Can the cloud and AI pivot turn recovery into sustainability?

While Alibaba’s domestic business remains its core, the company continues to grow, as evidenced by the company’s sales of 284,843 million yuan in the fourth quarter of 2026 (December 31, 2025), up from 280,150 million yuan in the same period last year.

Of the 284,843 million yuan, Alibaba’s domestic business revenue increased 6% year-on-year to 159,347 million yuan, benefiting from an expanded user base and improved trading behavior.

Taobao recorded double-digit growth in monthly active users. The number of 88VIP members exceeded 59 million, which also achieved double-digit growth, and the instant retail division generated revenue of 20.8 billion yuan, an increase of 56% year-on-year.

Improvements in unit economics and average transaction value to streamline logistics, order mix and customer retention demonstrate that the company’s core commerce engine continues to grow beyond simply relying on promotions to drive growth in its commerce business.

Alibaba Cloud’s growth has been phenomenal and is currently the fastest growing business segment within Alibaba Group.

Last quarter, Alibaba Cloud’s revenue was RMB 43.284 billion ($6.437 billion), an increase of 36% year-on-year. These impressive numbers reflect strong demand for both public cloud and AI products. AI revenue has recorded triple-digit year-over-year growth for 10 consecutive quarters, showing that organizations are increasing their IT budgets to fund pilot projects and seeing real results in terms of processing power costs and the ability to run many large-scale models.

To take advantage of this opportunity, Alibaba’s management team is implementing a new business model called Model-as-a-Service (MaaS) to provide AI capabilities.

Alibaba’s cloud business has shifted gears from “selling computing” to “selling AI capabilities.” The focus is now on building one continuous commercial chain that includes access to the largest models and their inference workloads, as well as access to cloud services, so that they can generate revenue more consistently and with greater frequency.

We are also working on our own internal structure called the “Token Hub” (or “Internal Token Development Center”) to group our efforts to monetize digital assistants and large-scale model-based applications, while continuing to develop the chip and cloud infrastructure we will use to build value from our AI capabilities.

Integrating AI as part of its revenue structure, rather than treating it as a separate R&D-based business, is a major step in Alibaba’s evolution as a company.

AI is being exposed in both the consumer and enterprise sectors.

For example, for Qianwen users, which has 300 million monthly active users, Taobao’s flash purchasing system now allows shoppers to place AI orders through voice.

The launch of the Qianwen app during the March market period contributed to 200 million order completions across three product categories (shopping, travel, and entertainment) and provided early signs that AI-assisted purchasing is becoming a habit.

On the enterprise side, a new Wukong division was created to incorporate AI into processes and turn MaaS into quantifiable productivity for clients. Alibaba Pingtouge silicon division has moved its in-house GPUs to mass production at the software level.

These chips support machine learning, fine-tuning, and inference, can work in conjunction with standard AI frameworks, and are expected to provide high-cost, high-performance holistic AI services to power cloud infrastructure when used with Qianwen models and Alibaba Cloud.

By tying the AI ​​strategy to specifically defined revenue expectations, management proposes that revenue growth from cloud and AI will likely exceed $100 billion over the next five years, making MaaS the largest revenue-generating product for Alibaba Cloud.

This clarifies the AI ​​discussion by changing the context of AI from “if” to “how soon” or “at what level of profitability?” As long as Alibaba continues to grow its AI revenue at over 100% year-over-year while expanding its AI infrastructure through in-house chip production and use of the public cloud, the revenue margin from increased demand will increase. Implementing MaaS can be advantageous for the overall profitability of an organization.

If the adoption of our AI services becomes more volatile and/or competitive price reductions increase significantly, we may have difficulty sustaining margin increases. Therefore, organizations must rely on e-commerce operations and improvements outside of China to support profit margin expansion.

Investors should consider what types of global policies and regulations exist. China’s government structure still has the same authorities it had a few years ago, when changes affecting technology regulation occurred overnight. Therefore, there was also a significant risk that the US depositary receipts would be withdrawn (not found) in 2022. However, despite recent good news on general market sentiment, this still exists as a tail risk, although some lawmakers are attempting to further pressure the SEC to consider the possibility of delisting.

Charlie Munger was once a large investor in Alibaba (his stock is still traded), but after learning how politically unstable China was at the time, he changed his mind about investing and sold almost all of his holdings (so he was a net seller until the end of November 2023). These events have significantly contributed to investors becoming more cautious about Alibaba as an investment weight due to these factors.

Whether Alibaba stock continues to rise in 2026 will depend on both the company’s ability to execute properly and the state of the investment environment.

When considering implementation, it will be important for Alibaba to continue to translate its AI interest into actual contract workloads, while at the same time expanding MaaS adoption rates across various industries and improving unit economics in the commerce sector.

In terms of stability, fewer new regulatory surprises and the continued reopening of international capital channels should allow Alibaba’s stock price to more fully reflect its underlying fundamentals. Alibaba stock remains far more sensitive to news events than its peers in more stable regions.

Alibaba is transforming from a site primarily for buying and selling goods to a company that provides cloud-based services and artificial intelligence (AI). The company intends to profitably leverage its ability to deliver AI models, rather than simply selling devices to use them.

If Alibaba’s maturity-as-a-service (MaaS) plans are successful and the company can continue to strengthen the underlying economics of its retail business, Alibaba stock’s story could change from a revival stock story to a durable stock story. For Alibaba to succeed as an e-commerce company, it needs to meet its goals and address an environment that has caused problems for investors in the past.