Alibaba Shares Drop After Weak Q3 Earnings
Alibaba shares declined sharply in Hong Kong trading on Friday after the company reported weaker-than-expected results for the December quarter.
Both revenue and profit figures missed market forecasts, overshadowing progress in the company’s artificial intelligence (AI) initiatives and dampening overall investor sentiment.
Stock Falls as Earnings Miss Expectations
Alibaba (HK:9988) stock dropped more than 5%, hitting an intraday low of HK$124.30—its weakest level since August 2025. The shares later recovered slightly, trading around HK$126.30.
The decline made Alibaba the biggest drag on the Hang Seng Index, which fell 0.6% during the session.
Profit Slumps Amid Rising Costs
Alibaba’s net income plunged 66.3% in the December quarter, mainly due to increased spending on e-commerce promotions and continued heavy investment in AI.
Higher operational costs significantly pressured margins, raising concerns among investors about the company’s near-term profitability.
Strong Cloud Growth Driven by AI Demand
Despite weak overall earnings, Alibaba’s cloud division delivered strong performance. Cloud revenue jumped 36%, exceeding expectations, as demand for computing power surged.
The growth was also supported by the integration of AI technologies into several of Alibaba’s consumer-facing platforms.
Alibaba Expands AI Strategy with New Division
Earlier this week, Alibaba announced plans to separate its AI business from its cloud computing unit. The newly formed AI division will be led by CEO Eddie Wu, signaling a stronger focus on artificial intelligence.
The company has already invested tens of billions of dollars into AI development and actively promoted its Qwen AI chatbot during the Lunar New Year period.
Rising AI Costs Weigh on Margins Across Tech Sector
While AI remains a key growth driver, the associated costs have significantly impacted Alibaba’s margins over the past year.
Other Chinese tech giants, including Tencent Holdings and Baidu, also saw their shares decline, as heavy AI-related spending continues to pressure profitability across the sector.
Tencent shares, in particular, came under pressure earlier in the week after the company indicated it would reduce share buybacks to fund its AI expansion plans.
