Alibaba's securities have the strongest collapse in a year. Why doesn't the market believe in the "Chinese Amazon"?

U.S.-traded shares of Chinese tech giant Alibaba fell nearly 10% in trading on March 19. This was the biggest one-day decline since April 2025. The company's results for last quarter were below analysts' forecasts. The company posted its lowest profit since the beginning of 2024. Alibaba has yet to convince the market that successes in AI will outweigh challenges in other business segments, Barron's said.

Alibaba reported for the quarter ended December 31, 2025. Citi analysts indicated that the results were weaker than forecasts, writes CNBC. "On the positive side" was a slight acceleration in cloud segment revenue growth (up 36% year-over-year), slightly above the consensus forecast, although market expectations were even higher, Citi said.

- Total revenue rose just 2% to ¥284.8 billion ($41.3 billion) versus analysts' expectations of ¥290.7 billion ($40.7 billion), according to LSEG data cited by CNBC).

- Net profit was the lowest since the beginning of 2024: it fell 66% to 15.6 billion yuan ($2.2 billion). The decline in profits was due to the "price war" with competitors - JD.com and Meituan, especially in the food delivery segment - which hit the entire sector, Barron's emphasizes.

- Adjusted earnings per American Depositary Share (ADS) came in at RMB7.09 ($0.99), coming in strongly short of the forecast of RMB10.94 ($1.53).

The disappointing results explain why the company needed a large-scale restructuring, Bloomberg notes. In particular, it decided to unite all its developments in the field of artificial intelligence within one structure.

AI remains one of Alibaba's main growth drivers. Revenue from its Cloud Intelligence Group unit added 36% year over year to 43.3 billion yuan ($6.06 billion). "This quarter, Alibaba maintained strong investment in our core businesses: AI and consumer," said Alibaba CEO Eddie Wu.

Alibaba is considered the favorite in the race of Chinese companies to create a common artificial intelligence (AGI), demonstrating the most aggressive investment policy in the region, Bloomberg writes. As part of its strategy, the company has allocated more than $53 billion to develop AI infrastructure and build data centers over a three-year period. Despite the impressive scale of these investments, they still look modest against the background of global trends. For comparison, leading American hyperscalers such as Microsoft and Google plan to allocate about $650 billion for similar purposes only during 2026, emphasizes Bloomberg.

At the same time, Alibaba has set an ambitious goal of quintupling its annual cloud and AI revenue to $100 billion within five years. That's a high bar for an AI division designed to offset the stagnation of the once-dominant e-commerce empire, Bloomberg adds.

To achieve its goals, the company is beginning to actively monetize its new technologies. On March 17, Alibaba's cloud division announced plans to raise the price of a number of key products. In particular, the prices for T-head's proprietary AI chips, including the Zhenwu 810E model, will increase in the range of 5% to 34%, while cloud storage services will become more expensive by 30%, Barron's points out.

Alibaba's main technological achievement has been the development of Qwen - its own family of large language models, which the company is actively implementing in all its services, Bloomberg reports. Despite the success of this AI interface and its high popularity among users, Alibaba's path to industry leadership is complicated by a serious internal crisis. The hardest hit was the sudden departure of Junyan Lin, Qwen's lead developer and a key figure in the company's AI transformation, which has called into question the continuity of future innovations.

In parallel, the profitability of the entire sector is falling due to dumping by startups like DeepSeek and Zhipu offering cheap open source models. In addition, Alibaba has to spend huge amounts of money to attract users: during the Lunar New Year period alone, Chinese giants spent about $1 billion on coupons and subsidies, which further increased the company's costs in the midst of the technology race, Bloomberg points out.

Alibaba securities in the U.S. are now 14% cheaper than they were at the beginning of 2026. By comparison, the U.S. broad market index S&P 500 fell by 3.7% over the same time.

At the same time, most analysts still advise to buy Alibaba securities: they have 36 Buy and Overweight ratings against only one Hold recommendation and one Underweight ("below market", corresponding to the advice to sell).

This article was AI-translated and verified by a human editor