To The Moon

$Alibaba(BABA)$ is scheduled to release its fiscal Q2 2026 earnings result on 25 November 2025 before market open.

Market Sentiment: Cautiously Bullish but Volatile.

BABA stock has had a massive run in calendar 2025 (up ~90% YTD), driven by a recovery in China tech sentiment and AI optimism. However, the stock recently pulled back from highs (~$182) to around ~$158 following news of a potential U.S. investigation into its data practices.

Consensus Expectations:

Revenue: ~RMB 243.2 Billion (~$34.3B USD), representing modest growth of 2–4% YoY.

EPS (Non-GAAP): ~$0.85 per ADS. Note that this represents a significant YoY decline (approx. 60% drop) compared to the same quarter last year. Crucial Note: This drop is largely due to heavy CAPEX investments in AI/Cloud and high base effects from one-off gains last year.

Summary: Q1 FY2026 Review

"Accelerating Revenue, Decelerating Profit" Alibaba delivered a "mixed" quarter. While the top-line growth (revenue) showed signs of life—particularly in the Cloud and Core Commerce segments—the bottom line (profit) took a hit due to massive spending. Management made it clear they are in an "investment cycle," prioritizing market share defense and AI infrastructure over immediate margins.

The Scorecard (Q1 FY2026)

3 Key Lessons Learned from Management's Guidance

The guidance provided during the Q1 call offers a specific checklist of what to verify in the upcoming Q2 report.

Lesson 1: The "AI Bet" is Working, but the Bill is Due

What happened: Cloud revenue growth accelerated to 26% (triple-digit growth in AI products). However, Free Cash Flow (FCF) turned negative (-$2.6B) due to a massive $5.4B Capex spend on Nvidia chips and data centers.

The Lesson/Guidance: Management signaled that Cloud revenue growth would continue to accelerate in coming quarters.

What it means for Q2: If Cloud growth drops below 25% next week, the "high Capex" narrative falls apart. Investors are tolerating the cash burn only because revenue is accelerating.

Lesson 2: "Quick Commerce" is the New Battleground (and it's expensive)

What happened: Core commerce profit (EBITA) fell because Alibaba poured money into "Quick Commerce" (instant delivery similar to Meituan) to defend its user base.

The Lesson/Guidance: Management explicitly stated that these losses were "strategic" and guided that "unit economics will improve significantly over the next few months" as they reach critical scale.

What it means for Q2: This is the "prove it" quarter. Next week, we need to see the e-commerce margin stabilize. If they are still burning cash at the same rate on Quick Commerce without improved margins, they have failed this specific guidance.

Lesson 3: Monetization Power is Back

What happened: Despite fears of a weak Chinese consumer, Alibaba squeezed 10% growth out of merchant fees (CMR), aided by a new 0.6% software service fee.

The Lesson/Guidance: Alibaba proved it still has pricing power. Management guided that this new monetization model would support steady CMR growth despite the high base.

What it means for Q2: Watch the CMR vs. GMV gap. If CMR growth sustains >8-9%, it confirms the bullish thesis that Alibaba can monetize its platform better than competitors like PDD, even in a slow economy.

Summary for Your Trading Strategy

The Q1 earnings taught us that BABA is no longer a "value stock" maximizing cash flow; it is back to being a "growth stock" spending heavily to fight wars.

Bullish Signal for Q2: If Cloud grows >25% and E-commerce margins improve (showing the Q1 spending cut back on subsidies).

Bearish Signal for Q2: If Management admits "Quick Commerce" still requires heavy subsidies, dragging profits down for a second consecutive quarter.

Key Metrics Investors Should Watch

For the stock to sustain its 2025 rally, Alibaba needs to prove that its massive spending is generating new growth, not just defending old turf.

1. Cloud Intelligence & AI Revenue (The "Growth Engine")

This is the most critical metric for Wall Street right now.

What to watch: Look for Cloud revenue growth accelerating toward the 20-30% range.

Why: Alibaba is pivoting to become an AI-first company. In the previous quarter, they showed triple-digit growth in AI-related products. Investors want to see if the new "Qwen" AI platform and enterprise adoption are translating into hard revenue. A miss here would be punished severely given the high CAPEX.

2. Customer Management Revenue (CMR) vs. GMV

This measures the health of the core Taobao/Tmall business.

What to watch: The gap between GMV (Gross Merchandise Volume) growth and CMR (revenue from merchants) growth.

Why: Historically, CMR has lagged GMV as Alibaba subsidized merchants to fight off competitors like PDD and ByteDance. Ideally, you want to see CMR growth stabilizing or matching GMV, signaling that Alibaba has stopped "bleeding" margin to keep merchants.

3. International Digital Commerce (AIDC) Losses

What to watch: Revenue growth (expected ~30%+) vs. Adjusted EBITA losses.

Why: Units like AliExpress and Lazada are growing fast but burning cash. Investors have been tolerant of losses for growth, but with the focus shifting to profitability, any narrowing of losses in this segment would be a major bullish catalyst.

4. Share Buybacks & Shareholder Return

What to watch: The pace of repurchases.

Why: Alibaba has one of the most aggressive buyback programs in China tech. Continued heavy buying (reducing float) puts a floor under the stock price and signals management confidence despite the recent "White House memo" noise.

Alibaba (BABA) Price Target

Based on 39 analysts from Tiger Brokers app offering 12 month price targets for Alibaba in the last 3 months. The average price target is $198.43 with a high forecast of $271.45 and a low forecast of $120.00. The average price target represents a 29.46% change from the last price of $153.28.

Trading Opportunity: Short-Term Post-Earnings

The setup for a post-earnings trade is High Volatility / Binary Event.

The Bull Case (Breakout > $175):

Trigger: Cloud growth beats expectations (>25%) + Management dismisses US regulatory fears + Announcement of expanded buybacks.

Trade: If the stock clears $165 in pre-market, it could squeeze shorts aggressively toward the October highs of $182. The "bad news" regarding earnings decline is likely already priced in; a "better than feared" profit number could ignite a rally.

The Bear Case (Breakdown < $145):

Trigger: Cloud growth decelerates or misses (<15%) + Management guides for even higher CAPEX without clear ROI + Spooked by US/China geopolitical headlines.

Trade: A break below psychological support at $150 could open the door to a rapid fill of the gap down to $135-$140.

Strategy: The "Straddle" or "Fade"

Implied Move: The options market is likely pricing in a 5-7% move (~$8-$12 share price swing).

BABA implied volatility (IV) is 49.3, which is in the 76% percentile rank. This means that 76% of the time the IV was lower in the last year than the current level. The current IV (49.3) is -2.5% below its 20 day moving average (50.6) indicating implied volatility is trending lower.

Fade the Pop: If BABA spikes on headline revenue beat but Cloud margins look weak, look to short the rally (buy Puts) at resistance levels ($170-$175).

Buy the Dip: Given the 90% YTD run, deep institutional support likely sits around $145. If it flushes on the "profit drop" headline (which is expected), it might be a buying opportunity for a swing back to $160.

Summary

Alibaba Group (BABA) reports Fiscal Q2 2026 earnings on Tuesday, November 25, 2025 (Before Market Open).

Context: After a massive ~90% rally in 2025, BABA has pulled back (~$158) amid US regulatory noise. The company is in a heavy investment cycle, sacrificing short-term profit for AI leadership.

Consensus Estimates:

Revenue: ~RMB 243.2B ($34.3B), modest +2-4% YoY.

EPS (Non-GAAP): ~RMB 5.78 ($0.80), a ~60% decline YoY. Note: This drop is due to heavy CAPEX and high base effects from last year's one-off gains.

Key Metrics to Watch:

Cloud Intelligence (The Catalyst): Must show sustained acceleration (aiming for 20-30% growth). Triple-digit AI product growth is the bullish trigger.

CMR vs. GMV (The Core): Investors want to see the gap between "Gross Merchandise Volume" and "Customer Management Revenue" close, proving merchant spending is stabilizing.

International Losses: A narrowing of losses in the fast-growing AIDC unit (Lazada/AliExpress) would be a positive surprise.

Trading Setup:

Bull Case (Target >$175): Cloud growth beats (>25%) + strong buyback execution. A break above $165 could trigger a squeeze back to highs.

Bear Case (Target <$145): Cloud decelerates (<15%) or management guides for even higher "unproductive" CAPEX. A drop below $150 risks filling the gap down to $135.

Bottom Line: Ignore the headline EPS drop; it’s priced in. The trade depends entirely on whether Alibaba proves its massive AI spending is generating new, high-margin revenue.

Appreciate if you could share your thoughts in the comment section whether you think BABA could show that massive AI spending on “Qiwen” would yield significant revenue contribution.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.