Alibaba Group Holding reported second-quarter fiscal 2026 results on September 30, revealing revenue of RMB 247.8 billion, a 5% increase year-over-year. Despite this growth, the company faced significant margin compression, with non-GAAP earnings per ADS of 61 cents, missing analyst expectations by 7.58%. The earnings in domestic currency fell 71% year-over-year to RMB 4.36.
A doubling of sales and marketing expenses to RMB 66 billion highlights the fierce competition from rivals like JD.com and Pinduoduo, targeting the quick commerce and food delivery segments. Furthermore, adjusted EBITDA declined 78%, primarily due to ongoing investments in quick commerce, while Alibaba spent approximately RMB 120 billion on AI and cloud infrastructure over the past year. The Zacks Consensus Estimate for earnings per share in fiscal 2026 is pegged at $5.98, indicating a potential 33.63% decline.
Alibaba’s forward price-to-sales ratio stands at 2.61, above the average of 2.25 for the broader Internet-Commerce industry, raising concerns about valuation amid deteriorating fundamentals. Investors are advised to reconsider their positions, as the competitive landscape shows no signs of easing and profitability challenges are likely to persist well into 2026.
