Alibaba's Q2 2026 Earnings Call: Contradictions Emerge on AI Demand, Cloud Infrastructure, and Quick Commerce Unit Economics

Date of Call: November 25, 2025

Financials Results

• Revenue: RMB 247.8 billion, like‑for‑like revenue up 15% YOY excluding Sun Art and InTime

Guidance:

• Continue decisive investment in AI+ cloud and quick commerce to drive long‑term growth.
• Cloud AI demand expected to keep accelerating; capacity constraints may require higher CapEx than prior RMB 380bn plan.
• Expect quick commerce investment to peak in the September quarter and materially scale down next quarter, improving EBITDA, while CMR benefits persist.
• Will dynamically adjust investment cadence by market competition and supply constraints.
• Prioritize foundation model training and efficient inference (Bai Lian) to maximize token quality and utilization.

Business Commentary:

* Revenue Growth and AI Integration: - Alibaba Group reported total revenue of RMB 247.8 billion for the quarter, with a year-over-year increase of 15% (excluding Sun Art and InTime). - Growth was driven by strong demand for AI and cloud intelligence, particularly in the AI and hybrid cloud segments.

• AI Cloud Expansion:
• Alibaba Cloud's revenue grew by 34%, with external customer revenue increasing by 29%.
• The increase was due to rising demand for AI-related products and services across various industries.

• Quick Commerce Success:
• The quick commerce business saw a 60% increase in revenue, contributing significantly to the growth in Taobao App's monthly active users.

• This growth was attributed to improved order mix, increased user retention, and enhanced logistics efficiency.

• Innovation in AI and E-commerce:

• Alibaba launched the QN app, surpassing 10 million new downloads within its first week, demonstrating its commitment to AI for both enterprise and consumer markets.
• The launch was supported by advancements in AI infrastructure and integration with Alibaba's extensive e-commerce ecosystem.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized 'steady and healthy growth' with total revenue up 15% (ex‑Sun Art/InTime), Alibaba Cloud revenue +34% and 'AI-related products continued to post triple‑digit year‑over‑year growth.' They highlighted halving per‑order quick commerce losses and that QN app reached >10M downloads in first week.

Q&A:

• Question from Gary Yu (Morgan Stanley): How should we look at cloud growth outlook going forward and key drivers for external revenue given China lacks a single large AI customer?
  Response: Demand for AI is very strong and accelerating across broad enterprise use cases (R&D, manufacturing, customer products); Alibaba cannot fully keep pace with server deployment, supporting continued cloud revenue acceleration.

• Question from Kenneth Fong (UBS): Key progress in quick commerce and synergies to core e‑commerce; outlook for December quarter CMR and EBITDA?
  Response: Quick commerce unit economics improved materially (per‑order UE loss cut ~50% vs July‑August), AOV up and logistics cost down; it boosts CMR; investments peak this quarter and should shrink next quarter, materially improving EBITDA though outcomes will be adjusted by competition.

• Question from Alex Yao (JP Morgan): As efficiency improves, how will cost savings be allocated among consumers, merchants and platform; and how much further can UE improve if consumer subsidies are maintained?
  Response: Savings will be channeled into higher AOV and better user experience/monetization (converting new users to sticky, higher‑value cohorts) while dynamically balancing subsidies among stakeholders based on market conditions.

• Question from Ronald Keung (Goldman Sachs): How should we think about the RMB 380bn three‑year CapEx and the implied CapEx-to‑incremental‑cloud‑revenue ratio?
  Response: RMB 380bn may be on the low side given current demand; company may scale CapEx up as needed; cannot provide a stable CapEx‑to‑revenue ratio now—priority is to invest aggressively in AI infrastructure, foundation models and inference utilization.

• Question from Elijah McCorry (unspecified firm): Given supply volatility, how are resource allocation priorities set across model training, MAS layer, and application front‑ends; how to evaluate ROIC on training vs inference?
  Response: Top priorities are foundation model training and inference efficiency (Bai Lian) to maximize 24/7 utilization and token quality; ROIC is evolving and hard to quantify now given early stage and differing revenue/margin profiles across use cases.

• Question from Xie Long Xi (Nomura): Beyond quick commerce, which consumption subsegments will Alibaba consider investing in?
  Response: Focus is on integrating and scaling existing consumer assets—Freshippo, O2O/offline supermarkets, Fliggy, AMAP/local services—to drive synergies and capture greater market share across large consumption subsegments.

Contradiction Point 1

AI Demand and Cloud Revenue Growth

It involves differing statements about AI demand and its impact on cloud revenue growth, which are critical for understanding the company's strategic focus and financial expectations.

What is the growth outlook for the cloud business, and will growth accelerate? What are the key drivers for external revenue growth in China, given the absence of a major AI company? - Gary Yu (Morgan Stanley)

2026Q2: Customer demand for AI is strong, and we can't keep pace with server deployment due to order growth. AI applications are scaling, driving demand for high-performance AI infrastructure and increasing compute and storage needs. - Eddie Wu(CEO)

How did cloud revenue growth compare from January to March? How do different AI model sizes affect cloud demand? - Ronald Keung (Goldman Sachs)

2025Q4: The growth in demand for inference compute power is robust, driven by both types of models, contributing to cloud revenue growth. - Eddie Wu(CEO)

Contradiction Point 2

Quick Commerce Unit Economics and Fulfillment Efficiency

It involves differing statements about the unit economics and fulfillment efficiency of the quick commerce business, which are critical for understanding the company's operational strategies and financial sustainability.

Did management achieve progress and synergies in quick commerce that impacted CMR and EBITDA for core e-commerce in Q4? - Kenneth Fong (UBS)

2026Q2: Quick commerce business significantly improved unit economics with better order mix, reduced fulfillment efficiency, and increased GMV share. - Jiang Fan(CEO, Alibaba E-commerce Business Group)

Can you discuss the investment in instant shopping and its impact on local service profitability? - Kenneth Fong (UBS)

2025Q4: Instant commerce is a natural extension for Alibaba, leveraging existing capabilities. It's a high-growth market with significant user-base potential. - Jiang Fan(CEO, Alibaba E-commerce Business Group)

Contradiction Point 3

AI Demand and Investments in Cloud Infrastructure

It involves changes in the company's perspective on AI demand and investments in cloud infrastructure, which are crucial for understanding the company's strategic focus and future growth prospects.

What is the outlook for cloud business growth acceleration? What are the key drivers for external revenue growth, given China lacks a major AI company like the U.S.? - Gary Yu (Morgan Stanley)

2026Q2: We see customer demand for AI is strong, and we can't keep pace with server deployment due to order growth. - Eddie Wu(CEO)

What drives Alibaba Cloud's 26% YoY growth, margin expectations, and sector performance? - Thomas Chong (Jefferies LLC)

2026Q1: Cloud segment revenue grew 26% due to strong AI demand, with AI-related revenue over 20% of external customers. - Yongming Wu(CEO)

Contradiction Point 4

Capital Expenditure and Infrastructure Investment

It highlights differing assessments of future capital expenditure needs, which are critical for understanding the company's investment strategy and financial sustainability.

How should we assess future capital spending and its impact on cloud revenue growth over the next three years, given past spending? - Ronald Keung (Goldman Sachs)

2026Q2: The planned CapEx figure of RMB 380 billion may be on the small side based on current demand. - Toby Xu(CFO)

How will Alibaba's cloud infrastructure and AI models impact cloud revenue growth, margins, CapEx, and profitability trends? - Alicia Yap (Citigroup)

2025Q3: Alibaba aims to increase investments in cloud and AI infrastructure over the next three years, exceeding past decade spending. - Eddie Wu(CEO)

Contradiction Point 5

Quick Commerce Impact on Active Users and GMV Growth

It impacts expectations regarding the impact of quick commerce on user growth and GMV, which are critical metrics for assessing the success of the company's strategic investments and business model.

Can management provide progress and synergies in quick commerce and their impacts on CMR and EBITDA for core e-commerce in Q4? - Kenneth Fong (UBS)

2026Q2: Quick commerce business significantly improved unit economics with better order mix, reduced fulfillment efficiency, and increased GMV share. - Jiang Fan(CEO, Alibaba E-commerce Business Group)

Can management outline the vision, investment plans, current progress, and impact on GMV/CMR growth for quick commerce in China? - Alicia Yap (Citigroup)

2026Q1: The quick commerce business has achieved first-stage goals with a peak daily order volume of 120 million and monthly active users of 300 million in August. - Yongming Wu(CEO)