so rapid growth should positively impact overall gross profit margin.
UBS asked how investors should assess return on the AI investment given the drag on free cash flow and EBITDA, and the framework for balancing aggressive AI spend versus earnings stability.
CFO Toby Xu attributed negative free cash flow to resolute AI investment during a historic window and said the firm will remain equally resolute over the next two years. Taobao/Tmall provide stable operating cash flow, quick commerce losses will narrow, and AIDC will turn profitable. Eddie Wu likened the spend to building AI training and inference 'factories' with clear 3-5 year ROI, noting not a single card on their servers is idle.
Jefferies asked for color on quick commerce UE drivers (AOV, subsidy ratio, fulfillment) and the multi-year outlook.
Jiang Fan said order volume was 2.7x the prior-year quarter (non-food orders 3x), with UE improving via fulfillment, logistics efficiency, and order-mix optimization. Management is confident UE will turn positive by the end of FY2027 and that quick commerce will reach overall profitability at scale, while generating synergies with conventional e-commerce.
Morgan Stanley asked about the level of CapEx required to satisfy MaaS and long-term cloud demand, and T-Head penetration and margin uplift.
Management reiterated a ~10x increase in data-center infrastructure needed by 2033 versus 2022, likely overshooting the RMB 380 billion CapEx figure, with some capacity acquired via OpEx. T-Head penetration remains relatively low due to China production capacity constraints but will contribute significantly to gross-margin expansion as deployment scales, versus 60-80% margins taken by leading foreign chip vendors.

More on Alibaba Group Holding Ltd

Reported 2026-05-13 · figures from the Alibaba Group Holding Ltd Q4 2026 earnings call.

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