Is Alibaba's China E-Commerce Growth Durable Amid Margin Pressure?

Alibaba’s BABA China E-commerce Group is regaining momentum, posting 10% year-over-year growth in the June quarter, driven by improved take rates on software services and higher user engagement. Taobao Instant Commerce emerged as a key growth engine, generating over 40 million daily orders, while the Taobao app recorded 25% growth in monthly active users, signaling renewed traction in core commerce.

This momentum is led by strategic restructuring and innovation. Alibaba consolidated its consumer platforms under the China E-commerce Group to enhance cross-platform synergies and monetization. Investments in quick commerce and instant commerce are translating engagement into transactions, while merchant tools and ecosystem services are boosting revenue per user. According to Mordor Intelligence, China’s e-commerce market is projected to witness a compound annual growth rate of 10.42% through fiscal 2030, reaching $2.52 trillion, providing Alibaba with a massive runway for growth.

However, sustaining this momentum comes with challenges. The company’s core e-commerce business, which contributes over 50% of revenues, faces profit pressure as Alibaba invests aggressively in instant commerce to counter rivals like JD and Meituan. Prioritizing market share over profitability in quick delivery signals a defensive strategy. Adding to the challenge are aggressive price wars and an increasingly complex Chinese regulatory environment, all of which strain margins and limit near-term earnings potential.

To maintain its growth trajectory, Alibaba needs to convert MAU growth into recurring spend, increase adoption rates without hurting conversions and optimize logistics economics. Execution on these fronts, along with cross-selling financial and local services, could deliver consistent, margin-accretive growth.

BABA Faces Stiff Competition in the E-commerce Business

JD.com JD sets itself apart from Alibaba with a vertically integrated model resembling Amazon, operating its own warehouses, logistics and delivery network. This control allows JD.com to ensure faster, more reliable shipping and stronger product authenticity than its rivals, which rely on third parties. Known for authentic products, strong customer service and AI-driven personalization, JD.com has built a reputation for quality and efficiency. Its expansion into lower-tier markets further strengthens JD.com’s competitive position in China’s e-commerce race.

PDD Holdings PDD has surged ahead of Alibaba by leveraging its Pinduoduo and Temu platforms with ultra-low pricing and innovative social shopping models. PDD Holdings benefits from an asset-light structure that drives superior margins and rapid scalability. Its Temu-led global expansion, particularly in the United States and Europe, has fueled faster revenue growth. By focusing aggressively on cross-border e-commerce, PDD Holdings has become Alibaba’s most formidable challenger at home and abroad.

BABA’s Share Price Performance, Valuation & Estimates

BABA shares have surged 66.5% in the year-to-date period, outperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s growth of 12.4% and 9.4%, respectively.

BABA’s YTD Price Performance

From a valuation standpoint, BABA stock is currently trading at a forward 12-month Price/Earnings ratio of 15.25X compared with the industry’s 24.72X. BABA has a Value Score of D.

BABA’s Valuation

The Zacks Consensus Estimate for the full-year fiscal 2026 earnings is pegged at $8.09 per share, down 5.7% over the last 30 days, indicating a 10.21% year-over-year decline.

Alibaba currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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