Core Viewpoint - Alibaba reported its Q2 FY2026 earnings with revenue of 247.8 billion yuan, a 5% year-over-year increase, and a net profit of 20.6 billion yuan, down 53% year-over-year, primarily due to a decline in operating profit [1][2]. Financial Performance - Revenue for Q2 FY2026 was 247.8 billion yuan, with a 5% year-over-year growth. Excluding disposed businesses, the year-over-year growth would be 15% [1]. - Net profit was 20.6 billion yuan, reflecting a 53% decline year-over-year. Adjusted net profit was 10.4 billion yuan, down 72% year-over-year [1][2]. Cloud Business Outlook - The management expressed strong confidence in the growth potential of Alibaba Cloud, citing high demand for AI servers that exceeds supply. The backlog of orders continues to grow, indicating a sustained acceleration in future growth [3]. Instant Retail Business Developments - The company has focused on optimizing unit economics in its instant retail business, achieving significant progress. The average order value has increased, and logistics costs have decreased, leading to a reduction in losses per order by half compared to previous months [4][5]. - Instant retail has shown rapid growth, particularly in food and health categories, with a 30% increase in orders from brands like Hema and Cat Supermarket since August [5]. EBITDA and CMR Insights - The EBITDA for the September quarter is expected to be a peak due to prior investments. Future quarters may see reduced investments as operational efficiency improves [6]. - The core e-commerce business's customer management revenue (CMR) is influenced by payment fees and promotional costs, with expected slower growth in the next quarter due to the recent introduction of payment fees [6]. Capital Expenditure Plans - The company has a three-year capital expenditure plan of 380 billion yuan, with 120 billion yuan already invested in the past four quarters. Management may increase investments if demand continues to outpace supply [8][9]. - The return on investment for capital expenditures remains uncertain due to the evolving nature of the AI industry, but long-term demand growth is expected to support investment returns [9][11]. Strategic Focus Areas - Alibaba is prioritizing the enhancement of its AI infrastructure and model capabilities to meet customer demands. The focus includes improving the efficiency of AI resource utilization and expanding high-value application scenarios [10][11]. - The company is also exploring potential growth in other consumer sectors, including offline retail and travel services, while emphasizing the importance of business integration and collaboration [12].