Is there a Possible End to the Struggles for Alibaba?
Alibaba Group, the global e-commerce leader, is currently trading at $135.48, a significant drop from its 2020 peak of above $300. Despite this, investors are closely watching the company's performance in the coming quarters, with a focus on the progress of its e-commerce business and the sustainability of its cloud business's growth.
The restructuring of Alibaba's business, announced earlier this year, aims to unify customer touchpoints, reduce duplication, and sharpen focus, particularly in competitive battlegrounds like instant delivery. Taobao, Tmall, Ele.me, and Fliggy have been combined into one commerce division, and the reporting segments have been reduced to four areas.
In Q1 2026, Alibaba's revenue showed signs of stabilization, with actual growth closer to 10% after adjusting for business disposals. The growth in revenue was due to stable growth in the core-commerce business and the accelerating growth in the cloud computing segment. Alibaba's e-commerce business saw a 10% increase in revenue, thanks to growth in customer management revenue.
The cloud revenue for Alibaba surged 26% year over year in Q1 2026, powered by soaring demand for AI infrastructure and services. In fact, AI product revenue for Alibaba has grown at triple-digit rates for eight consecutive quarters. However, the quick commerce sector continues to weigh on Alibaba's profitability due to heavy subsidies and thin margins in food and grocery delivery.
Competition from Pinduoduo and Douyin is persistent, compelling Alibaba to innovate to keep pace with younger consumers. The company's gross margin stands at 40.65%, and the dividend yield is 0.77%.
One area of concern is the impact of U.S. chip restrictions on Alibaba's AI roadmap, even as it develops its own processors. As for leadership changes, the search results do not provide information about who took over from Daniel Zhang, who resigned as CEO on March 10, 2023.
In a recent analysis, The Motley Fool's Stock Advisor analyst team did not include Alibaba Group in their list of the 10 best stocks for investors to buy now. However, if Alibaba can sustain its recent performance across both segments, investors will have more conviction in holding on (or buying) the stock.
In the past three weeks of August, there was a 25% year-over-year increase in monthly active consumers on the Taobao app. With a market capitalization of $303 billion, Alibaba continues to be a significant player in the global e-commerce market.
In conclusion, while Alibaba faces challenges in certain areas, its strong performance in Q1 2026 and the growth in its cloud business offer reasons for optimism. The restructuring of the business and the focus on innovation should help the company maintain its competitive edge in the e-commerce market.
