Alibaba’s stock has experienced a pullback despite strong growth in its cloud and AI divisions, presenting a potential buying opportunity for investors focused on long-term innovation. Alibaba Cloud, a key growth driver, recently posted 34% year-over-year revenue growth, with external customer revenue increasing 29%. The company’s AI-related revenue is expanding at a triple-digit rate and already accounts for over 20% of its external customer revenue, indicating Alibaba’s strategic shift toward advanced technology services. This growth positions Alibaba well as a core player in China’s cloud and AI markets, supported by its AI model Qwen and extensive data center infrastructure.
Additionally, Alibaba’s quick commerce business is improving its unit economics, enhancing profitability and positioning Alibaba to expand market share in fast-growing segments. These trends reflect Alibaba’s broader strategy of focusing on higher-value services and technologically advanced offerings, which could generate sustainable revenue growth over time.
While Alibaba currently trades like a mature platform with valuation multiples around 17 to 21 times earnings, analysts highlight that this does not fully reflect the company’s substantial AI and cloud growth potential. Leading brokerage firms such as Morgan Stanley and Jefferies have maintained Buy or Overweight ratings on Alibaba’s stock, citing the resilience and strong growth outlook of its cloud and AI businesses. This suggests that despite near-term earnings pressure, Alibaba’s investments in AI and cloud computing may reward investors in the medium to long term.
