Broker Consensus Sees Q3 Profit Dropping 43.3%
Ahead of its third-quarter fiscal 2026 earnings release, a survey of eight brokerage firms indicates that Alibaba (BABA-W) is expected to report a steep decline in profitability. The median forecast for non-GAAP net profit for the quarter ending December 2025 is RMB28.936 billion, a 43.3% drop from the RMB51.066 billion recorded in the same period last year.
The range of estimates is wide, spanning from RMB25.099 billion (a 50.8% YoY decrease) by CLSA to RMB31.858 billion (a 37.6% YoY decrease) by Morgan Stanley. Despite the sharp annual decline, the median forecast represents a nearly 180% increase from the previous quarter's adjusted net profit of RMB10.352 billion.
AI and Retail Investments Drag Down Earnings
The anticipated profit contraction stems from Alibaba's deepened investment into strategic growth areas, specifically artificial intelligence and instant retail. These initiatives have reportedly led to wider losses within the company's "other businesses" segment, pressuring overall margins.
Investors will be scrutinizing the company's upcoming announcement for details on its capital allocation strategy. Key focus areas include the growth trajectory of the cloud business, the supply of GPUs for AI development, capital expenditure plans for AI, the operational strategy for its Qianwen large language model, and its approach to the competitive instant e-commerce market.
T-Head Chip Unit Spin-Off Under Scrutiny
Beyond immediate operational performance, market participants are focused on Alibaba's long-term structural plans. The potential spin-off and independent listing of its in-house chipmaking unit, T-Head, is a central point of interest. Any commentary from management on the timeline or strategy for separating T-Head will be a critical factor for evaluating Alibaba's future valuation and strategic direction.
Edgen Stock·Mar 12 2026, 07:51
