EARNINGS REVIEW
Alibaba, FY2026 Q2 Earnings Results
Historical quarterly report · Results and outlook reflect information available at the time of that release. Actual results from later quarters have not been incorporated into the outlook.
Cloud and AI growth accelerated, but quick-commerce and technology investment pressured operating income and cash flow. Changes in the consolidation scope following business disposals also affect revenue comparisons.
Assessment · Improved cloud growth and deteriorating consolidated profitability occurred together. To strengthen the investment thesis, better quick-commerce unit economics must translate into actual recovery in operating income and cash flow. AI growth alone does not justify a near-term FCF deficit.
Key management and company statements
Earnings release · Excerpt from the original“We are re-investing our profits and free cash flow for the future while near-term profitability is expected to fluctuate.”Meaning · The company expects short-term profitability to fluctuate as it reinvests earnings and FCF for the future.
Context · The official quarterly release explains this relationship between reinvestment and short-term profitability.
Original statement ↗01 Revenue, operating income and results versus expectations
Year over year · revenue 33.012 → 34.623 B$ (+4.9% · +1.611 B$), operating income 4.920 → 0.750 B$ (−84.8% · −4.170 B$).
Quarter over quarter · revenue 34.239 → 34.623 B$ (+1.1% · +0.384 B$), operating income 4.837 → 0.750 B$ (−84.5% · −4.088 B$), operating margin 14.1% → 2.2% (−12.0%p).
Revenue in RMB increased 5%; company-provided like-for-like growth excluding the Sun Art and Intime disposals was 15%. Cloud revenue increased 34%, and AI-related product revenue posted triple-digit growth for 9 consecutive quarters.
The YoY and QoQ figures at the top are in B$, translated at each quarter’s average exchange rate. Company-reported growth rates in the narrative are in RMB and may differ because of currency effects.
02 Earnings sustainability · From operating income to net income
GAAP operating income declined 85% in RMB. The company attributed this mainly to investment in quick commerce, user experience and technology. Adjusted EBITA of 1.268 B$ differs from GAAP operating income.
Consolidated net income includes investment gains/losses and equity-method income/losses. Net income exceeding operating income does not by itself establish strong recurring profitability in the core business.
- Operating income
- 0.750 B$
- Net non-operating income
- 2.593 B$
- Income tax expense
- −0.775 B$
- After-tax equity-method income/loss
- 0.313 B$
- Consolidated net income
- 2.880 B$
Net income of 2.937 B$ in the existing quarterly dataset is attributable to the parent/shareholders. Its scope differs from consolidated net income used in the cash flow bridge.
03 Cash flow quality · Net income → OCF → FCF
Company FCF was an outflow of −3.052 B$, mainly reflecting quick-commerce investment and increased cloud infrastructure spending.
CapEx used in company FCF includes adjustments for items such as office property and campus construction, and FCF also reflects changes in buyer protection funds. It has not been forced into the same definition as simply deducting total cash CapEx.
- Consolidated net income
- 2.880 B$
- Total net adjustments for noncash items, working capital and other items¹
- −1.469 B$
- Operating cash flow
- 1.411 B$
- Company-defined cash CapEx
- −4.401 B$
- Additional company-defined adjustments and disclosure rounding²
- −0.061 B$
- Company-defined FCF
- −3.052 B$
¹ Total net adjustments calculated as OCF−net income. This is not a single disclosed line item; it combines noncash items, working capital, classification differences and other adjustments.
² Difference between company FCF and OCF−cash CapEx. The detailed scope follows the explanation above and the original company definition.
FCF versus previous quarter · −2.601 → −3.052 B$, 0.450 B$ deterioration.
04 Financial capacity · Net debt and payment obligations
Previous-quarter net cash · 2025-06-30
Cash and current investments 52.328 / Debt 32.400 B$
Current-quarter net cash · 2025-09-30
Cash and current investments 46.118 / Debt 39.555 B$
Net debt worsened by 13.366 B$ from the previous quarter. The carrying amount of current debt is 3.693 B$. It may differ from the principal maturity schedule.
The company’s broader reported liquidity includes certain other treasury investments. Net cash below uses the narrower common definition of cash equivalents and current investments less interest-bearing debt.
Common definition · Cash and current investments = cash equivalents + current investments and deposits. Debt = carrying amount of interest-bearing borrowings (current + noncurrent), excluding separately reported lease liabilities. This differs from total liabilities of 108.456 B$. Restricted cash, noncurrent securities and noncurrent deposits are excluded from cash and current investments.
05 Investment, capital allocation and cash returns
The company said it made substantial AI and cloud infrastructure investments over the past 4 quarters. Distinguish cumulative investment from current-quarter cash spending, and assess whether improvements in cloud profitability and capacity match the scale of reinvestment.
This quarter, cash CapEx/revenue is 12.7% and company-defined FCF/revenue is −8.8%. These ratios should not be used as a simple ranking of companies with different business models and FCF definitions.
Quarterly results · CY-aligned presentation
Amounts in B$. Based on the CY-aligned year of this report, the table shows all 4 quarters of the preceding year and the current year to date. Each fiscal quarter is assigned to the CY quarter with the greatest overlap in actual reporting dates, alongside its original FY/CY quarter and start/end dates. Amounts have not been recalculated into actual calendar quarters.
| CY alignment | 2024 · 4 quarters | 2025 · 3 quarters | Change this quarter | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Metric | 2024 total4-quarter totalBalances are period-end | 1QFY2024 Q424-01-01 ~24-03-31 | 2QFY2025 Q124-04-01 ~24-06-30 | 3QFY2025 Q224-07-01 ~24-09-30 | 4QFY2025 Q324-10-01 ~24-12-31 | 2025 year to date3-quarter totalBalances are period-end | 1QFY2025 Q425-01-01 ~25-03-31 | 2QFY2026 Q125-04-01 ~25-06-30 | 3QFY2026 Q225-07-01 ~25-09-30 | QoQvs FY2026 Q1 | YoYvs FY2025 Q2 |
| Revenue | 136.436 | 30.865 | 33.591 | 33.012 | 38.967 | 101.374 | 32.512 | 34.239 | 34.623 | +1.1%+0.384 B$ | +4.9%+1.611 B$ |
| Operating income | 17.675 | 2.054 | 4.970 | 4.920 | 5.731 | 9.501 | 3.914 | 4.837 | 0.750 | −84.5%−4.088 B$ | −84.8%−4.170 B$ |
| Operating margin | 13.0% | 6.7% | 14.8% | 14.9% | 14.7% | 9.4% | 12.0% | 14.1% | 2.2% | −12.0%p | −12.7%p |
| FCF · Company definition | 11.881 | 2.137 | 2.399 | 1.917 | 5.427 | −5.138 | 0.515 | −2.601 | −3.052 | −0.450 B$ | −4.969 B$ |
| Operating cash flow | 22.144 | 3.247 | 4.645 | 4.388 | 9.864 | 8.053 | 3.784 | 2.858 | 1.411 | −50.6%−1.447 B$ | −67.8%−2.977 B$ |
| Cash CapEx · Company definition | 10.083 | 1.552 | 1.670 | 2.441 | 4.420 | 13.133 | 3.384 | 5.347 | 4.401 | −17.7%−0.946 B$ | +80.3%+1.960 B$ |
| Net cash | 23.044 | 47.132 | 25.768 | 19.417 | 23.044 | 6.563 | 19.790 | 19.928 | 6.563 | −13.366 B$ | −12.854 B$ |
| Cash and current investments | 54.763 | 70.784 | 54.381 | 48.239 | 54.763 | 46.118 | 51.582 | 52.328 | 46.118 | −11.9%−6.210 B$ | −4.4%−2.121 B$ |
| Debt | 31.719 | 23.652 | 28.613 | 28.822 | 31.719 | 39.555 | 31.792 | 32.400 | 39.555 | +22.1%+7.156 B$ | +37.2%+10.733 B$ |
Indented rows are components or reference items for the parent metric. Net cash = cash and current investments − debt. Depending on the company definition, FCF may include additional adjustments such as lease principal and therefore differ from operating cash flow − cash CapEx. See the cash flow discussion for the detailed definition.
Annual totals and year-to-date totals appear before each year’s quarters. Revenue, earnings and cash flow are sums of quarterly figures; margin is total operating income ÷ total revenue; net cash, cash and debt are balances at the end of the last quarter. Do not treat totals covering different lengths of time as directly comparable annual figures.
Net cash = cash and current investments − debt. A negative figure indicates net debt. Changes in FCF and net cash are shown as absolute amounts in B$. Quarterly figures have not been adjusted to force reconciliation with disclosed annual totals.
Comparison bases, calculation methods and quarterly sources
Calculation and presentation · Amounts in B$. Figures disclosed in millions of US dollars are divided by 1,000 without altering the source values. Where only cumulative cash flows are available, the previous cumulative period within the same fiscal year is deducted. YoY, QoQ and margins are calculated using amounts before display rounding. Earnings changes from negative or 0 bases are expressed as profit/loss transitions and absolute amounts.
Opinions and outlook · Management quotations include original excerpts and their translations. Quotations not identified as earnings-call transcripts come from earnings releases. Interpretations and implications are the author’s judgments. No numerical probability of achieving a target is assigned without quantitative verification.
Currency translation · Earnings and cash flow use the quarterly average of 7.157017 RMB/USD; balances use 7.1190 RMB/USD as of 2025-09-30. Each historical quarter also uses its own exchange rate. This differs from the company’s convenience translation at the period-end rate. Company FCF and cash CapEx are kept separate from the common definition. Original exchange-rate data ↗