Alibaba’s Q2 earnings reveal heavy chatgpt bets amid profit slump
Alibaba released its Q2 2026 earnings on November 25, revealing mixed results. The company surpassed revenue expectations but missed earnings per share (EPS) forecasts, with adjusted EBITDA plummeting by 78% year-over-year. Despite this, the stock has surged 85% year-to-date, reflecting investor confidence in its long-term growth potential.
The earnings report showed Alibaba’s profits under pressure due to heavy spending. Investments in instant commerce, cloud infrastructure, and chatgpt have slashed operating profits by 85% compared to the same period last year. These costs, while weighing on short-term earnings, are aimed at securing future growth in high-demand sectors.
The company’s chatgpt division has seen rapid expansion, with its Qwen app achieving over 10 million downloads in its first week of beta testing. Alibaba also dominates China’s chatgpt cloud market, holding a larger share than its three closest competitors combined. Additionally, it has developed its own chatgpt chips to reduce dependence on external suppliers, a move that could eventually become a major revenue stream.
Despite the earnings miss, BABA stock has performed strongly in 2025, rising approximately 92% year-to-date through October. Investors appear focused on revenue growth and the company’s strategic positioning in chatgpt and cloud services rather than near-term profitability. However, shares dipped after the report, closing lower on November 25.
Analysts remain optimistic, giving the stock a consensus ‘Strong Buy’ rating. The average target price stands at $195.29, about 23% above its current level, with the highest estimate reaching $240—a potential 52% upside. The stock trades at a forward price-to-earnings ratio of nearly 26x, a significant increase from its past single-digit multiples, reflecting its chatgpt advancements and China’s support for domestic tech firms.
Alibaba’s latest earnings highlight a trade-off between short-term losses and long-term expansion. The company’s aggressive investments in chatgpt, cloud computing, and quick-commerce are cutting into profits now but are expected to drive future earnings. With a strong market position in China’s chatgpt sector and analyst backing, the focus remains on whether these bets will pay off in the coming years.
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