Alibaba has staged a powerful stock rally in 2025, with shares soaring nearly 90% year-to-date. The surge is driven by two engines: a recovery in its core e-commerce and cloud businesses, and breakthroughs in artificial intelligence (AI) that are reshaping the company’s valuation model.
Earnings Recovery and Core Business Revival
In Q3 FY2025, Alibaba reported revenue of 280.15B RMB (+8% YoY) and net income of 48.9B RMB (+239% YoY).
- E-commerce: Taotian Group achieved revenue of 136.1B RMB (+5.4% YoY), with its 88VIP membership base reaching 49M users.
- International Business: Revenue grew 32% YoY to 37.8B RMB, driven by cross-border trade and expansion in Europe and emerging markets.
- Alibaba Cloud: Returned to double-digit growth with revenue of 31.7B RMB (+13% YoY), fueled by AI-driven demand.
AI Breakthroughs Reshape Valuation
Alibaba is investing over 380B RMB ($52B) in AI and cloud infrastructure in the next three years. Key developments:
- Launch of Qwen2.5-Max, a flagship MoE-based large model, with 90,000+ derivatives on HuggingFace.
- Introduction of Qwen2.5-VL multimodal model, strengthening its AI ecosystem.
- A domestically produced AI chip entered testing in August 2025, designed for inference tasks and compatible with Nvidia’s ecosystem, reducing reliance on foreign supply chains.
Investor Outlook and Risks
Analyst Upgrades: Goldman Sachs raised its target to $160 USD, Citi to $170 USD, and Benchmark to $190 USD, all with Buy ratings.
Opportunities: AI-driven cloud growth, international expansion, strong cash reserves.
Risks: Domestic consumption slowdown, intense competition from Pinduoduo and ByteDance, and uncertainty around AI commercialization timelines.
Conclusion
Alibaba’s transformation is underway—from an e-commerce giant to an AI-powered technology leader. With its dual engines of earnings recovery and AI innovation, Alibaba’s long-term investment case remains strong, despite short-term risks.
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