Alibaba Shares Fall Despite Accelerating AI Growth. Is It Time to Buy the Dip?
Alibaba stock sank after its earnings results disappointed investors.
However, the company continued to show strong progress with its turnaround plan.
Meanwhile, the stock remains cheap at current levels.
10 stocks we like better than Alibaba Group ›
Alibaba (NYSE: BABA) stock has had a good start to 2025, but it was giving back some of its gains after its fiscal fourth-quarter earnings report disappointed investors. The stock is still up about 45% on the year, as of this writing.
That said, the results clearly showed that the turnaround at the company's e-commerce business is progressing, while it continued to demonstrate strong artificial intelligence (AI) growth within its cloud-computing segment.
Let's take a closer look at Alibaba's most recent earnings to see if investors should buy the dip.
Alibaba's largest and most important business by far remains e-commerce, which consists of its leading Tmall and Taobao platforms. Tmall is similar to Amazon's marketplace business and is where established brands sell their merchandise. Taobao is more akin to eBay, but without the auction format, where anyone can sell their goods.
In the past few years, the company's e-commerce business has been under pressure from a weak Chinese economy and heavy competition led by PDD's popular Pinduoduo platform. However, the company has been investing in its e-commerce business to make it more competitive, and its efforts began to show up this fiscal year, first through gross merchandise value (GMV) growth and then later with revenue and earnings before interest, taxes, and amortization (EBITA) growth.
This continued in fiscal 2025's Q4 (ended March 31, 2025), with the e-commerce segment growing its revenue 9% year over year to $14 billion, including 12% growth in its important third-party business. Alibaba credited the growth to a higher take rate from an earlier new software service fee it implemented and increasing uptake of its new AI marketing tool, Quanzhantui.
Importantly, its segment EBITA climbed 8% to $5.8 billion. This shows its e-commerce business is not just growing but growing profitably. It said it continues to see strong new customer growth along with continuous increases in orders. Its 88VIP premium memberships continued to grow by double digits, topping 50 million members.
Alibaba plans to invest heavily in "instant commerce" whereby customers can get items purchased on its Taobao platform delivered within an hour. Management thinks this can become a 1 billion consumer market opportunity. It also extended a deal with social media platform Rednote (akin to Instagram) to have Taobao links directly embedded in its posts.
Its cloud-intelligence group, or cloud-computing segment, saw revenue growth accelerate to 18% in the quarter, as revenue came in at $4.2 billion. It said its AI products were seeing broader adoption across industries, helping lead to its seventh consecutive quarter of triple-digit, AI-related growth. The segment's adjusted EBITA, meanwhile, soared 69% to $333 million.
The company is expecting to see significant cloud-computing revenue growth over the next few quarters.
The company's other businesses also generally showed strong revenue growth, although they largely remain unprofitable. Its international commerce segment (AIDC), which includes AliExpress, once again led the way, with revenue climbing 22% to $4.6 billion. However, its segment EBITA came in at negative $492 million. The company is still looking for the unit to become profitable this year despite tariffs.
Overall, Alibaba's revenue increased 7% to $32.6 billion, while adjusted EBITA jumped 36% to $4.5 billion. Its adjusted earnings per American depositary share (ADS) climbed 23% to $1.73.
Its operating cash flow rose 18% to $3.8 billion, but its free cash flow plunged 76% to $516 million as it invested heavily in data center infrastructure. It was still able to generate $10.2 billion in free cash flow for its fiscal year.
Alibaba ended the quarter with $51.6 billion in cash and short-term investments and $31.8 billion in debt. It also had $56.6 billion in equity and other investments on its balance sheet.
While investors were hoping for even more from Alibaba, the company continued to show strong progress in its turnaround. It's really made some nice strides with its domestic e-commerce business to return it to growth. Instant commerce could become a big differentiator, while its partnership with Rednote looks like a smart move. Meanwhile, its Quanzhantui AI marketing tool continues to gain adoption.
The company's cloud-computing business is seeing strong growth and nice operating leverage. While AI competition is fierce in China, Alibaba has become one of the country's leading AI players.
In addition, if the company can turn its AIDC business profitable, that will be a big profitability driver this fiscal year. Currently, it has a lot of money-losing emerging ventures it is trying to develop.
Trading at a forward price-to-earnings (P/E) ratio of around 12 times fiscal 2026 analyst estimates, the stock remains cheap, albeit not as cheap as it was much of last year. But between its continued turnaround and valuation, this looks like a good opportunity to buy on the dip.
Before you buy stock in Alibaba Group, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Alibaba Group wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!*
Now, it's worth noting Stock Advisor's total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join .
See the 10 stocks »
*Stock Advisor returns as of May 12, 2025
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and eBay. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
Alibaba Shares Fall Despite Accelerating AI Growth. Is It Time to Buy the Dip? was originally published by The Motley Fool
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
7 minutes ago
- Yahoo
Dollar General Stock Just Popped, but Is the Worst Really Behind It?
Dollar General is starting to benefit from more affluent customers trading down on their shopping choices. However, its core customer base remains under pressure. The stock, meanwhile, is no longer in the bargain bin after a strong rally. 10 stocks we like better than Dollar General › Dollar General (NYSE: DG) has struggled in recent years, as inflationary pressures hurt its lower-income consumer base. However, the stock staged a strong rally following its fiscal first-quarter earnings report. As of this writing, it is up 50% in 2025. Let's take a closer look at its most recent earnings report and commentary to see whether this rally is sustainable or if the worst is not really behind it just yet. On the surface, tariffs would seem to be a big negative for a company like Dollar General. After all, the retailer's core customer base was already feeling pressure from higher prices due to inflation, and it looked like it was losing share to big-box price leader Walmart (NYSE: WMT). However, the company has begun to see more higher-income consumers frequent its stores in search of value. The retailer said it plans to minimize the impact of tariffs on its gross margins as much as possible without raising prices, although it could increase prices as a last resort. It plans to do this by working with vendors to cut costs, moving some manufacturing to other countries, and tweaking its product lineup by making changes or swapping out certain items. It noted that a mid- to high-single-digit percentage of its overall purchases are directly imported from China, but about double that percentage comes indirectly from the country. The inroads with higher-income consumers contributed to a 2.4% increase in same-store sales in the quarter. While traffic fell by 0.3%, its average checkout ticket rose by 2.7%. Growth came from gains in the food, seasonal, and home & apparel categories. Same-store sales is a very important metric for Dollar General, as it has said in the past that it needs to grow its comparable-store sales by around 3% for it to leverage its expenses and grow its earnings. However, the composition matters, and growth from high-margin areas, such as seasonal items, helped power its earnings higher. This appears to be largely a reflection of higher-income consumers shopping at its locations, as well as its efforts to improve the customer experience and offer better merchandising in categories such as seasonal decor and home items. The company also said that its newer pOpshelf store concept -- which is meant to provide a fun and affordable shopping experience with a focus on home goods, seasonal decor, and party supplies -- performed well, exceeding expectations. Overall, Dollar General's revenue rose 5% year over year to $10.4 billion, while its earnings per share (EPS) jumped 8% to $1.78. That was well ahead of the analyst consensus of $10.3 billion in revenue and adjusted EPS of $1.48. Gross margin increased 78 basis points to 31%, helped by lower shrink and higher inventory markups. Shrink is the amount of merchandise that gets lost, damaged, spoiled, stolen, or just generally can't be sold, and the company has been working hard to improve this metric. Looking ahead, Dollar General raised its full-year guidance. It now expects revenue to grow between 3.7% and 4.7%, with same-store sales increasing between 1.5% and 2.5%. That's up from a prior outlook of revenue growth of 3.4% to 4.4% on comparable-store growth of 1.2% to 2.2%. Meanwhile, it raised the low end of its full-year EPS guidance to a range of $5.20 to $5.80, up from a previous forecast of between $5.10 and $5.80. It said that the guidance assumes that current tariff rates remain in place. Metric Prior Guidance Current Guidance Revenue growth 3.4% to 4.4% 3.7% and 4.7% Same-store sales growth 1.2% to 2.2% 1.5% and 2.5% Earnings per share $5.10 to $5.80 $5.20 to $5.80 Source: Dollar General. The company is also looking to add 575 new store openings in the U.S. this year and up to 15 in Mexico. Dollar General appears to be benefiting from the trade-down effect this year. This is something Walmart has been experiencing for a while, but something dollar stores like Dollar General had previously been missing out on. It was only last year that these companies were talking about how the current environment was one of the most difficult periods in their histories. And for dollar stores' core customer bases, things may actually be worse now with tariffs than they were last year. As such, whether Dollar General can continue to turn the corner likely depends largely on whether it can keep the higher-income customers that have begun to visit its stores and continue to attract new ones. Right now, the company is seeing these new customers visit more often and spend more money per visit. Its remodeling efforts, along with initiatives like its mobile app and own same-day delivery service and partnership with DoorDash, are also likely helping attract more affluent consumers. From a valuation perspective, the retailer now trades at a forward price-to-earnings (P/E) ratio of 20 based on analyst estimates for fiscal year 2025 (ending January 2026). That valuation shows the stock is no longer in the bargain bin. While Dollar General has made a lot of progress -- with its core consumer still very stressed -- I don't want to chase this rally at its current valuation. Before you buy stock in Dollar General, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Dollar General wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $674,395!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $858,011!* Now, it's worth noting Stock Advisor's total average return is 997% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash and Walmart. The Motley Fool has a disclosure policy. Dollar General Stock Just Popped, but Is the Worst Really Behind It? was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
18 minutes ago
- Yahoo
Ryan Specialty Reaches Agreement to Acquire J.M. Wilson
Ryan Specialty Holdings, Inc. (NYSE:RYAN) announced that it has entered into a definitive agreement to acquire J.M. Wilson Corporation. Headquartered in Michigan, JM Wilson will be integrated into RT Binding Authority, Ryan Specialty's division focused on binding authority solutions. JM Wilson, established in 1920, operates out of six offices across the US and offers a wide range of insurance products, from personal lines to surety. The firm is especially recognized for its strong expertise in transportation insurance, a complex segment where it has built a reputation for underwriting profitability and maintaining long-term partnerships with top-tier carriers. Commenting on this acquisition, Ed McCormack, CEO of RT Specialty, made the following comment: 'JM Wilson is very well respected in the industry, with its strong underwriting track record and client-focused approach. We are delighted to be able to add such high-quality talent to our organization. This team fills a critical need for RT Specialty, giving us a more robust Midwest binding authority presence and strengthening our transportation practice.' Ryan Specialty Holdings, Inc. (NYSE:RYAN) offers specialized products and services to insurance brokers, agents, and carriers. The company operates as both a wholesale broker and a managing underwriter with delegated authority, delivering solutions that include distribution, underwriting, product development, administration, and risk management. While we acknowledge the potential of RYAN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: and Disclosure. None. Sign in to access your portfolio
Yahoo
28 minutes ago
- Yahoo
Stablecoin Issuer Circle Surges 168% in NYSE Debut After IPO Tops Price Expectations
Shares of Circle Internet Group (NYSE:CRCL) jumped 168% on Thursday following its initial public offering, which raised nearly $1.1 billion for the stablecoin firm and its selling shareholders. The stock debuted at $69 on the New York Stock Exchange, well above its IPO price of $31, and at one point hit a high of $103.75. Circle Internet Group (NYSE:CRCL) set its IPO price late Wednesday, significantly above both the revised $27–$28 range earlier in the week and the initial $24–$26 estimate from last week, giving the company a valuation of around $6.8 billion before trading began. By the end of the day, trading volume hit approximately 46 million shares, well above the number of publicly available shares. CEO Jeremy Allaire made the following statement on CNBC's 'Money Movers' on Thursday: 'To realize our vision, we needed to forge relationships with governments, we needed to work with policymakers … because if you want this to work for mainstream, it's got to work in mainstream society and you need to have those rules of the road. We've been one of the most licensed, regulated, compliant, transparent companies in the entire history of this industry, and that's served us well.' Allaire co-founded Circle Internet Group (NYSE:CRCL) in 2013. Originally headquartered in Boston, the company began with a focus on consumer payment solutions, along with crypto wallet and exchange services. In 2015, it became the first company to secure the notoriously hard-to-get BitLicense from New York State. Earlier this year, Circle relocated its headquarters to New York. While we acknowledge the potential of CRCL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: and Disclosure. None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
