Alibaba Group, one of China’s most influential technology giants, is preparing to release its Q2 FY26 financial results on Tuesday, and anticipation across global markets is rising sharply. The company’s shares have already soared more than 90% since the beginning of the year, powered by renewed investor confidence in its artificial intelligence ambitions, a revitalized cloud division, and stronger-than-expected traction across its digital economy ecosystem.

The upcoming earnings announcement follows a solid Q1 FY26 performance, where Alibaba reported revenue of 247.7 billion yuan ($34.6 billion). Its cloud division—now the centerpiece of the group’s long-term strategy—posted a 26% revenue jump to 33.4 billion yuan. Analysts estimate that Q2 revenue will reach around $34.29 billion, representing modest year-over-year growth. However, earnings per share are expected to decline to $0.85 from last year’s $2.10, reflecting the pressure from competitive pricing, heavy investment in AI, and ongoing discount-driven battles in China’s crowded e-commerce space.

Investors are likely to focus on whether Alibaba’s cloud and AI momentum can counterbalance sluggish domestic consumption and growing competition from platforms such as JD.com, Pinduoduo, and Meituan. Market watchers are also paying attention to Alibaba’s emerging consumer-AI products, which have shown promising demand in early rollout phases.

Despite concerns about profitability, the sentiment on Wall Street remains optimistic. Price targets from 39 analysts place Alibaba’s expected stock value at an average of $198.19, with bullish estimates going as high as $271.11. This reflects a potential upside of nearly 25% from the current trading price of $158.89. Still, valuation models such as GuruFocus’ GF Value present a more cautious view, projecting a fair value estimate of around $115.14 over the next year.

Alibaba’s latest quarter further fueled the conversation around its transformation. Revenue for the July–September period rose 5% to 247.8 billion yuan ($35 billion), but net profit fell sharply—down 52% year-over-year—as e-commerce rivals intensified their price wars, especially in sectors such as groceries and instant commerce. Alibaba’s CEO, Eddie Wu, acknowledged the hit to short-term profitability but emphasized the strategic necessity of maintaining investment in AI and next-generation cloud infrastructure.

The company recently reaffirmed its commitment to spending heavily on AI innovation. Earlier this year, Alibaba pledged a massive 380 billion yuan ($53 billion) over three years to bolster cloud computing capabilities and expand its AI infrastructure. Wu now suggests that even this figure may underestimate the true scale of future demand. Over the last four quarters alone, Alibaba has already invested roughly 120 billion yuan in capex driven by AI-related infrastructure.

In the fast-evolving AI race, Alibaba is making significant strides. Its Qwen chatbot—positioned as a domestic challenger to OpenAI’s ChatGPT—recorded over 10 million downloads within its first week of public availability. The rapid adoption underscores the growing appetite for AI tools in China as companies and consumers increasingly integrate generative AI into daily tasks and enterprise operations.

Cloud computing remains the brightest spot in Alibaba’s portfolio. The company’s cloud revenue surged 34% year-on-year to 39.8 billion yuan, beating expectations and marking the division’s strongest growth rate in recent quarters. AI-related cloud products achieved triple-digit growth for the ninth consecutive quarter, reinforcing Alibaba’s strong positioning in China’s AI infrastructure market.

Although Alibaba’s overall profitability experienced a setback—largely due to escalating investments in rapid delivery and instant commerce—the company’s core e-commerce platforms, Taobao and Tmall, delivered encouraging signs. Combined revenue rose 16% year-over-year to 132.6 billion yuan, reflecting improved user activity and better engagement on the Taobao app.

With cloud and AI demand accelerating faster than Alibaba can deploy new servers, and with global supply constraints on GPUs and data center hardware expected to persist, the company projects a multi-year period of tight supply and high demand—an environment that CEO Eddie Wu insists does not resemble an AI bubble.

As Alibaba prepares to release its Q2 results, the key questions revolve around execution and sustainability: Can cloud and AI keep the company ahead of intensifying competition? Will profitability rebound as strategic investments begin to pay off? Investors are eager for answers, and Tuesday’s report could provide important clarity on Alibaba’s evolving trajectory.

FAQ

1. Why is Alibaba’s stock rising so quickly this year?
Alibaba’s stock has surged due to strong cloud performance, rapid AI adoption, and renewed investor confidence in the company’s restructuring and long-term growth strategy.

2. What are analysts expecting in Alibaba’s Q2 FY26 results?
Analysts expect around $34.29 billion in revenue and earnings of $0.85 per share.

3. What is driving Alibaba’s cloud growth?
Massive demand for AI infrastructure, enterprise cloud tools, and Alibaba’s aggressive spending on data centers and AI models.

4. Why did Alibaba’s profit fall despite rising revenue?
Intense e-commerce price wars, higher investments in AI, and heavy spending on instant commerce reduced short-term profitability.

5. Is Alibaba considered undervalued or overvalued right now?
Analyst targets suggest upside potential, while valuation models like GF Value show possible downside—leading to mixed views.