Alibaba Stock Set to Soar Ahead of Earnings with AI Deal and Strong Fundamentals

Alibaba is set to report Q4 2025 earnings on May 15, with analysts expecting earnings of $1.74 per share and revenues of $33.1 billion, up 24% and 7% YoY, respectively. The stock has jumped 45% YTD on a rebound in core e-commerce sales and solid financial results. Alibaba recently confirmed an AI deal with Apple, supporting its growth plans. Analysts remain positive on the stock ahead of earnings.

Chinese e-commerce giant Alibaba is set to release its March quarter and full fiscal year 2025 results on Thursday, May 15, 2025, at 7:30 PM (Hong Kong time). Investors will be closely watching for updates on the company's AI investments and the impacts of US trade policies.

Earnings Expectations

Analysts anticipate Alibaba to report fourth-quarter revenue growth of 6.4% year-on-year (YoY) to RMB 236.1 billion, bringing the fiscal year 2025 revenue to RMB 1000.5 billion. Net income attributable to ordinary shareholders is expected to show an impressive improvement, with projections indicating a 68.7% increase to RMB 134.5 billion. Gross margin is forecast to expand from 33.3% to 37.2%, demonstrating the company's ability to improve its cost structure and operational efficiency [1].

What to Watch For

Domestic E-commerce Segment: Taobao and Tmall Group, Alibaba's core domestic e-commerce business, accounted for 49% of total revenue in the previous quarter. Investors expect this segment to grow by approximately 5% YoY as the Chinese government implements stimulus measures to combat economic deflation [1].

International Digital Commerce: The international digital commerce business, which contributed 15% of revenue in Q3, represents another crucial segment to monitor. This division has been the company's fastest-growing business but faces significant challenges from recent changes in US trade policies [1].

AI Investments: Alibaba has committed to investing more than RMB 380 billion in AI and cloud computing infrastructure over the next three years. The company has also rolled out a new AI model family called Qwen3, which can compete with models from major competitors like OpenAI's 'o-series' and Google's Gemini Pro. The cloud intelligence group is expected to grow by approximately 16% YoY, increasing its share of overall revenue and representing a key driver of future growth [1].

Management's Guidance: The management's guidance for Q1 2026 will be another focal point, especially regarding revenue projections and margin expectations. Any adjustments to outlook could significantly impact market sentiment toward the e-commerce sector as a whole [1].

Macro Factors

China's domestic economic conditions continue to play a crucial role in Alibaba's performance. Recent deflationary pressures have prompted government stimulus measures, the effectiveness of which will directly impact consumer spending on Alibaba's platforms [1].

The uncertainty in trade policies represents a key headwind for Alibaba's international e-commerce business. The US has recently removed tariff exemptions on imported goods below US$800 in value, subjecting these packages to 120% duties or a flat rate of $100 [1].

Analyst Outlook

Analyst sentiment on Alibaba has remained relatively stable over the past two years. According to LSEG Data & Analytics, 16 out of 43 analysts currently assign a 'strong buy' recommendation to Alibaba's US-listed ADR (BABA), with 25 'buy' ratings and just two 'hold' recommendations [1].

The average one-year price target from analysts stands at $160.54, suggesting a potential 30% increase from the 7 May 2025 closing price of $123.23. This optimistic target reflects confidence in Alibaba's strategic initiatives and growth prospects [1].

Technical Analysis

Alibaba's shares have generated impressive returns of 45% so far this year, though they still trade at a 61% discount from their all-time high. The technical chart shows characteristics of an overall uptrend as the shares are trading well above the technically critical 200-day simple moving average (SMA). A better-than-expected earnings report could drive the share price toward the recent peak at $148, potentially signalling the continuation of the current uptrend. However, technical indicators suggest some caution may be warranted, with potential pullback towards the $128-129 level if the current up leg resembles a corrective Wave B under Elliott Wave Theory [1].

References

[1] https://www.ig.com/za/news-and-trade-ideas/alibaba-q4-fy25-earnings-preview-250508