Alibaba Gr Hldgs (NYSE:BABA) reported fourth-quarter financial results on Wednesday. The transcript from the company’s fourth-quarter earnings call has been provided below.
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The full earnings call is available at https://edge.media-server.com/mmc/p/npqai6e2/
Watch the full earnings call below:
Summary
Alibaba Group Holding Ltd reported a 11% year-over-year revenue growth for the quarter, with Cloud Intelligence Group’s external revenue accelerating by 40% and AI-related product revenue achieving triple-digit growth for the 11th consecutive quarter.
The company highlighted substantial investments in AI and cloud infrastructure, aiming to make AI-related product revenue the primary growth engine for the cloud business, with expectations for AI product revenue to surpass 50% of cloud revenue within a year.
Total adjusted EBITDA decreased by 84% due to strategic investments, while GAAP net income increased by 96% year-over-year, driven by gains from equity investments.
The Quick Commerce segment showed significant improvements in unit economics and maintained stable market share, expecting positive UE by fiscal year 2027.
Management discussed strategic priorities focused on AI commercialization, cloud infrastructure, and consumption businesses, with expectations for significant long-term growth and improved margins.
Full Transcript
OPERATOR
Good day ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group’s March quarter and full fiscal year 2026 results conference call. At this time all participants are in listen only mode. After management’s prepared remarks, there will be a Q&A session. I would now like to turn the call over to Lydia Liu, Head of Investor Relations of Alibaba. Please go ahead. Good day everyone. Thank you for joining Alibaba Group’s March quarter and full fiscal year 2026 earnings call. On the call with me are Joe Cai, Chairman Eddie Wu, Chief Executive Officer Toby Xu, Chief Financial Officer Jiang Fan, Chief Executive Officer of Alibaba E-Commerce Business Group. As a reminder, this call is being webcast live. A replay of the call will be available on our website later today. On this call we may make forward looking statements and discuss certain non Generally Accepted Accounting Principles (GAAP) financial measures. The forward looking statements reflect management’s current expectations that are subject to risks and uncertainties. Our Generally Accepted Accounting Principles (GAAP) results and reconciliations of Generally Accepted Accounting Principles (GAAP) to non Generally Accepted Accounting Principles (GAAP) measures is included in today’s earnings press release and investor presentation. Our comments will be on year over year comparisons unless we state otherwise. And with that, let me turn the call over to Eddie.
Eddie Wu (Chief Executive Officer)
Welcome to Alibaba Group’s fiscal year 2026 fourth quarter earnings call. Over the past quarter, Alibaba’s high intensity investment in our two strategic priorities of AI Cloud and consumption is rapidly translating into tangible business results. With group revenue growing 11% year over year this quarter, Cloud Intelligence Group’s external revenue growth accelerated to 40% and AI-related product revenue achieved triple digit growth for the 11th consecutive quarter, China E-Commerce Customer Management Revenue (CMR) grew 8% year over year on a like for like basis and the quick commerce market achieved significant unit economics improvement while maintaining market share. We are at a pivotal inflection point in the evolution from Conversational Chatbots to autonomous AI agents, which is directly driving explosive growth across three core workload categories, training, inference and agent orchestration. Against this backdrop, Alibaba’s AI’s moved beyond the initial investment phase and progressed commercialization at scale. Next, let me walk you through four areas in detail, AI commercialization, cloud infrastructure, the AI application ecosystem and our consumption business. First, the AI and cloud commercialization inflection point has arrived. This quarter, Cloud Intelligence Group’s annualized AI-related product revenue has surpassed 35.8 billion RMB. Continuing to maintain triple digit growth, AI-related product revenue now accounts for 30% of cloud intelligence Group’s external revenue. We expect that in about one year, AI-related product revenue will cross the 50% threshold, becoming the primary engine driving the cloud business’s revenue growth. As a result, Cloud Intelligence Group’s external revenue growth is expected to continue accelerating beyond its current 40% rate over the coming quarters. Given the certainty of long term AI demand and our full stack technology advantages, we expect this trajectory to sustain strong growth over the medium to long term. This reflects AI’s role in driving a comprehensive upgrade of Alibaba Cloud’s entire business. As its growth engine fully pivots from traditional compute and storage to models, AI Compute and agent services, we’re also seeing exponential growth in AI model and application services revenue. A new revenue engine driven jointly by foundation model services and AI-native software. Over the past three months, Token Consumption volumes on our model services platform grew substantially quarter over quarter as enterprise customers accelerated their shift from simple tasks to production scale and complex workloads, driving continued growth and demand for model and application services. On the Model Studio platform, we expect model and application services annualized recurring revenue Annualized Recurring Revenue (ARR) inclusive of the Model Studio platform to to surpass 10 billion RMB in the June quarter and 30 billion RMB by year end. The higher margin profile of this revenue stream is becoming increasingly apparent, making it a source of healthy high quality growth. Second, our AI infrastructure underpins our full technology stack and constitutes a durable moat. T Head’s proprietary GPU chips have achieved scaled mass production with over 60% of compute capacity already serving external customers across Internet financial services and autonomous driving verticals. As the only AI Cloud provider in China capable of delivering self developed AI chips at scale, we’ve secured autonomy over our compute supply chain while providing customers with highly competitive AI inference and training services. In an environment of compute scarcity, this structural advantage is favorable to our revenue growth and gross margin improvement. At the same time, our cloud products are accelerating their AI-oriented upgrade. The surge in agent workloads has significantly elevated demand for traditional cloud products built around CPU storage and containers, and we’re upgrading these into infrastructure solutions optimized for the agent era. Third, at the application layer, we’ve built a complete closed loop spanning AI-native software to a full agent ecosystem. Alibaba Token Hub ATH continues to launch new products connecting consumer and enterprise environments with breakthrough progress in AI-native software and coding agents. The Q1 model continues to iterate across reasoning, coding and agentic capabilities. On the enterprise side, we’ve launched a range of products spanning intelligent workplace tools, AI coding and business operations management, helping enterprises unlock greater productivity. On the consumer side, the Kuwin app, fully integrated Taobao and Tmall’s commerce service capabilities on May 7 with this Kuwan app is now deeply embedded across the ecosystem spanning Taobao, Alipay, Amap and Fliggy, making it China’s first all in one personal assistant to seamlessly bridge everyday life, productivity and learning. Fourth, across our consumption business and at the group level, we’re prioritizing long term value beyond AI Our consumption strategy continues to progress steadily with Customer Management Revenue (CMR) growth rebounding significantly this quarter. Customer Management Revenue (CMR) grew 8% year over year on a like for like basis as we continue to improve user experience and merchant operating efficiency. The quick commerce business achieved significant unit economics improvement while maintaining stable market share market scale. In summary, the return on our investments in AI, cloud and consumption are increasingly clear. AI plus Cloud revenue growth is accelerating with improving margins model and application services. Annualized Recurring Revenue (ARR) continues to grow at pace and operating efficiency across our consumption business continues to improve. Facing the historical opportunity that AI represents, Alibaba is at a pivotal juncture where our technology investments are beginning to pay off commercially. We’ll maintain our strategic resolve and leverage our full stack AI capabilities to support long term growth. That concludes my prepared remarks. Next, I’ll hand over to Toby to walk you through our financial results. Thank you.
Toby Xu (Chief Financial Officer)
Thank you Eddie. Our strategic priorities remain laser focused on AI cloud and consumption businesses. Multiple growth catalysts including technological advancement and business innovation are aligning to create strong tailwinds on AI cloud. Our full stack capabilities span models, cloud infrastructure and applications with established leadership in every layer. The strong growth of our AI cloud businesses and the clear path to monetization of our Model as a Service (MaaS) platform give us confidence to make significant investments to extend our leadership on consumption. We achieved a strong CMR growth on a like for like basis during the quarter and our quick commerce business continued to improve User Experience (UE) and Average Order Value (AOV) quarter over quarter. Now let’s look at the financial results for this quarter on a consolidated basis. Total revenue was Renminbi (RMB) 243.4 billion excluding revenue from Sun Art and Intime revenue on like for like basis would have grown by 11%. Total adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) decreased 84% primarily due to our strategic investments in technology businesses, quick commerce and user experience partly offset by the improved operating results supported by continued growth in consumer management service in the cloud business and enhanced operating efficiencies across various businesses. Our GAAP net income was Renminbi (RMB) 23.5 billion, an increase of 96% primarily attributable to the year over year increase in net gain from mark to mark changes of our equity investments and disposal losses of sundown and Intime. In the same quarter last year, partly offset by the decrease in adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Operating cash flow was an inflow of Renminbi (RMB) 9.4 billion. Free cash flow was an outflow of Renminbi (RMB) 17.3 billion. We are reinvesting our operating cash flow to enhance our competitive advantage in AI. As of March 31, 2026, we held approximately US$38 Billion in net cash excluding debt with maturities beyond five years, our net cash position stands at approximately 59 billion. This balance sheet strength gives us confidence to invest for growth. Now let’s look at our consumption businesses. Revenue from China E Commerce group was Renminbi (RMB)122 billion, an increase of 6%. Customer management revenue increased by 1%. To help merchants grow their businesses and increase willingness to spend our platform, we upgraded our business development program for select merchants during the quarter under which the level of platform subsidies for these merchants is directly tied to their marketing spend on our platform for accounting purpose. Such subsidies, previously recorded as sales and marketing expenses are now recorded as a contract revenue item to CMR. Accordingly, CMR grow 1% year over year during the quarter excluding the contract revenue impact from the program on a like for like basis, CMR would have grown 8% year over year. Revenue from our quick commerce business increased 57% to Renminbi (RMB) 20 billion. The quick commerce business further improved User Experience (UE) and increased the Average Order Value (AOV) quarter over quarter primarily driven by order mix optimization. Alibaba China E Commerce Group adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was on the 24 billion, a decrease of 40% primarily due to the investment in quick commerce user experience and technology. While there’s positive contribution from customer management service excluding loss from our quick commerce …
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