Alibaba Group (NYSE:BABA) reported weaker-than-expected results for its December quarter, as revenue fell short of forecasts and profits declined sharply, sending its US-listed shares down about 8%.
For the quarter ended December 31, 2025, the company posted revenue of 284.8 billion yuan ($41.4 billion), below the 290.7 billion yuan expected by analysts.
Revenue rose 2% year-over-year, or 9% on a like-for-like basis excluding divested businesses.
Net income fell 66% to 15.6 billion yuan from 46.4 billion yuan a year earlier, while operating income dropped 74%, reflecting continued investments in quick commerce, user experience, and technology.
Adjusted EBITA declined 57% year-over-year to 23.4 billion yuan, with margins down 12 percentage points to 8%.
Cash flow also weakened, with operating cash flow down 49% and free cash flow falling 71%, largely due to spending on its quick commerce segment.
By segment, Alibaba’s China e-commerce group grew 6% year-over-year to 159.3 billion yuan, though customer management revenue rose just 1%. International digital commerce revenue increased 4% year-over-year to 39.2 billion yuan.
Cloud Intelligence Group performed strongly, with revenue up 36% to 43.3 billion yuan, while the “All Others” category fell 25% to 67.3 billion yuan.
“This quarter, Alibaba maintained strong investments across our core pillars of AI and consumption,” Alibaba CEO Eddie Wu said in a statement.
“Looking ahead, we are well-positioned to drive growth on both enterprise AI and consumer AI fronts, powered by our fullstack AI capabilities spanning foundation models, cloud infrastructure, and proprietary chips, alongside deep integration with our broader ecosystem.”
Jefferies analysts highlighted that the results were 1.7% behind consensus and largely in line with our estimates, noting that adjusted EBITA of 23.4 billion yuan fell short of both consensus at 32.1 billion yuan and their forecast of 27.5 billion yuan.
They highlighted mixed segment performance, with China e-commerce underperforming relative to expectations, international digital commerce growth below forecast, and cloud revenue slightly exceeding estimates.
The analysts believe key areas to watch include model competition and Agentic AI opportunities, cloud pricing and margin trends, capital expenditure plans, consumer demand, quick commerce performance, and international strategy.