Alibaba Group Posts Q1 Revenue Beat, Analysts Raise Price Targets

Alibaba Group Holding reported Q1 revenue of $34.57 billion, up 2% YoY, beating the consensus estimate of $34.26 billion. However, adjusted earnings per ADS fell short of expectations. The company's CEO highlighted strong growth in consumption and AI + Cloud, and shares rose 1.5%. Analysts raised their price targets, with B of A Securities, Mizuho, and Benchmark maintaining Buy ratings.

Alibaba Group Holding Limited (BABA) reported its first-quarter (Q1) 2026 earnings, revealing a mixed bag of results that highlight the company's strategic focus on consumption and AI + Cloud. The company's Q1 revenue of $34.57 billion, up 2% year over year (YoY), beat the consensus estimate of $34.26 billion. However, adjusted earnings per American Depositary Share (ADS) fell short of expectations, coming in at $2.06 per ADS, down 3.29% from the Zacks Consensus Estimate [1].

The revenue growth was driven by strong performance in the Cloud Intelligence Group and continued expansion of the domestic e-commerce platform. Strategic investments in quick commerce, however, pressured margins. Excluding disposed businesses of Sun Art and Intime, revenues increased 10% on a like-for-like basis. The company's shares rose 6.76% in pre-market trading following the release, significantly outperforming the Zacks Retail and Wholesale sector's 10.4% return year to date [1].

Alibaba's earnings beat the Zacks Consensus Estimate once and missed in the remaining three quarters, with an average surprise of 0.97%. The company's CEO highlighted strong growth in consumption and AI + Cloud, with revenues from external customers growing 26% YoY in the Cloud Intelligence Group, driven by accelerated growth in public cloud revenues and rising adoption of AI-related products and services [1].

The company's AI-related product revenues maintained triple-digit growth for the eighth consecutive quarter, now representing over 20% of revenue from external customers. Alibaba continues to advance its AI capabilities with upgraded Qwen3 models, including reasoning models and AI coding solutions that are gaining traction in global markets through open-source initiatives [1].

Alibaba's sales and marketing expenses increased significantly, up 62.6% YoY, reflecting heavy investment in "Taobao Instant Commerce" and user acquisition initiatives. General and administrative expenses decreased 48% YoY, while product development expenses increased 12% YoY. Adjusted EBITDA was down 11% YoY, primarily due to strategic investments in quick commerce, partly offset by revenue growth and improved operating efficiencies [1].

Analysts raised their price targets following the earnings report, with B of A Securities, Mizuho, and Benchmark maintaining Buy ratings. The company's focus on strategic pillars—consumption and AI + Cloud—provides a compelling narrative for investors, despite ongoing challenges in the fast-evolving commerce and cloud sectors [2].

References:
[1] https://finance.yahoo.com/news/baba-q1-earnings-miss-estimates-155300223.html
[2] https://simplywall.st/stocks/us/retail/nyse-baba/alibaba-group-holding/news/why-alibaba-baba-is-up-87-after-surging-cloud-and-ai-revenue