Should Alibaba’s transition to Huawei AI chips amid declining profits require action from Alibaba Group Holding (BABA) investors?

• Alibaba Group Holding Limited has already reported its financial results for the third quarter and nine months ended December 31, 2025, with modest sales growth but significant year-on-year declines in net profit and earnings per share.
• At the same time, Alibaba is preparing to adopt Huawei’s new 950PR AI processor, as US regulations on Nvidia hardware push the company to adopt domestically produced chips for its cloud and data center infrastructure.
• Here, we examine how Alibaba’s transition to Huawei’s 950PR AI chip could impact the company’s AI cloud investment story and future positioning.

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Alibaba Group Holding Investment Story Summary

To own Alibaba now, you need to believe that the company’s heavy AI and cloud spending can ultimately support healthy earnings after a year of declining profitability and slow revenue growth. Huawei’s move towards the 950PR AI chip could impact how efficiently Alibaba can expand its AI cloud capacity in the near term, but the more immediate near-term catalyst is whether margins can stabilize after a sharp decline in net income, and execution risks for large-scale AI and quick commerce spending remain at the forefront.

The latest quarterly results make this point even clearer, with sales for the three months ended December 31, 2025 slightly increasing to 284,843 million yuan, but net profit falling to 16,383 million yuan from 49,127 million yuan in the same period last year. The contrast between modest advances in sales and sharp declines in revenue shows how investors will evaluate the benefits and cost implications of adopting Huawei’s 950PR chip within Alibaba’s already large AI and cloud investment plans.

However, investors are concerned that if Alibaba’s multi-year AI infrastructure build-out does not match actual AI demand and monetization…

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Alibaba Group Holding is forecast to have revenue of C$1,352.3 billion and profit of C$157.6 billion by 2029. This would require annual sales growth of 10.0% and profit growth of C$64.8 billion from the current C$92.8 billion.

Alibaba Group Holding’s forecast reveals how it generates a fair value of $189.58, an increase of 55% from the current price.

explore other perspectives

Some of the most optimistic analysts had previously assumed that Alibaba could drive annual sales to around 1,455.7 billion yuan and profits to around 219.7 billion yuan, painting a far more optimistic picture than the risk that capital spending on AI would prove to be excessive if demand slumps. These bullish assumptions may be revisited after the Huawei 950PR news, so it’s worth comparing these different views before deciding how to view the stock.

Check out 62 other fair value estimates for Alibaba Group Holding – find out why the stock is worth more than twice its current price!

Create your own verdict

Don’t agree with the existing narrative? Following the herd rarely yields exceptional investment returns. Follow your intuition.

• A great starting point for researching Alibaba Group Holding is an analysis that highlights three key benefits that can influence your investment decision.
• Our free Alibaba Group Holding research report provides comprehensive fundamental analysis compiled into a single visual (snowflake), allowing you to easily assess Alibaba Group Holding’s overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.

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