Alibaba Earnings: Can AI bets power the next growth wave?

Alibaba heads into a closely watched earnings report on August 20, with investors looking for evidence that its aggressive push into artificial intelligence is translating into sustainable revenue and profits. The stock has rebounded sharply from its June low of around $92 to about $123, but the earnings report could determine whether that recovery has further legs. (Sources: Benzinga, Reuters, TradingKey)

Alibaba’s Qwen AI models have gained significant traction, with downloads reportedly surpassing those of models from Meta and Google over the past six months. Qwen has open-sourced 460 models and generated more than 300,000 derivatives, strengthening Alibaba’s position in the global AI ecosystem.

Alibaba’s cloud business remains central to the AI investment story. In its March quarter, cloud revenue jumped 38% year-on-year, while overall revenue rose 3% to $35.2 billion. China e-commerce revenue increased 1%, while international digital commerce revenue grew 5%, highlighting the stronger momentum coming from cloud and AI-related operations.

The major concern is profitability. Despite growth across key businesses, Alibaba’s operating profit plunged 84% in the March quarter as the company stepped up spending on AI. For the upcoming quarter, analysts cited by Benzinga expect revenue to rise 8.35% to about $39.74 billion, while EPS could fall to around $1.48 from $2.

Analyst sentiment remains broadly positive despite the earnings risks. Susquehanna raised its price target to $185, Barclays increased its target to $195 and JPMorgan lifted its target to $205. TipRanks says Alibaba retains a Strong Buy consensus, with 12 Buy ratings and an average price target of $190.76.

Alibaba is also facing a federal securities class-action lawsuit alleging investors were misled about risks linked to U.S. restrictions involving Chinese military companies and allegations surrounding unauthorized access to Anthropic’s Claude AI model. The legal overhang adds another layer of uncertainty as investors assess Alibaba’s AI ambitions and regulatory exposure.

Technical indicators suggest the recent rally is losing some momentum. JournalArta reported Alibaba shares down 1.64% in the latest session, with MACD weakening and trading volume running below its 20-period average. HKD 110 is identified as key support, while HKD 128.10 is the first major resistance.

Alibaba’s earnings will be less about headline revenue growth and more about whether AI and cloud investments can eventually generate higher-margin, recurring revenue. Strong Qwen adoption and cloud growth provide the bullish case, while falling profits, heavy investment and legal risks remain the key concerns. The earnings report could therefore decide whether Alibaba’s AI-driven rebound is the start of a longer-term rerating or another short-lived rally.