Alibaba reports June-quarter results on Thursday with investors looking to its cloud business to end a four-quarter run of earnings disappointments.
The company will release results before the US market opens, followed by a conference call at 7:30 a.m. ET.
Alibaba enters the print with renewed enthusiasm around Qwen and cloud computing, but a tougher test: whether rapid AI growth is becoming profitable enough to offset weaker Chinese consumption and heavy investment.
UBS and Jefferies expect group revenue growth of about 9%, up from 3% in the previous quarter, while UBS sees cloud revenue rising roughly 45%.
Alibaba Cloud has become the number Wall Street cares about most
Cloud is now the clearest measure of whether Alibaba’s AI strategy is translating into commercial demand.
At the previous update, external cloud revenue growth accelerated to 40%, while AI-related product revenue posted triple-digit growth for an 11th consecutive quarter. That has raised expectations.
UBS analysts led by Kenneth Fong said investors were likely to “refocus on its valuable AI assets and AI growth angle,” according to the South China Morning Post.
UBS expects cloud revenue growth of about 45% and annual recurring revenue from AI model services of roughly 10 billion yuan.
Morgan Stanley analyst Gary Yu is bullish. TipRanks reported that Yu expects cloud growth of about 45% year on year, ahead of market expectations, with margins improving towards 11%.
Strong AI growth still has to overcome weak consumption
However, Cloud remains smaller than Alibaba’s commerce operations, leaving the company exposed to China’s subdued consumer backdrop.
JD.com offered a reminder when its quarterly revenue fell 2.9% year on year, its first decline in more than a decade, despite beating analyst expectations.
Yu has flagged pressure in Alibaba’s core e-commerce business from soft consumption.
Citi analyst Alicia Yap expects weaker customer-management revenue after subdued retail sales and the 6.18 shopping festival.
Yap expects cloud revenue to grow about 45%, with cloud margins reaching roughly 11.5%. She also sees smaller quick-commerce losses and stronger cloud profitability helping offset weaker retail trends.
That is the earnings tension investors must resolve. Cloud is growing far faster than commerce, but commerce remains larger.
Alibaba therefore needs AI growth to become visible in group profits, not simply in headline growth percentages.
After four EPS misses, quality matters more than the beat
Alibaba has missed EPS expectations in four consecutive quarters, making another respectable report unlikely to reset sentiment on its own.
Investors will be watching three areas: whether cloud growth reaches the roughly 45% level expected by major brokers, whether cloud margins improve as AI demand scales, and whether quick-commerce losses continue narrowing.
Barclays has positioned for upside. The bank recommended call spreads ahead of earnings, citing accelerating cloud growth, AI recurring revenue exceeding targets, faster improvement in quick-commerce losses and stabilising core-commerce profitability.
The options market was pricing an earnings move of about 6%, below Alibaba’s six-quarter average realised move of 7.6%.
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