Alibaba's Core Profit Craters 84% in March Quarter While Cloud and AI Revenue Surge 38%

The Numbers, Straight Up

Alibaba reported its March quarter results on May 13, 2026. Adjusted EBITA — the metric that strips out accounting noise and shows real operating health — came in at 5.1 billion yuan ($750.9 million). That's an 84% year-on-year collapse, according to CNBC.

Net income in the December quarter (fiscal Q3) had already fallen 66% year-over-year to $2.2 billion, down from $6.6 billion, according to Digital Commerce 360. That was a miss on both revenue and profit. Analysts at FactSet had expected adjusted earnings of RMB 10.94 per ADS — Alibaba delivered RMB 7.09. Per IG International chief market analyst Chris Beauchamp, that shortfall left investors "questioning whether AI investment costs were running out of control."

The March quarter shows the losses deepened.

What's Eating the Profits

Two things are draining Alibaba's earnings: AI infrastructure and instant delivery.

On the AI side, Alibaba has been pouring money into semiconductors, data centers, and building out its own family of AI models under the Qwen brand. That's expensive upfront. Every dollar spent building data centers is a dollar not sitting in the earnings column.

On the commerce side, Alibaba is fighting a brutal war in "quick commerce" — the race to deliver groceries and goods to your door in under an hour. This isn't a niche business anymore. It's a full-scale battlefield in China, and Alibaba is spending heavily to compete. Adjusted EBITA in the China e-commerce group dropped 40% year-on-year in the March quarter, per CNBC.

The quick-commerce revenue number tells you why they're doing it anyway: 57% year-on-year growth. You don't walk away from that.

The Cloud Story Is Actually Good

Alibaba Cloud is posting strong results that haven't received enough attention.

Cloud revenue hit 41.6 billion yuan in the March quarter, up 38% year-on-year — and that growth rate is accelerating, not decelerating. Cloud adjusted EBITA jumped 57%. AI-related product revenue has now posted triple-digit growth for eleven consecutive quarters, according to Alibaba CFO Toby Xu.

Total AI-related revenue came in at 9 billion yuan this quarter alone.

For context, in the December quarter (fiscal Q3), cloud revenue was already up 36% year-over-year to $6.2 billion, per Digital Commerce 360. The March quarter accelerated that. Alibaba's Qwen AI platform surpassed 300 million monthly active users and is being integrated into shopping, delivery, and travel services.

The company is competing effectively in the AI race while absorbing heavy spending on infrastructure buildout.

Market Reaction

Alibaba's U.S.-listed shares (BABA) initially popped in premarket trading after the May 13 report, then reversed and fell as much as 4%, settling around 1.3% lower, per CNBC. Investors saw the cloud numbers, got excited, then saw the 84% profit plunge and got nervous.

This reflects genuine tension in the data. The profit collapse is real. The question is whether it's structural or transitional. If Alibaba is spending now to own cloud and AI infrastructure for the next decade, the current earnings hit is the price of admission. If the spending never translates to margin recovery, this is a slow bleed.

The Broader Context

Most financial coverage treats this as a simple "AI spending weighs on profits" story. The bigger picture involves geopolitics. Alibaba is the most direct Chinese challenger to Amazon Web Services and Microsoft Azure in the Asia-Pacific cloud market. Its Qwen model series is competing with OpenAI's GPT lineup. The company's ability to build domestic AI infrastructure at scale matters to shareholders, to Beijing's strategic ambitions, and to Washington's concerns about Chinese AI dominance.

U.S. outlets covering this earnings report focused on the profit number because it's striking. But the context extends beyond a quarterly EBITA figure.

Alibaba missed revenue estimates in Q3 — $40.7 billion reported against higher expectations, per Digital Commerce 360. Alpha Spread noted that Q3 revenue of 284.8 billion yuan came in below the 290.7 billion yuan analyst consensus. But revenue trends in cloud and quick commerce are moving upward.

What Matters Going Forward

For BABA shareholders, the short-term pain is real. Two consecutive quarters of profit misses is not a blip — it's a pattern that demands explanation.

The underlying business is not collapsing. A company posting 38% cloud growth and 57% surge in quick-commerce revenue is not dying. It's spending aggressively to compete in two of the most important technology markets on earth.

The core question: is Alibaba building an AI infrastructure empire that rivals what Amazon and Microsoft built in the U.S. over the last decade? If yes, the current profit drought resembles Amazon circa 2014 — painful in the moment, transformative in hindsight.

The data doesn't answer that yet. But it doesn't rule it out either.