What Happened to Alibaba (BABA) This Year?

Key Points

• Alibaba’s stock has risen nearly 50% this year.

• Its e-commerce business is stabilizing, and its cloud business is accelerating.

• It looks undervalued, relative to its growth potential.

• 10 stocks we like better than Alibaba Group ›

Alibaba (NYSE: BABA), the largest e-commerce and cloud infrastructure company in China, has shed about 60% of its value since it closed at a record high of $307.84 on Oct. 27, 2020. The bulls retreated as the company faced fierce regulatory, competitive, and macroeconomic headwinds.

China's antitrust regulators slammed its e-commerce business with a record fine and shackled it with tighter restrictions in 2021. Those setbacks eroded its defenses against aggressive competitors like PDD and JD.com. As for the macro environment, the sluggish growth of China's economy after the pandemic curbed consumer spending and drove many companies to rein in their spending on the company's cloud-based services.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Image source: Getty Images.

Those challenges convinced many investors that Alibaba's high-growth days were over. However, since the beginning of 2025, its stock has rallied nearly 50%. Below, I'll review the main catalysts that fueled that rally and see if they'll drive the company's shares even higher through the end of the year.

The three catalysts that drove Alibaba's stock higher

Alibaba impressed the market again with the stabilization of its e-commerce business, the accelerating growth of its cloud business, and its bold buybacks.

The company has been offsetting the slower growth of its maturing Taobao and Tmall marketplaces in China with the robust growth of its overseas marketplaces. In fiscal 2025 (which ended in March), its Taobao and Tmall revenue rose just 3%. But its smaller International Digital Commerce Group (which includes Lazada in Southeast Asia, Trendyol in Turkey, Daraz in South Asia, and AliExpress for its cross-border purchases) saw revenue jump 29%.

Meanwhile, Alibaba's Cloud Intelligence revenue rose 11% as the explosive growth of the artificial intelligence (AI) market drove more companies to ramp up their spending on its cloud infrastructure services again. It also integrated Qwen -- its own family of large language models (LLMs) for new generative AI applications -- into its cloud infrastructure platform to attract more AI-oriented customers. The expansion of that ecosystem turned Alibaba from an aging e-commerce leader into an exciting cloud and AI play.

Alibaba's revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) both rose 6% in fiscal 2025. With an enterprise value of 1.69 trillion yuan ($240 billion), the company's stock looks dirt cheap at 2x this year's sales and 8x its adjusted EBITDA.

That valuation is likely being compressed by the unresolved trade issues between the U.S. and China, which are curbing the market's appetite for Chinese equities. Yet the company bought back 5% of its shares for $11.9 billion in fiscal 2025 -- which implies it's still deeply undervalued. Therefore, a favorable trade deal between the U.S. and China could drive its valuations a lot higher.

From a growth play to a value play

From fiscal 2025 to fiscal 2028, analysts expect Alibaba's revenue and adjusted EBITDA to grow at a compound annual growth rate (CAGR) of 7% and 11%, respectively. That growth should be driven by the growth of its e-commerce and cloud businesses, the expansion of its generative AI ecosystem, and the increased usage of its logistics services for third-party customers.

Alibaba also recently proposed a spin-off of its Banma autonomous driving unit, which suggests it might revisit plans to spin off its cloud and logistics units in fresh initial public offerings (IPOs). A chilly market and other macro challenges forced it to scrap those plans, but spinning them off could boost the company's cash flow while unlocking more value for its shareholders.

Alibaba's high-growth days are probably over. The company should grow at a stable rate over the next few years as its core businesses expand and it finds fresh ways to boost its earnings, but it will likely be considered a value play instead of a growth one. Its stock could gradually head higher through the end of the year if the relationship between the U.S. and China warms up, but investors shouldn't expect it to revisit its all-time highs anytime soon.

Should you invest $1,000 in Alibaba Group right now?

Before you buy stock in Alibaba Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alibaba Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $659,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,113,120!*

Now, it’s worth noting Stock Advisor’s total average return is 1,068% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 25, 2025

Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Alibaba Group and JD.com. The Motley Fool has a disclosure policy.