Alibaba Stock: Can a Cloud-and-AI Pivot Turn Recovery Into Durability?

While Alibaba’s domestic business remains at its core, the company continues to achieve growth, as evidenced by the company’s revenue of 284.843 billion yuan in the 4th quarter of 2026 (December 31, 2025), an increase from the company’s revenue of 280.15 billion yuan in the same period last year. 

Of the 284.843 billion yuan, the revenue of Alibaba’s domestic business grew 6% year over year to 159.347 billion yuan as it benefited from growth in its user base and an improvement in transaction behaviors. 

Monthly active users on Taobao had a double-digit growth; 88VIP membership exceeded 59 million and had also seen double-digit growth, and the Instant Retail segment generated 20.8 billion yuan in revenue, representing a 56% year over year increase.

The improvements resulting from efficiencies in logistics, order mix and customer retention from improved unit economics and average transaction values indicate that the company's core commerce engine continues to strengthen beyond simply relying on promotions to drive the growth of their commerce business.

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

In the last quarter, Alibaba Cloud generated 43.284 billion CNY ($6.437 billion), an increase of 36% over the same period last year. This impressive number reflects strong demand for both public cloud and AI products. AI revenues have experienced triple-digit growth year over year for ten consecutive quarters, signifying that organizations are increasing their IT budgets to fund pilot projects and developing actual outcomes in terms of the cost of processing power and the ability to run many large models.

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

Alibaba's cloud business has changed gears from "selling compute" to "selling AI capabilities." The emphasis now is on creating one continuous commercial chain that includes access to the biggest models and their inference workloads, and access to cloud services so they can produce a more stable and larger frequency of revenue.

They are also working on their own internal structure called "Token Hub" (or "internally token development center") to group together their efforts for monetizing digital assistants and large model-based applications while also continuing the development of the chips and cloud infrastructure that they use to build value off of their AI capabilities. 

Integrating AI as part of the revenue structure instead of treating it as a separate R&D based business represents a big step in Alibaba's evolution as a company.

AI has gone public in both the consumer and enterprise sectors. 

For example, 300 million monthly active Qianwen users, where the Taobao flash purchase system has now allowed shoppers to place AI orders through voice. 

The launch of Qianwen on the launch of the Qianwen app during the lunar market period contributed to the completion of 200 million orders between three product categories (shopping, travel, and entertainment), and provided early indications that AI-assisted buying is becoming habit-forming.

On the enterprise side, the new Wukong division has been created to incorporate AI into processes and change MaaS into quantifiable productivity for clients. The Alibaba Pingtouge silicon unit has moved its in-house GPUs into volume production at the software level. 

These chips support machine learning, fine-tuning, and inference, where the chips can work with standard AI frameworks, and—when used with the Qianwen model and Alibaba Cloud—are anticipated to provide high-cost, high-performance overall AI services to enhance the cloud infrastructure.

By linking the AI strategy with specifically defined revenue expectations, management is proposing that revenue growth from cloud and AI will surpass $100 billion over the next five years, with MaaS likely becoming Alibaba Cloud's biggest revenue-generating product.

 This brings clarity to the AI discussion by changing its context from "if" to "how quickly" or "at what level of profitability." As long as Alibaba continues to grow AI revenue at a rate greater than 100% year over year while scaling the AI infrastructure through in-house chip production and public cloud utilization, then revenue margins from increased req. of MaaS will be advantageous for the total profitability of the organization. 

If adoption of AI services is more variable and/or if price reductions due to competition increase significantly, it may be harder to maintain that margin growth; therefore, the organization will have to rely on its e-commerce operations and improvements made outside of China to support margin growth.

Investors need to take into account what type of global policy and regulations exist. China's governmental structure still has those same authorities in place from prior years when changes affecting technology regulation happened overnight; therefore, there was also significant risk that an American depository receipt could end up pulled (un-found) in 2022, But some lawmakers are trying to put more pressure on the SEC to study the possibility of delisting & this still exists as a tail risk despite some recent good news on general market sentiment.

Charlie Munger was also once a large investor in Alibaba (shares of which continue to be traded) but changed his opinion about his investment after realizing how politically unstable China was at the time, selling off almost all of his shares (resulting in him being a net seller through the end of November 2023). These events contribute greatly to investors being more cautious about Alibaba as an investment weighting due to these factors.

In 2026, whether Alibaba shares will continue moving higher depends on both the company's ability to execute properly and the state of the investment environment. 

When considering execution, it is important for Alibaba to continue converting interest in AI into actual contracted workloads while expanding the adoption rate of MaaS across different industries, as well as improving the unit economics of its commerce unit. 

In terms of stability, fewer new regulatory surprises and a continued reopening of international cross-border capital channels would enable Alibaba's stock price to more fully reflect its underlying fundamentals. Alibaba's stock is still much more sensitive to news events than its peers in more stable jurisdictions.

Alibaba is changing from being mainly a site for buying and selling things into a company providing cloud-based services and artificial intelligence (AI). The company intends to monetaneously leverage its ability to offer AI models as opposed to merely selling devices to use those AI models on.

If Alibaba's Maturity as a Service (MaaS) plan is successful, and if Alibaba can continue to enhance the underlying economics of its retail business, the story of Alibaba's stock could transform from a story of being a turnaround stock to one of being a durable stock. For Alibaba to succeed as an e-commerce company, they have to achieve its goals and deal with an environment that has caused problems for investors in the past.