Why Alibaba Is a Strategic Bet for SGA Global Growth Strategy in 2026

SGA's Quality-Focused Investment Rationale

Virtus SGA International Growth's inclusion of Alibaba in its portfolio reflects a disciplined approach to quality investing. The fund prioritizes companies with durable competitive advantages, strong balance sheets, and management teams capable of executing long-term visions. Alibaba's 2025 restructuring, coupled with its 54.1% gross margin and 16.60% three-year earnings growth rate, aligns with these criteria.

Moreover, SGA's emphasis on Information Technology and Consumer Discretionary sectors-where Alibaba operates-positions the fund to capitalize on secular trends like AI adoption and digital commerce. The fund's management team, which employs bottom-up research to identify industry leaders, has clearly recognized Alibaba's potential to generate sustainable returns despite near-term volatility.

Conclusion

Alibaba's transformation into an AI and cloud infrastructure leader, combined with its improved pricing power and alignment with China's strategic priorities, makes it a compelling addition to growth-oriented portfolios. For SGA International Growth, the company embodies the qualities of a high-conviction, long-term investment: a robust business model, a visionary management team, and a clear path to dominating its ecosystem. As 2026 unfolds, Alibaba's ability to navigate competitive pressures while scaling its AI ambitions will likely cement its status as a strategic bet for global growth.

Alibaba's 2025 restructuring marked a pivotal shift in its corporate DNA. By centralizing AI and cloud computing within its strategic framework, the company has repositioned itself as a core infrastructure provider in China's AI ecosystem. This move reflects a broader industry trend: as global demand for AI capabilities surges, firms that can scale infrastructure and enterprise solutions will dominate. Alibaba's Cloud Intelligence Group, for instance, reported a 34% year-over-year revenue increase in the September 2025 quarter, with AI-related revenue growing at a triple-digit rate. Such performance underscores the company's ability to monetize its technological investments while addressing the surging demand for cloud services across industries.

The development of Alibaba's Qwen family of language models further illustrates this commitment. The Qwen App, launched in late 2025, achieved over 10 million downloads in its first week, signaling robust consumer adoption of AI-driven tools. This dual focus on enterprise and consumer AI not only diversifies Alibaba's revenue streams but also strengthens its ecosystem, creating network effects that are difficult for competitors to replicate.

Pricing Power and Financial Resilience

Despite macroeconomic headwinds, Alibaba has demonstrated improved pricing power, particularly in its core e-commerce segment. For fiscal Q4 2025, the Taobao and Tmall Group generated 101.4 billion yuan in revenue, with customer management revenue rising 12% year-on-year. This growth was driven by higher take rates and the introduction of value-added services like Quanzhantui, a marketing solution that enhances seller engagement. While the company's net income fell short of expectations due to one-time charges, its ability to extract incremental revenue from merchants-without sacrificing user growth-highlights a maturing business model.

Alibaba's Cloud Intelligence Group further exemplifies this resilience. With revenue up 18% year-on-year to 30.1 billion yuan in Q4 2025, the division has become a profit engine, even as the company invests heavily in AI infrastructure. These investments, though capital-intensive, are critical for maintaining a competitive edge in a market where rivals like PDD and JD.com are aggressively undercutting prices. By leveraging AI to optimize logistics and personalize user experiences, Alibaba is transforming cost pressures into opportunities for differentiation.

Alignment with China's AI and Consumption-Driven Agenda

Alibaba's strategic direction is inextricably linked to China's national priorities. The Chinese government's push for AI self-sufficiency and digital transformation has created a favorable policy environment for firms like Alibaba. By aligning its AI roadmap with initiatives such as the "New Generation Artificial Intelligence Development Plan," Alibaba is not only securing regulatory support but also capturing a disproportionate share of the domestic AI market.

Simultaneously, the company's "instant commerce" model-aimed at reducing delivery times and enhancing customer engagement-resonates with China's consumption-driven economic agenda. As disposable incomes rise and e-commerce penetration stabilizes, Alibaba's ability to blend AI with logistics innovation ensures it remains a dominant player in a market expected to grow at a moderate but steady pace.