What Management Said

Read the full Q3 2026 transcript ↗

Good day, everyone, and welcome to Alibaba Group's December quarter 2025 earnings conference call. Our GAAP results and reconciliations of GAAP to non-GAAP measures is included in today's earnings press release and investor presentation. Cloud Intelligence Group revenue growth accelerated to 36%, while our Quick Commerce business continued to expand in scale with ongoing improvement in unit economics. Cloud and software budgets for enterprise IT services have traditionally represented only around 5% of corporate revenue.

From AI infrastructure to the application layer, Alibaba has built a complete full stack AI capability set to support the exponential growth in AI demand. Given the enormous and sustained growth momentum of the AI market, combined with Alibaba's full stack positioning across the AI value chain, the business goal of Alibaba's AI strategy is very clear. Over the next five years, our goal is to surpass $100 billion in combined cloud and AI external revenue, including MaaS. Regarding our infrastructure, driven by sustained strong AI demand, Cloud Intelligence Group's revenue from external customers accelerated to 35% this quarter, with AI-related product revenue delivering triple-digit year-over-year growth for the 10th consecutive quarter.

Alibaba Cloud's cumulative external revenue through February for fiscal year 2026 officially surpassed RMB 100 billion. On Alibaba's other strategic priority, the consumption segment, we continued to advance our strategic initiatives. This quarter, our Quick Commerce business further expanded and scaled with continued share growth, high customer retention and sequential improvement in both unit economics and average order value. At the same time, Quick Commerce and E-commerce demonstrated clear synergies, driving Taobao app monthly active consumers to double-digit year-over-year growth.

What went well
  • Cloud Intelligence Group external revenue accelerated to 35% growth (up from 29% the prior quarter), with AI-related product revenue delivering triple-digit growth for the 10th consecutive quarter and cloud market share rising to 36% for a third straight quarter.
  • Cumulative Alibaba Cloud external revenue through February surpassed RMB 100 billion for fiscal 2026, and token consumption on the Model Studio platform grew 6x over the past three months.
  • Quick commerce revenue grew 56% to RMB 20.8 billion with continued GMV market-share gains, high retention, and sequential UE and AOV improvement, helping drive Taobao app MAC to double-digit year-over-year growth.
  • T-Head cumulatively shipped 470,000 AI chips (over 60% serving external customers across 400+ enterprises), reaching an annual revenue run rate at the RMB 10 billion level.
  • Qwen surpassed 300 million consumer MAU across platforms and exceeded 1 billion cumulative downloads on Hugging Face by end of January, reinforcing engagement and long-term monetization.
  • Operating cash flow was a healthy inflow of RMB 36 billion, supporting continued reinvestment.
What went wrong
  • Total adjusted EBITDA decreased 57%, primarily due to strategic investments in technology innovation and quick commerce.
  • GAAP net income fell 66% to RMB 15.6 billion.
  • Free cash flow was RMB 11.3 billion, a decrease of RMB 27.7 billion from the same quarter last year, as cash was reinvested into AI and quick commerce.
  • China E-commerce Group adjusted EBITDA fell 43% to RMB 34.6 billion on quick commerce, user experience, and technology investment; customer management revenue grew only 1% amid weak macro consumption, a warm winter, and a later Chinese New Year.
  • All Other segment adjusted EBITDA was a loss of RMB 9.8 billion (revenue down 25% to RMB 67.3 billion), and unallocated adjusted EBITDA was a loss of RMB 2.7 billion versus RMB 0.2 billion a year earlier due to Ele.me one-off replacement award costs.

Guidance Changes

MetricPeriodCurrent guidance
Combined cloud + AI external revenue (incl. MaaS)Next five years (through ~2031)surpass $100 billion (increase)
Quick commerce GMVFY2028over RMB 1 trillion (target maintained) (increase)
Quick commerce cash flowAt RMB 1 trillion GMV (FY2028)positive cash flow (improve)
Quick commerce profitabilityFY2029overall profitable (improve)
MaaS ranking within cloudFutureexpected to become Cloud Intelligence Group's largest revenue product (increase)
Physical-goods GMV and CMR trendMarch quarter (following)significantly recovered with improving consumer sentiment; EBITDA expected to improve (improve)

Performance Breakdown

MetricYoYNote
Total revenue +9% on a like-for-like basis (RMB 284.8 billion) Like-for-like excludes Sun Art and Intime; driven by cloud and quick commerce.
Cloud external revenue +35% (up from 29% prior quarter) Surging AI demand; AI-related product revenue triple-digit for the 10th consecutive quarter.
China E-commerce Group revenue +6% (RMB 159.3 billion) CMR up 1%; quick commerce revenue up 56%; slowdown from weaker transactions and phase-out of software service fee impact.
Customer management revenue (CMR) +1% Weak macro consumption, warm winter, later Chinese New Year timing, and extended promotional season with higher consumer-benefit investment.
Quick commerce revenue +56% (RMB 20.8 billion) Executed plan to grow scale while improving user experience, UE, and AOV.
AIDC revenue +4% Adjusted EBITDA loss narrowed on logistics optimization and investment efficiency; AliExpress Choice UE improved sequentially.
Total adjusted EBITDA -57% Strategic investment in technology innovation and quick commerce.
GAAP net income -66% (RMB 15.6 billion) —

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
AI agent era / TAM expansionchatbot-driven AIagent-driven era; IT budgets (historically ~5% of corporate revenue) expected to expand by several multiplesExpanding
Cloud external revenue growth29% (prior quarter)35%Accelerating
Alibaba Token Hub (ATH) / full-stack AIdispersed AI businessesnew ATH business group unifying Tongyi Lab, MaaS, Qwen, Wukong, and AI innovation; five-year $100 billion revenue goalUp
T-Head proprietary chipsscaled mass production470,000 chips shipped, RMB 10 billion annual revenue, 60%+ external; possible IPO with no set timelineExpanding
Quick commerce UE and synergyscaling with rising lossessequential UE/AOV improvement; +150 million AACs in 2025; RMB 1 trillion GMV target by FY2028Improving
Consumption / CMRweak December quarterre-accelerating into March quarterRecovering

Q&A Summary

Bernstein asked how the new Token Hub (ATH) changes how cloud and AI businesses work together, and for a hierarchy of priorities across market share/revenue, first-party model capability, and consumer agentic traction.
Eddie Wu said ATH reflects the agent-driven era, where tight integration of models and applications is critical because data increasingly comes from customer usage. Qwen app (B2C) and Wukong (B2B) sit at the application layer, connected via a robust MaaS layer that distributes tokens. The top priority is developing the most intelligent models, which in turn attracts applications and drives the data flywheel.
Bank of America asked about CMR trends into the March quarter and whether consumer sentiment is improving after a notably slower December quarter.
CFO Toby Xu attributed the December-quarter softness to weak macro consumption, a warm winter, later Chinese New Year, and an extended promotional season with higher consumer-benefit investment. He said consumer recovery has been evident since the start of the calendar first quarter, with physical-goods GMV and CMR significantly recovered and EBITDA expected to improve accordingly.
Morgan Stanley asked about quick commerce priorities (share vs. UE improvement) and how synergy with traditional e-commerce translates into faster CMR growth.
Toby Xu said UE continues to improve via logistics efficiency, better monetization, and order-mix optimization, expecting further improvement in coming quarters. Quick commerce added 150 million AACs in 2025 (including 100 million physical-goods buyers, more than the prior three years combined), and Alibaba maintains its RMB 1 trillion GMV target by FY2028, positive cash flow at that scale, and profitability in FY2029.
Citigroup asked about reports of a T-Head (Pingtouge) spin-off/listing, operating metrics, growth rate, external usage, and how its chips compare to other domestic chips.
Eddie Wu said T-Head is top-tier among domestic chips, covering training, fine-tuning, and inference, with over 60% used by external commercial customers and good CUDA-ecosystem compatibility. Its key value is cost-effective co-design with Alibaba Cloud and Qwen plus guaranteed compute supply amid a 3-5 year global shortage. He said an IPO is possible but there is no definitive timeline.
CITIC Securities asked for detail on the five-year $100 billion cloud+AI revenue goal, implied CAGR, growth drivers, and when Alibaba Cloud margins will sustainably improve.
Eddie Wu cited three drivers: MaaS as the core engine, enterprise-level private inference/training demand, and CPU-centric traditional cloud upgraded for billions of agents. He said the fundamental driver is enterprises treating tokens as production inputs rather than IT budget. Cloud profitability should become increasingly visible and improve steadily but non-linearly, potentially with step-change scale effects and T-Head scaling.

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Q3 2026 call
Reported 2026-03-19 · figures from the Alibaba Group Holding Ltd Q3 2026 earnings call.

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