Alibaba Group (NYSE: BABA) has
long been a dominant force in e‑commerce, cloud computing, and AI-driven
digital services. The company’s Q4 2025 earnings, ending March 2025, delivered good
growth in revenue and earnings per share, while having low valuation. In this
article we will dive into Alibaba recent earnings, stock performance & valuation,
growth potential, and the risks investor should consider.
About Alibaba
Founded in 1999, by Jack Ma in
Hangzhou, China, Alibaba has evolved from an e‑commerce startup into a
diversified tech conglomerate. Its core business units, Taobao & Tmall
(domestic retail platforms), Alibaba Cloud, Cainiao logistics, AliExpress &
Lazada (international commerce), local services, and digital
media/entertainment. With a global footprint, Alibaba continues investing in
AI, cloud infrastructure, and consumer services, cementing its position among
leading global tech players.
Alibaba Financial Performance
Alibaba Group reported solid
financial results for the fourth quarter of fiscal year 2025, which ended in
March 2025. The company generated revenue of $32.57 billion, representing a
5.99% increase compared to $30.72 billion in the same quarter of 2024. Quarterly
earnings per share (EPS) saw a remarkable surge to $0.71, up 294.44% from $0.18
in Q4 2024, signaling strong profitability improvements. On a trailing
twelve-month (TTM) basis, total revenue reached $137.24 billion, up 5.29% from
$130.34 billion a year earlier. Similarly, TTM EPS rose to $7.38, marking a
70.44% increase compared to $4.33 in the prior year.
However, free cash flow per share
(TTM) declined significantly to $4.55, down 44.65% from $8.22. Despite this,
Alibaba maintained good profitability metrics, with a gross profit margin of
39.95%, net profit margin of 13.06%, and a free cash flow margin of 1.3%. The
company also demonstrated solid returns, reporting a return on assets (ROA) of
7.21% and a return on equity (ROE) of 12.97%, supported by a conservative
debt-to-equity ratio of 0.22, highlighting financial strength and low leverage.
Over the past five years,
Alibaba's revenue has been growing at a 10.6% CAGR. Net income is down from its
2020 peak but has been increasing steadily since then, while free cash flow has
fluctuated.
Alibaba Fiscal 2025 Financial
Forecast
Looking ahead, analysts are
optimistic about Alibaba's growth trajectory. Revenue for fiscal year 2026 is
forecasted at $148.43 billion, a 7.37% increase from 2025 $138.24
billion. Additionally, non-GAAP EPS is projected to rise to $9.89, representing
a 9.02% year-over-year growth from $9.08. Analysts have assigned a strong buy
rating to the stock, with a consensus price target of $162.73, implying a
potential upside of 33.52% from current levels. The highest analyst price
target stands at $190.16, suggesting an upside potential of 56.08%,
underscoring analyst confidence in Alibaba’s continued growth and value
creation.
BABA Stock Price Performance
and Valuation
Alibaba’s stock has delivered strong performance over the past year, with the share price rising 53.6% to reach $121.88, significantly outperforming the S&P 500’s 12.5% gain during the same period. However, over a longer five-year horizon, the stock remains down 44%, underperforming the S&P 500, which has risen 98.2% in that time. This long-term underperformance, largely due to Alibaba declining net profit from 2020. The stock also offers a modest dividend yield of 0.86%, which adds to total shareholder return.
Despite its recent rally, Alibaba
still trades at compelling valuation levels. The price-to-sales (P/S) ratio on
a trailing twelve-month (TTM) basis stands at 2.08, with a forward P/S of 1.86,
indicating the market values its future sales conservatively relative to peers.
The company’s non-GAAP price-to-earnings (P/E) ratio is 13.41 on a TTM basis,
and 12.27 forward, suggesting the stock is undervalued given its earnings
growth prospects. Additionally, the price-to-free cash flow (P/FCF) ratio sits
at 26.7.
If we look at the valuation over
the past five years, the forward P/S ratio is below the average, the forward
P/E is also below the average, while the P/FCF is above the average. This shows
that Alibaba is currently trading at a significantly lower valuation compared
to the past five years, due to a decrease in net income from its 2020 level and
slower growth. However, the current low valuation makes it attractive.
Alibaba Growth Potential
Alibaba growth prospect remains
robust, driven by several factors.
- Stable Domestic Dominance
Alibaba’s Domestic E-commerce segment, encompassing Taobao and Tmall, reported a 9% YoY revenue increase to RMB 101.37 billion (US$ 13.96 billion) in Q4 2025, with customer management revenue from marketing and merchant services rising 12% YoY. This growth was fueled by enhanced user experiences and effective monetization strategies. The 88VIP membership base expanded to 49 million, achieving double-digit YoY growth. Alibaba’s user-first approach, including advanced product recommendations and merchant-friendly tools like Quanzhantui, is driving engagement and transaction volumes.
China’s economic stimulus is expected to boost consumer spending, supporting a projected 5% YoY growth in the near term. Investments in “instant commerce” with rapid delivery services aim to meet convenience-driven demand, strengthening Alibaba’s competitive edge against JD.com and Pinduoduo, potentially increasing market share in the dynamic e-commerce landscape. - Strong Growth in International
Commerce
Alibaba’s International Digital Commerce (AIDC) segment saw a 22% year-over-year increase to RMB33.58 billion (US$4.62 billion) in Q4 2025, propelled by strong performance in cross-border businesses like AliExpress. Losses significantly narrowed from RMB 7.1 billion (US$990 million) to RMB 4.5 billion (US$620 million) YoY, reflecting enhanced operational efficiency. AliExpress Choice’s emphasis on curated products and faster shipping is driving robust order growth, particularly in Europe. Lazada’s operational enhancements in Southeast Asia, including Indonesia, the Philippines, and Thailand, are reducing losses and boosting competitiveness.
Despite a full year 2025 7% YoY revenue decline, Alibaba.com’s B2B platform remains a promising long-term opportunity for cross-border trade, especially for SMEs. AIDC’s trajectory suggests strong growth potential, with improving profitability and strategic expansions positioning Alibaba to capture global e-commerce opportunities, though trade policy risks persist. - Accelerating Cloud Adoption
Alibaba’s Cloud Intelligence Group saw an 18% YoY revenue rise to RMB 30.12 billion in Q4 2025, with AI-related products achieving triple-digit growth for the seventh consecutive quarter. Alibaba Cloud’s dominance in AI infrastructure, strengthened by open-sourcing Qwen2.5-VL and Qwen2.5-Max models, has generated over 90,000 derivative models on Hugging Face, amplifying its global reach. Increasing demand for cloud-based AI services in industries like manufacturing and agriculture is broadening its customer base.
CEO Eddie Wu underscored a “significant growth track” for future cloud revenue. Alibaba’s RMB 380 billion investment in AI and cloud infrastructure over three years aims to challenge AWS and Microsoft Azure. Despite margin pressures from heightened spending and potential global trade risks, Alibaba Cloud is well-positioned for sustained growth in the competitive AI and cloud market.
Risks to Consider
While Alibaba looks like a
compelling stock, we should be mindful of potential risk.
- Regulatory and Political Risks
in China
Alibaba has faced significant regulatory scrutiny in China, including a $2.75 billion anti-monopoly fine in 2021. Continued government oversight and evolving policies pose ongoing risks to its operations and growth. The company's future performance heavily depends on how well it can adapt to and comply with China's changing regulatory environment, making regulatory and political risks a critical factor for investors to consider. - Geopolitical and Trade
Tensions
US-China trade tensions pose risks for Alibaba, as recent US actions include removing tariff exemptions on some Chinese imports and calls to delist Chinese firms from US exchanges over national security concerns. These disputes, centered on technology export controls and tariffs, could disrupt Alibaba's international business and affect its US-listed ADR shares amid ongoing trade negotiations and geopolitical friction. - Fierce Competition
Alibaba faces intense competition both domestically and internationally. In China, rivals like JD.com and Pinduoduo are gaining market share, while Alibaba’s annual active consumer base is nearing saturation, limiting growth potential. Internationally, Alibaba competes with global e-commerce giants such as Amazon and other cloud service providers. To maintain its edge, Alibaba continues investing in technology and partnerships, but the competitive landscape remains challenging and dynamic.
Conclusion
Alibaba Group presents a
compelling case for investors seeking a blend of strong growth potential and
attractive valuation. The company has demonstrated solid financial performance
in Q4 2025, with notable increases in revenue and earnings per share, despite
short-term pressure on free cash flow. Its stock has significantly outperformed
the broader market over the past year, yet still trades at relatively low
valuation multiples, offering meaningful upside based on analyst forecasts. While
macroeconomic and regulatory risks remain, the company’s fundamentals and
strategic focus suggest that BABA stock remains a good investment opportunity
for value seeking investors.
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