Alibaba Cloud's Rapid Rise: Is AI Setting Up More Upside Ahead?

Alibaba’s BABA Cloud Intelligence Group is gaining strong momentum as its core unit, Alibaba Cloud, continues to scale with rising AI adoption, an area that is expected to remain a key driver of accelerated revenue growth. BABA’s AI products are seeing broader adoption across a wide range of industry verticals, including Internet, retail, manufacturing and media, with a growing focus on value-added applications.

Building on this momentum, Alibaba expects demand to accelerate in the coming quarters. The company highlighted that many businesses are moving away from traditional, in-house infrastructure and shifting AI workloads to the cloud. To meet this shift, the company is increasing investments in AI products and services, to increase cloud adoption for AI and maintain its market leadership.

This focus is already showing through in product innovation and global expansion. In April, Alibaba released its Qwen3 model series, an open-source family of AI models built for tasks like coding and general reasoning. Globally, Alibaba Cloud is expanding its footprint with a second data center set to launch in South Korea by the end of June. New partnerships with SAP and Panasonic further integrate Alibaba’s AI tools into enterprise operations and connected home ecosystems.

In the fourth quarter of fiscal 2025, Alibaba’s Cloud Intelligence Group generated RMB 30.1 billion ($4.15 billion) in revenues, up 18% year over year, contributing around 12.7% of total revenues. This was driven by the increasing adoption of AI-related products. With AI-related product revenues growing at triple digits for seven straight quarters, Alibaba Cloud is fast becoming the foundation of the company’s AI-driven future.

BABA Faces Stiff Competition in the AI-Driven Cloud Race

Several players are competing with Alibaba Cloud in AI-powered cloud services, with Amazon AMZN and Microsoft MSFT expanding rapidly.

Amazon recently added Claude 4 to Amazon Bedrock, strengthening its generative AI lineup and simplifying enterprise AI development. Bedrock remains a core part of Amazon’s AWS’ strategy to drive AI adoption.

Microsoft is advancing through its Azure AI Essentials program, launched under its AI Center of Excellence. This initiative by Microsoft offers tools and guidance to help businesses scale AI responsibly.

BABA’s Share Price Performance, Valuation and Estimates

BABA shares have gained 34.3% in the year-to-date (YTD) period, outperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s growth of 4.2% and 2.8%, respectively.

BABA’s YTD Price Performance

From a valuation standpoint, BABA stock is currently trading at a forward 12-month Price/Earnings ratio of 10.37X compared with the industry’s 24.39X. BABA has a Value Score of B.

BABA Valuation

The Zacks Consensus Estimate for first-quarter fiscal 2026 earnings is pegged at $2.48 per share, which has remained steady over the past 30 days, indicating 9.73% year-over-year growth.

Alibaba Group Holding Limited Price and Consensus

Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote

The consensus mark for fiscal 2026 earnings is pegged at $10.62 per share, which has remained steady over the past 30 days. The estimate indicates 17.87% year-over-year growth.

Alibaba currently carries a Zacks Rank #4 (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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