**Alibaba’s Profitability Decline Amid Share Price Surge**
Alibaba Group Holding Limited (BABA) shares have increased by 28% over the past six months, but this growth contrasts sharply with its financial performance. In the second quarter of fiscal 2026, the company posted revenues of RMB247.8 billion, a modest 5% year-over-year increase, while non-GAAP diluted earnings plummeted 71% to RMB4.36 per ADS, missing analyst expectations by about 20%. Total adjusted EBITDA also fell by 78%, primarily due to significant investments in AI infrastructure.
The company reported escalating expenses, with sales and marketing costs more than doubling to RMB66 billion as it invests heavily in its AI initiatives. Despite a robust 34% revenue growth from its Cloud Intelligence Group, forward guidance remains bleak. The Zacks Consensus Estimate for fiscal 2026 earnings indicates a 33.85% decline year-over-year. Analysts are warning investors that BABA’s ongoing spending commitments could significantly impact profitability, with a projected net income drop of 53% year-over-year and expectations for further declines in upcoming quarters.
