Alibaba in 2025: Three Shifts That Investors Should Know Before Entering 2026

2025 marked an inflection year for Alibaba Group (NYSE: BABA). After several years defined by regulatory pressure, slowing growth, and investor skepticism, the company didn't suddenly return to its former dominance. But it did change direction in ways that matter for long-term investors.

Instead of chasing short-term optics, Alibaba clarified its priorities. It leaned into cloud and artificial intelligence, stabilized its core e-commerce business, and began repositioning itself from a pure commerce giant into a broader technology and AI platform.

Three shifts stand out.

Image source: Getty Images.

Cloud and AI emerged as Alibaba's primary growth engine

The most important development in 2025 was the acceleration of Alibaba Cloud, driven overwhelmingly by AI demand.

In the September 2025 quarter, Alibaba reported cloud revenue growth of 34% year over year, making it the company's fastest-growing major segment. Management also disclosed that AI-related cloud revenue continued to grow at triple-digit rates.

These numbers matter because they confirm something investors doubted for years: Alibaba's cloud business is no longer a scale story without monetization. AI workloads -- including model training, inference, and enterprise AI services -- require significantly more computing power than traditional cloud tasks. That dynamic drives higher spending per customer and improves the long-term quality of revenue.

Alibaba now operates as one of the core infrastructure providers supporting China's AI adoption. Enterprises across logistics, internet services, and industrial sectors increasingly rely on Alibaba Cloud to deploy and scale AI applications. With its integrated infrastructure comprising Qwen (Tongyi Qianwen) language models, cloud services, and AI development tools, Alibaba has built a cloud platform that increasingly resembles the roles Amazon's AWS and Microsoft's Azure play in Western markets, but is tailored to China's regulatory and enterprise environment.

For investors, 2025 changed how Alibaba Cloud fits into its long-term story. It moved from a supporting asset to the company's most credible long-term growth engine.

E-commerce stabilized, and that was enough

Alibaba's core China commerce business didn't reaccelerate in 2025 to its past trajectories, but it didn't need to. After years of concern that Taobao and Tmall were in structural decline, the business showed clear signs of stabilization.

In the half year ended Sept. 30, 2025, e-commerce customer management revenue returned to 10% growth, supported by improving user engagement and better retention. This performance is particularly satisfying considering that the giant continues to face intense competition from peers like Pinduoduo, JD.com, Douyin and Meituan.

This stabilization mattered more than headline growth rates. Investors stopped treating Alibaba's e-commerce business as a melting ice cube. Instead, they began viewing it as a mature, resilient foundation that could support investment in newer growth areas.

The bar for commerce in 2025 was simple: hold share, protect engagement, and avoid further erosion. Alibaba largely met that bar. While competitive pressure continues to weigh on margins, the commerce segment no longer dominates the risk narrative, giving management room to execute elsewhere.

Alibaba began redefining itself as a technology and AI platform

Perhaps the most underappreciated shift in 2025 was strategic rather than financial. Alibaba increasingly framed itself not just as an e-commerce leader, but as a cloud, AI, and enterprise technology platform.

This repositioning showed up across the organization. Alibaba highlighted AI-driven improvements across Taobao and Tmall and the use of AI across other businesses in logistics, enterprise software, etc. At the same time, the company emphasized its role as an infrastructure provider (primarily via its cloud and AI division) for enterprises building AI-powered workflows.

Don't get me wrong. Commerce still matters, but it no longer defines the entire strategic direction. Cloud and AI now sit at the center of Alibaba's long-term vision, with commerce acting as both a distribution channel and a data engine for its technology platform.

This identity shift matters because it expands Alibaba's opportunity set. A commerce-only Alibaba faces natural growth limits. A technology platform anchored in cloud and AI carries far more optionality over the next decade.

2025 didn't complete that transformation, but it made the direction unmistakably clear.

What does it mean for investors?

Alibaba still faces real challenges. Competition remains intense, margins face pressure, and investor sentiment toward Chinese tech can swing quickly. But 2025 delivered something investors hadn't seen in a while: coherence.

Cloud and AI now drive growth. E-commerce provides stability rather than anxiety. And management has articulated a clearer identity centered on technology and enterprise enablement.

For long-term investors, that combination matters more than short-term earnings volatility. Alibaba no longer looks like a company stuck between past success and future uncertainty. Instead, it looks like a company laying the groundwork for its next chapter.

2025 wasn't a comeback year. It was a reset year, and resets like this often mark the real beginning of a more durable recovery.

Lawrence Nga has positions in Alibaba Group and PDD Holdings. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool recommends Alibaba Group and JD.com and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.