Alibaba ADRs suffered their sharpest drop in six months during the US cash session after quarterly results revealed a massive tumble in net income and sluggish top-line growth, overshadowing yet another quarter of triple-digit expansion across its cloud and AI businesses.

Third-quarter results showed that Alibaba's core retail business remained sluggish, while its Cloud Intelligence Group posted 36% growth compared with the same period one year ago.

Revenue for the quarter rose by only 1.7% year-over-year to RMB 284.84 billion, missing the Bloomberg Consensus estimate of RMB 289.79 billion. Adjusted EPS, EBITDA, and net income all fell below analyst expectations, with adjusted net income plunging 67% year-over-year.

Here's a snapshot of the earnings:

Revenue 284.84 billion yuan, +1.7% y/y, estimate 289.79 billion yuan (Bloomberg Consensus)

• Alibaba International Digital Commerce Group revenue 39.20 billion yuan, +3.8% y/y, estimate 41.67 billion yuan
• Cloud Intelligence Group revenue 43.28 billion yuan, +36% y/y, estimate 42.36 billion yuan
• China E-commerce Business Group revenue 159.35 billion yuan, +5.8% y/y, estimate 165.94 billion yuan

Adjusted earnings per American depositary receipts 7.09 yuan vs. 21.39 yuan y/y, estimate 12.34 yuan

Adjusted EBITDA 34.06 billion yuan, -45% y/y, estimate 39.62 billion yuan

Adjusted net income 16.71 billion yuan, -67% y/y, estimate 31.6 billion yuan

All Other revenue 67.34 billion yuan, -25% y/y, estimate 66.93 billion yuan

Alibaba's dismal earnings report highlights the pressure to monetize its costly AI buildout. CEO Eddie Wu, on a call with analysts earlier, offered few details on execution, implying Alibaba would need to sustain 35% annual growth to reach that goal.

"The business goal of Alibaba's AI strategy is very clear. Over the next five years, our goal is to surpass $100 billion in combined cloud and AI external revenue," Wu told the analysts.

Bloomberg Intelligence analysts Robert Lea and Jasmine Lyu noted, "Alibaba's push into agentic AI and creation of a "Token Hub" won't alter the e-commerce giant's AI profit outlook, which remains challenged. API (application programming interfaces) from companies including Tencent, MiniMax and Baidu is a loss-leading service despite recent price increases, reflecting high computational costs and low industry pricing. Rising cloud demand won't offset pressure in Alibaba's e-commerce and food-delivery businesses either, which remain the company's primary earnings drivers."

Alibaba is also pressing ahead with a full-stack AI strategy anchored by its proprietary T-Head chips, which management says have now entered scaled production. This signals a chip war with US tech firms and provides a tailwind for Alibaba's hardware push, as both state-backed and private-sector customers seek to reduce reliance on foreign suppliers and boost domestically produced chips.

In the cash session in New York, BABA ADR fell 6.3%, the largest intraday decline since October 10, 2025, or about six months ago. Shares of BABA peaked in late fall last year and are down 14% year to date.

BABA's big drop in net income is certainly overshadowing its AI progress.