Shares of Alibaba slid 3.7% to $140.46 on May 14, as traders locked in gains from the prior session's 8.18% surge. BABA had closed at $145.81 on Wednesday, up more than 8% , fueled by a twin catalyst: Beijing pressing the U.S. to ease restrictions on advanced semiconductor exports at the Trump-Xi summit, and investor enthusiasm for Alibaba's cloud-AI pivot despite dismal headline earnings. The pullback, while the S&P 500 and Nasdaq edged up roughly 0.4%, signals that the market is still weighing whether Alibaba's massive spending spree will ever translate into real profits.
• Profit Collapsed, But Investors Cheered Anyway
The company reported a significant drop in non-GAAP net profit, down 99.7% to 86 million yuan, falling short of expectations.
Adjusted EBITA came in at 5.1 billion yuan ($750.9 million), an 84% year-on-year drop. Yet the stock rallied because after falling 4% in pre-market, it rallied after the open as executives defended the company's investments, telling analysts they will eventually pay off. Shareholders are essentially accepting near-zero earnings today on a promise of future returns — a risky bet if execution stumbles.
• Cloud and AI Are Now the Whole Story
The Cloud Intelligence segment posted revenue of 41.63 billion yuan ($6.04 billion), up 38% year-over-year, with adjusted EBITA expanding 57%.
AI-related product revenue reached 8.97 billion yuan, extending triple-digit growth to 11 consecutive quarters and representing 30% of cloud external revenue. This is why the market is repricing BABA: the cloud unit is profitable and accelerating. But it still can't offset the losses elsewhere.
• The $53 Billion Spending Plan Leaves Little Margin for Error
Alibaba reaffirmed its 380 billion yuan ($53 billion) AI spending plan through 2027.
CEO Eddie Wu said his company is prioritizing AI growth over the bottom line — meaning it's likely to spend "far, far" more than previously targeted. The company holds approximately $38 billion in net cash , a cushion — but one that could thin quickly if returns lag.
• The Summit Helped, But Geopolitics Remains a Wildcard
Beijing is pressing the U.S. to roll back measures limiting China's access to critical chip-making technology.
China is actively urging its tech firms to cut reliance on Nvidia , which benefits Alibaba's own chip efforts. But whether the gap between current price and analyst targets closes depends on limited geopolitical disruption around AI chip export controls.
14 analysts maintain a "Strong Buy" consensus with an average price target of $185.86, forecasting a 27.5% upside. The question is binary: if cloud-AI revenue keeps compounding at this pace, today's price looks cheap. If spending burns cash without proportional returns, the stock's premium over its five-year average valuation — a trailing P/E of 25.5x versus a 5-year median of 21x — starts to look fragile.