Alibaba's Q1 Earnings Miss Estimates, Cloud and E-commerce Segments Show Strong Growth

Alibaba reported mixed Q1 results, missing expectations on top and bottom lines, but showing solid growth in e-commerce and cloud segments. The company's e-commerce business grew 28% YoY, while its cloud computing arm saw revenue surge 60%. Alibaba's shares fell 3.6% in after-hours trading.

Alibaba Group reported its Q1 2025 earnings, with mixed results that saw the company fall short of analyst expectations on both top and bottom lines. Despite this, the company demonstrated robust growth in its e-commerce and cloud computing segments. Total revenue for the quarter ended June 30 came in at 247.65 billion yuan, below the 252.92 billion yuan average estimate compiled by LSEG [1]. Net income was 43.11 billion yuan, compared to the 28.5 billion yuan expected by analysts.

The company's e-commerce business, which accounts for over 50% of revenue, grew 10% year-on-year to 19.6 billion yuan. However, adjusted earnings in this division fell 21% due to heavy investments in so-called quick or instant commerce, a feature introduced on Taobao that provides deliveries within an hour. This investment is expected to contribute 1 trillion yuan in annualized incremental gross merchandise value (GMV) over the next three years [2].

Alibaba's cloud computing unit, a key driver of growth, saw revenue surge 26% year-on-year to 33.4 billion yuan. This growth was driven by robust demand for AI services, with AI-related product revenue maintaining triple-digit year-over-year growth for the eighth consecutive quarter. The company's cloud unit is seen as integral to monetizing AI, similar to Microsoft or Google [3].

The company's shares fell 3.6% in after-hours trading following the earnings release, despite the strong performance in the cloud segment. This drop can be attributed to the overall revenue missing estimates and the broader economic challenges in China [3].

Alibaba is navigating a delicate balancing act between investing in AI and new e-commerce models while continuing to grow in China's competitive market. The company's long-term potential in AI and cloud computing offers promising growth avenues, but near-term profitability may be strained by aggressive competition and increased investment in new business segments [2].

References:
[1] https://www.cnbc.com/2025/08/29/alibaba-baba-june-quarter-2025-earnings-report.html
[2] https://www.ainvest.com/news/alibaba-ai-driven-growth-outpaces-revenue-decline-q1-earnings-report-2508/
[3] https://insideretail.asia/2025/08/31/competition-eats-into-alibaba-retail-revenue-but-cloud-business-surges/