Alibaba Shares Jump on AI Gains as Momentum Continues. Is It Too Late to Buy the Stock?

Core Viewpoint - Alibaba's fiscal third-quarter results indicate a rebound in its e-commerce business and strong growth in artificial intelligence, leading to a significant stock rally [1][2]. E-commerce Business - Alibaba's e-commerce segment, including Tmall and Taobao, remains its largest business, experiencing a solid 5% growth in the fiscal third quarter to $18.6 billion, with a notable 9% growth in its third-party business [3][5]. - The growth in e-commerce is attributed to higher gross merchandise value (GMV) and a high take rate [5]. - The company reported double-digit growth in its 88VIP premium memberships, reaching 49 million by the end of the quarter [6]. Cloud Computing and AI - The cloud intelligence group saw a revenue increase of 13% to $4.3 billion, with AI-related revenue growing by triple digits for the sixth consecutive quarter [7]. - Adjusted EBITA for the cloud segment rose 33% to $430 million, with the company highlighting its foundational AI model Qwen 2.5-Max [7]. - Alibaba plans to invest aggressively in AI infrastructure over the next three years, aiming for artificial general intelligence (AGI) [8]. Financial Performance - Overall revenue increased by 8% to $38.4 billion, with adjusted earnings per American depositary share climbing 13% to $2.93 [9]. - Free cash flow was reported at $5.3 billion, and the company ended the quarter with $54.8 billion in cash and short-term investments [10]. Market Position and Valuation - Alibaba's stock is considered undervalued, trading at a forward price-to-earnings ratio under 15 for fiscal 2026 estimates and a price/earnings-to-growth (PEG) ratio under 0.4 [14]. - The company is positioned as a leader in AI in China, recently securing a deal with Apple for AI services [12][13]. - The Chinese government's support for tech companies in the AI sector is seen as beneficial for Alibaba's growth prospects [13].