Alibaba Has AI Written All Over It: Here’s Why Buying BABA Stock Makes Sense

Core Viewpoint - Alibaba's stock has significantly outperformed the market with a year-to-date gain of nearly 70%, reflecting a recovery in the company's standing with the Chinese government amid a focus on AI development [1][2]. Financial Performance - Alibaba reported mixed results for fiscal Q1 2026, with revenues increasing by 2% to $34.57 billion, but falling short of estimates. Adjusted for disposed businesses, revenue growth was 10% [4]. - Operating income decreased by 3% to $4.88 billion, while net income surged by 76% year-over-year to $6.01 billion, exceeding market expectations, largely due to gains from asset disposals and mark-to-market changes in equity investments [4]. - The company's instant commerce business is experiencing rapid growth, with monthly active users nearing 300 million [4]. AI and Cloud Business - The earnings report highlighted the importance of AI, with management emphasizing AI initiatives over other core businesses during discussions [6]. - The Cloud Intelligence Group, which encompasses Alibaba's cloud and AI operations, saw a 26% revenue increase in the June quarter, with AI-related revenue constituting 20% of revenues from external customers [7]. - The Cloud business has achieved triple-digit growth for eight consecutive quarters, indicating strong momentum in this segment [7].