Alibaba Group is the IBD Stock of The Day for Friday. Shares of the Chinese tech giant are gapping higher following the company's fiscal Q1 results and a report it is developing a new AI chip.
The overall results for the e-commerce giant were mixed. Alibaba said that it earned an adjusted 14.75 yuan per American depositary share for the June-ended quarter, down 10% from a year earlier. That beat the 14.16 yuan per ADS that analysts polled by FactSet were forecasting. Sales increased 2% to 247.65 billion yuan, or $34.6 billion, below analyst estimates of 251.45 billion yuan, or $35.15 billion.
Alibaba's Cloud Intelligence revenue increased a stronger-than-expected 26% to 33.3 billion yuan. That marked an acceleration from 18% growth in Alibaba's March quarter. The tech giant said "increasing adoption of AI-related products" boosted its cloud business.
Separately, the Wall Street Journal reported early Friday that Alibaba is testing a new custom computing chip designed for a broad range of AI tasks amid curbs on Nvidia chips in China.
On the stock market today, U.S.-listed Alibaba stock vaulted 12.9% to close at 135. Shares gapped up above a potential early entry at 127.93, which was its previous high for August before a recent downward trend.
Alibaba stock is also forming a consolidation pattern, which would have a buy point at 148.43, representing a 52-week high from mid-March.
Alibaba Stock Gets AI Boost
Including its gains Friday, Alibaba stock has rallied 60% this year. But the stock is down from stronger gains earlier this year. Share growth stalled from mid-March highs for Alibaba stock amid questions about the Chinese economy, restrictions on imports of AI processors from the U.S., and broader trade tensions between the U.S. and China.
Alibaba's reported chip plans could help address one of those hurdles. Top chipmaker Nvidia was recently authorized by the U.S. government to sell an older-generation AI chip in China. But Chinese authorities are reportedly pressuring domestic companies not to buy the chips. The Wall Street Journal report on Alibaba's plans cited unnamed sources.
The chip from Alibaba would add to a broader AI push from the company, which is China's largest cloud computing provider. Alibaba has been racing to bolster its Qwen AI large language models and integrate AI into its retail operations.
The tech giant has pledged to spend more than $50 billion over the next three years on AI-related infrastructure for its cloud business.
"Driven by robust AI demand, Cloud Intelligence Group experienced accelerated revenue growth and AI-related product revenue is now a significant portion of revenue from external customers," Alibaba Chief Executive Eddie Wu said in a news release.
Alibaba's 'Quick Commerce' Competition
Meanwhile, Alibaba's battle for the so-called quick commerce market in China has been closely watched by investors. Alibaba stock fell 2% Thursday after food-delivery rival Meituan told investors that its profit was suffering from "irrational competition" in food delivery. Alibaba, Meituan and JD.com have been racing to lower prices to win market share for app-based delivery in China.
Alibaba's adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — declined 14% year over year to 38.8 billion yuan, or $5.4 billion. The company said the decline could be partially attributed to "investment in Taobao Instant Commerce," which holds its instant delivery operations. Alibaba launched the business at the end of April.
Meanwhile, overall revenue for Alibaba's broader China e-commerce group increased 10% to 140.1 billion yuan, or $19.5 billion. Its international e-commerce business grew revenue 19% to 34.7 billion yuan, or $4.9 billion.
CFRA analyst Angelo Zino wrote to clients Friday that Alibaba's pivot toward quick commerce and AI are driving "meaningful operational changes across the business." While the initiatives are weighing on profits, they should position the company well, the analyst said.
"We believe the improving cloud growth validates Alibaba's AI infrastructure emphasis and positions the company favorably in the expanding GenAI market," Zino wrote.
He added that the international commerce division's "19% growth and approach to break-even demonstrate effective international execution."
Futures: Alibaba News Hits AI. Why This Isn't DeepSeek 2.0.
Alibaba Stock In Strong-Performing Retail-Internet Group
Friday's rally pushed Alibaba stock back above its 21-day and 50-day moving averages.
Meanwhile, Alibaba stock has an IBD Composite Rating of 88 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one.
E-commerce stocks have outperformed this year, despite the global tariff uncertainty. The 59-stock Retail-Internet industry group tracked by IBD ranks 10th among 197 industry groups, based on six-month price performance. The overall group is up 25% year to date.
Alibaba's IBD Composite Rating, while strong, places it below some of the top stocks in that group. Alibaba ranks 13th overall, according to IBD Stock Checkup. The leader is Singapore-based Sea Ltd., which owns the leading e-commerce platform in Southeast Asia and competes against Alibaba in some markets.
