Alibaba Group Q2 2025 Earnings: Revenue Miss, Cloud Growth

August 29, 2025

Executive Summary

Alibaba Group Holding Limited (NYSE:BABA) reported its Q2 2025 earnings (September quarter 2024) on August 29, 2025, highlighting strength in e-commerce trends and AI-driven growth. The company posted ✘ $34.6 billion (¥247.7 billion) revenue, below estimates of $35.3 billion, but saw 10% revenue growth excluding certain subsidiaries, driven by cloud and international commerce. Adjusted EPS of ✘ $2.06 (¥14.75) missed estimates of $2.16 due to heavy AI and quick-commerce investments.

Challenges include tariff impacts from the U.S.-China trade truce expiration and ✘ 14% adjusted EBITA decline, reflecting margin pressure from strategic spending.

Stock analysis underscores Alibaba’s e-commerce trends and AI growth, offset by tariff impacts and profitability challenges.

Summary of Beats, Misses, and Forward Guidance

1. Q2 2025 Financial Performance

Alibaba’s Q2 2025 earnings reflect a mixed performance amid a competitive landscape:

• Total Revenue: ✘ $34.6B (¥247.7B), up 2% YoY, but below estimates of $35.3B due to slower domestic commerce growth.
• Adjusted EPS: ✘ $2.06 (¥14.75), missing estimates of $2.16, impacted by investments in AI and quick-commerce.
• Net Income: $6B (¥42.38B), up 78% YoY, driven by equity investment gains and the sale of Trendyol.
• Adjusted EBITDA: ✘ $6.4B (¥45.74B), down 14% YoY, missing estimates of $7.3B due to increased spending.
• Cloud Revenue: ✔ $4.6B (¥33.4B), up 26% YoY, surpassing expectations with strong AI-related growth.
• International Commerce: ✔ $4.85B (¥34.7B), up 19% YoY, driven by cross-border business strength.

2. Growth Drivers for E-commerce Trends

Alibaba’s e-commerce trends and AI growth are propelled by strategic initiatives:

• Cloud and AI Expansion: Strong AI revenue growth, driven by demand for AI infrastructure, with Alibaba Cloud maintaining leadership in China’s IaaS market.
• International Commerce: 19% revenue growth in cross-border platforms like AliExpress, fueled by global consumer demand.
• E-commerce Engagement: Robust user growth on Taobao and Tmall, with 88VIP members surpassing 50 million, supported by AI-driven personalization.
• Strategic Partnerships: Collaboration with competitors to curb price wars in China’s food delivery sector, stabilizing merchant margins.

AI growth and international expansion fuel Alibaba’s e-commerce trends.

3. Valuation and Market Reaction

Alibaba’s stock showed resilience post-earnings:

• Market Reaction: Shares rose ✔ 10.8% in U.S. trading, closing at $132.50, driven by cloud growth and investor optimism.
• Valuation: Forward P/E of 15.3, attractive for growth investors, though tempered by tariff impacts and margin pressures.
• Market Cap: Approximately $320 billion, reflecting Alibaba’s dominant position in e-commerce and cloud computing.

4. Tariff Impacts

Alibaba faces challenges from tariff impacts and other headwinds:

• Tariff Pressures: ✘ Expiration of U.S.-China trade truce risks up to 9% revenue decline in international commerce due to higher tariffs.
• Margin Pressure: ✘ 14% adjusted EBITA decline, driven by heavy investments in AI and quick-commerce initiatives.
• Domestic Competition: ✘ Intense rivalry from JD.com and PDD Holdings pressures domestic e-commerce profitability.

5. FY2026 Forward Guidance

Alibaba’s FY2026 outlook reflects cautious optimism:

• Revenue: Forecasted at 5%–7% growth, driven by cloud and international commerce, despite tariff risks.
• Cloud Revenue: Expected to maintain ✔ above-market growth, prioritizing AI-driven revenue over near-term margins.
• Adjusted EBITDA: Projected to face pressure due to continued AI and quick-commerce investments.
• Share Repurchases: Ongoing $10 billion program, signaling confidence in long-term value.

Alibaba’s guidance balances e-commerce trends and AI growth with tariff impacts.

6. Competitive Landscape for Stock Analysis

Alibaba operates in a highly competitive environment:

• Domestic E-commerce: ✘ JD.com and PDD Holdings challenge with aggressive pricing and logistics investments.
• Cloud Computing: ✘ Tencent and Baidu compete in AI-driven cloud services, pressuring market share.
• Advantage: Leadership in AI and e-commerce scale supports Alibaba’s competitive edge in cloud and global markets.

7. Risks and Challenges for Investors

Key risks impacting Alibaba’s performance include:

• Tariff Impacts: ✘ Higher U.S. tariffs could reduce international commerce revenue and margins.
• Investment Costs: ✘ Heavy AI and quick-commerce spending pressures profitability, with free cash flow down significantly.
• Regulatory Risks: ✘ Potential Chinese regulations on tech and data privacy could impact operations.
• Competition: ✘ Intense domestic rivalry risks eroding e-commerce market share.
• Economic Uncertainty: ✘ Slowing Chinese consumer demand may hinder domestic commerce growth.

Investors must balance Alibaba’s e-commerce trends and AI growth with tariff impacts and competitive risks.

8. Industry Impact of Alibaba’s Performance

Alibaba shapes e-commerce trends and AI growth:

• AI Innovation: Strong AI revenue growth sets a benchmark for cloud computing in the tech industry.
• E-commerce Strategies: AI-driven personalization influences global e-commerce platforms to adopt similar technologies.

9. Guidance to Investors

Q2 2025 earnings present opportunities with caution:

• Growth Investors: ✔ Consider BABA for its 15.3 P/E and AI-driven cloud growth, but monitor tariff impacts.
• Risk-Averse Investors: ✔ Diversify with global tech firms like Amazon to mitigate BABA’s ✘ tariff risks.
• Opportunistic Investors: ✔ Capitalize on dips, given the ✔ 10.8% stock gain, but expect ✘ trade tension volatility.
• Hedging Strategies: ✔ Use protective puts to manage ✘ stock volatility amid tariff and regulatory risks.
• AI Focus: ✔ Track cloud revenue growth, as AI remains a key driver of long-term value.
• Tariff Monitoring: ✘ Evaluate U.S.-China trade policies, as tariffs could impact international growth.

Balance Alibaba’s e-commerce trends and AI growth with tariff impacts.

10. Conclusion

Alibaba’s Q2 2025 earnings, with ✘ $34.6B revenue and ✘ $2.06 adjusted EPS, reflect challenges in meeting expectations but highlight strength in e-commerce trends and AI growth, driven by 26% cloud revenue growth.

✘ Margin pressures and tariff impacts underscore risks to profitability and international expansion.

Alibaba advances e-commerce trends and AI growth, but success hinges on navigating tariffs and competitive pressures.

11. Disclaimer

This stock analysis is for informational purposes only and does not constitute financial, investment, or legal advice. Investors should conduct due diligence and consult a financial advisor. Alibaba’s stock faces risks from tariff impacts, heavy investment costs, regulatory pressures, intense competition, and economic uncertainty, which could impact results. Past performance is not indicative of future results. Qunatical assumes no liability for losses from actions based on this analysis.

Alibaba’s ✔ cloud and international growth and e-commerce trends are offset by ✘ revenue and EPS misses and tariff impacts, requiring cautious navigation for investors.