Alibaba's Stock Price Drops, As Q4 Revenue Fell Short of Expectations Amid AI Growth Concerns

Alibaba (HK: 9988) experienced a significant drop on Friday, falling 5.4% during the Hong Kong trading session, with shares hitting a low of HK$120.30.

The catalyst for this decline was the company’s reported financial results for the fourth quarter of fiscal year 2025, which revealed that revenue did not meet expectations, raising investor concerns regarding the progress of its artificial intelligence strategy.

According to the earnings report, Alibaba’s revenue grew by 7% year-on-year to RMB 236.5 billion (approximately USD 32.8 billion). This figure fell short of Wall Street's expectation of RMB 237.9 billion. Additionally, adjusted earnings per share also missed market projections.

The primary reason behind this disappointing performance was that growth in its cloud intelligence business lagged market expectations. Although Alibaba Cloud reported an 18% year-on-year revenue increase to RMB 30.1 billion—a three-year high rate—it was below the expected growth rate of 20%. This discrepancy has led investors to doubt Alibaba Cloud’s short-term growth potential. 

Furthermore, profit margins for the cloud business decreased by 1.9 percentage points quarter-on-quarter, indicating pressure on profitability from short-term investments.

Alibaba's local services reported a revenue growth of 10.3% this quarter, although there was a slight quarter-over-quarter decline of 1.8 percentage points. However, losses in the local life services segment significantly exceeded expectations, reaching 2.32 billion yuan compared to the anticipated loss of 660 million yuan.

The competition in the instant retail market is intense, with Taobao's flash sales and Ele. I engaged in a 'bloodbath' alongside JD.com and Meituan. This has raised investor concerns that future losses may widen even further.