There’s growing pressure for artificial intelligence (AI) companies to deliver strong results. As investments into AI are rising, so too are expectations for there to be a payoff. While there have been reports of AI-related job losses and companies touting their newfound efficiencies, investors remain skeptical, and that is evident with many AI stocks incurring steep losses this year.
One promising AI stock that recently posted underwhelming earnings numbers is Chinese company Alibaba Group Holdings (NYSE: BABA). While the business is growing, it may not be enough to convince investors that its stock is worth buying. Entering trading this week, the tech stock has fallen by 17% since the start of the year.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
Here’s how it did in its most recent quarterly results, and whether it may be worth buying on the dip.
For the last three months of 2025, Alibaba’s revenue totaled 284.8 billion Chinese yuan ($41.3 billion), which was lower than analyst projections of 290.7 billion Chinese yuan ($42.2 billion). On a year-over-year basis, the company’s top line rose by a relatively modest rate of around 2%. Meanwhile, on the bottom line, its net income fell by 66%, to 15.6 billion Chinese yuan ($2.3 billion), as the company invested heavily into user experiences and technology. Its sales and marketing expenses rose by 69%.
Despite the seemingly underwhelming results, Alibaba continues to say “AI is and will continue to be one of our primary growth engines.” The company said that for a tenth consecutive quarter, revenue related to its AI products generated triple-digit growth. Its Qwen app, which is a rival to ChatGPT, has also surpassed 300 million monthly active users.
Although Alibaba is investing heavily in AI, there are a couple of things that raise flags that investors shouldn’t overlook. The first is that if the company’s AI-related product revenue continues to generate triple-digit growth, this must still be fairly small in the grand scheme of things, given its underwhelming top line; Alibaba doesn’t even separate AI revenue when breaking out its quarterly results. Secondly, the company’s steep drop in earnings is particularly concerning since it was largely due to worsening operational results, with sales and marketing expenses rising at a significant pace.
