Alibaba Group reported modest revenue growth but sharply lower profit for the December quarter, as spending on artificial intelligence (AI) and rapid delivery services weighed on results.

Revenue rose to $40.7 billion in Alibaba’s fiscal Q3, which ended Dec. 31, 2025. That’s up 2% from $40.1 billion a year earlier. Net income fell to $2.2 billion, down 66% from $6.6 billion.

For the first nine months of its fiscal year, Alibaba revenue totaled $111.6 billion. That’s up 3% from $108.7 billion. Net income declined to $11.2 billion, down 31% from $16.3 billion in the same period last year.

The results highlight steady top-line growth but significant pressure on earnings as the company invests in AI, cloud computing, and faster delivery capabilities.

“This quarter, Alibaba maintained strong investments across our core pillars of AI and consumption,” CEO Eddie Wu said in a statement. “AI is and will continue to be one of our primary growth engines.”

Alibaba owns the world’s two largest online marketplaces by gross merchandise value (GMV), Taobao and Tmall.

Taobao ranks No. 1 in the Global Online Marketplaces Database, Digital Commerce 360’s ranking of the largest such marketplaces by GMV. Tmall ranks No. 2. Both platforms operate in China and primarily serve the Chinese market. Among Alibaba’s other marketplaces is the global B2B marketplace Alibaba.com.

How Alibaba grew revenue in Q3

Alibaba’s cloud business was a key driver, with revenue reaching $6.2 billion, up 36% year over year. The company said demand for AI-related products continued to surge, with that category posting triple-digit growth for the 10th consecutive quarter.

Alibaba said its Qwen AI platform is gaining traction, surpassing 300 million monthly active users. The company is expanding the platform’s role across shopping, delivery and travel services.

Alibaba’s China ecommerce segment generated $22.8 billion in Q3 revenue, up 6% year over year.

Growth in core marketplace services remained limited, with customer management revenue increasing 1% as overall transaction activity slowed.

At the same time, Alibaba’s quick-commerce business — focused on rapid local delivery — expanded quickly. Revenue in that segment reached $3.0 billion, up 56% year over year.

The company said it is continuing to invest in logistics and customer experience to scale the business.

Alibaba’s international ecommerce unit posted $5.6 billion in Q3 revenue, up 4% year over year.

Losses in the segment narrowed compared with the prior year, driven by improved logistics efficiency and more disciplined spending, particularly at AliExpress.

Operating income dropped to $1.5 billion, down 74% year over year, reflecting higher spending on technology, logistics and user growth.

Cash generated from operations declined to $5.2 billion, down 49%, while free cash flow fell to $1.6 billion, down 71%.

Chief financial officer Toby Xu said the company plans to continue investing despite the near-term impact on earnings.

“The rapid growth of AI and cloud businesses in recent quarters gives us confidence to scale investments,” Xu said.

Alibaba ended the quarter with $80.1 billion in cash and liquid investments, which the company said will support ongoing investment in AI and commerce initiatives.

Alibaba is increasingly positioning AI and cloud computing at the center of its strategy while expanding its consumer platforms.

The company said it is integrating AI capabilities across its ecosystem, including Taobao, Tmall and its rebranded instant commerce service, to drive engagement and transactions.

The results underscore Alibaba’s transition toward AI-driven growth, with stronger cloud performance offset by weaker profitability tied to continued investment.

Percentage changes may not align exactly with dollar figures due to rounding. Check back in for more earnings updates. Here’s last quarter’s update about Alibaba revenue and earnings.

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