On May 13, Alibaba announced its fourth-quarter and full-year results for FY2026. Despite a 99.7% YoY decline in adjusted net profit for Q4 2026 to just RMB 86 million, far below market expectations of RMB 15 billion.

However, fueled by the rapid growth of Alibaba Cloud + AI business, revenue from AI-related products achieved triple-digit growth for 11 consecutive quarters, surpassing 30% of Alibaba Cloud's external commercialization revenue for the first time, propelling the group's victory during its transition period to a new climax.

Following the earnings release, Alibaba's Hong Kong-listed shares surged over 8% on May 14, with the capital market offering interim approval for Alibaba's progress in its dual-front wars.

Notably, the e-commerce business, which underpins the group's revenue and profit, along with its key figure Jiang Fan, played a less prominent role in this earnings call compared to previous ones.

In Q4 2026, Alibaba's e-commerce segment continued to support the group's AI endeavors, bolster internal instant retail, and stem external e-commerce bleeding.

The transition from a change-maker to a wartime logistics steward has placed a heavier burden on Jiang Fan.

During World War I and II, the failure of the dual-front wars on the European battlefield was, on the surface, due to missteps in resource allocation and strategic leanings. The core reason, however, was the inherent weakness in their self-sufficiency capabilities, unable to withstand prolonged consumption.

Stabilizing Alibaba's current e-commerce foundation may be the key to this ongoing dual-front war.

I. The Hype of Instant Retail and Management's Caution

Earnings reports show that Alibaba's revenue from AI-related products achieved triple-digit growth for 11 consecutive quarters, surpassing 30% of Alibaba Cloud's external commercialization revenue for the first time. The high-speed operation of these businesses relies on continuous internal support from the e-commerce segment.

Bearing the group's sustained high expenditures on AI business, internally digesting the necessary expenses and subsidies for the transition of instant retail from extensive to refined operations, and facing external pressure from e-commerce competitors, Jiang Fan, the helmsman of Alibaba's e-commerce group, has never seen a decrease in pressure.

This also led to FY2026, where despite a 9% YoY increase in revenue for Alibaba's e-commerce group to RMB 554.217 billion, driven by instant retail, the full-year adjusted EBITA plummeted 44% YoY to RMB 107.509 billion.

In Q4 2026, the adjusted EBITA for the above segment was RMB 24.01 billion, down 40% YoY.

Among them, Alibaba's e-commerce revenue in Q4 was RMB 96.292 billion, down 1% YoY. Customer management revenue, which contributes significantly to profits, was RMB 73.024 billion, up 1% YoY.

The 1% growth did not come easily.

Looking back at the 2025 food delivery war, it was not merely a market competition but essentially an alternative "defense tax" that Alibaba had to pay to maintain the stability of its e-commerce foundation.

In recent years, as traffic growth on the main platform slowed, Taobao and Tmall have had to invest heavily in traffic expenses annually to maintain stability.

The outbreak of the food delivery war last year undoubtedly provided an opportunity for Taobao and Tmall to boost user engagement, attempting to retain more users through flash sale subsidies and generate more consumption on the main Taobao platform.

Simultaneously, by continuously investing in fulfillment capabilities, Alibaba can proactively participate in the instant retail market and follow up with defensive measures against Meituan's encroachment on e-commerce through instant retail.

In Q4 2026, Alibaba's instant retail revenue was RMB 19.988 billion, up 57% YoY.

In other words, without the continuous investment in instant retail in 2025, Alibaba's e-commerce business would likely have struggled to maintain its current growth rate in Q4 2026.

However, as time passes, two core factors—cost considerations and engagement effectiveness—are causing changes.

During the heightened intensity of the 2025 food delivery war, numerous questions at Alibaba's earnings calls pointed to instant retail. This also led to Jiang Fan, who had been sidelined due to personal controversies at the end of 2024, to be entrusted with a critical mission once again, returning to the center stage after years.

However, during this Q4 earnings call, Jiang Fan's Q&A sessions were reduced.

When asked about market changes in instant retail over the next two to three years, Jiang Fan said, "The improvement in UE this quarter is mainly due to enhanced logistics efficiency, optimized order structure, and increased average order value. The company expects to achieve positive UE by the end of FY2027."

Compared to his Q3 statement, where he mentioned continuous sequential improvements in UE, Jiang Fan's Q4 statement clarified the timeline for achieving positive UE in instant retail, displaying a more optimistic outlook.

The substantial subsidies for instant retail over the past year represent a significant economic consideration for the group. The proposal of achieving positive UE may indicate a shift in the group's resource allocation tendencies.

Previously, Goldman Sachs estimated that in the quarter with the highest subsidies from Alibaba, Meituan, and JD in 2025, the total subsidies amounted to RMB 25 billion.

Reports indicate that over the past year, the cumulative subsidies from these three parties for food delivery and instant retail ranged from RMB 80 billion to RMB 100 billion.

The sustainability of such high investments and the long-term cost-effectiveness continue to question the financial health of these three parties.

In Q4 2026, Alibaba's e-commerce group's EBITA profit decreased by over RMB 15 billion YoY, while the business increment was approximately RMB 7.3 billion. This equates to spending around RMB 3 for every additional RMB 1 in revenue, resulting in a net loss of around RMB 2.

From announcing a RMB 50 billion subsidy plan within 12 months in July 2025 to adding nearly RMB 2 billion for flash sale warehouse ecosystem construction in February 2026, Alibaba has continuously made heavy bets on instant retail throughout the past year.

At the Q4 earnings call, Jiang Fan explicitly mentioned, "We will continue to innovate and optimize user and merchant experiences, consolidate long-term competitiveness, and achieve overall profitability based on our current scale and market share."

The proposal to "achieve overall profitability based on our current scale and market share" at least implies that Alibaba's next focus for instant retail is to better digest the captured market, shifting from subsidy-driven to efficiency-driven, rather than continuing with heavy subsidies.

This also indicates that when the AI battlefield requires long-term substantial investments, the group at least has a cautious judgment on the investment costs required for instant retail in the next step.

II. Is E-commerce Prepared for Long-Term Warfare?

Another key point is whether the nearly year-long investment in instant retail subsidies has had a long-term effect on boosting Taobao and Tmall's user engagement.

Jiang Fan mentioned at the earnings call, "The flash sale business has a significant synergistic effect with physical goods e-commerce, positively impacting new customer acquisition, user engagement improvement, diversified consumption scenario fulfillment, transaction and commercialization pull, and logistics infrastructure support this quarter."

Notably, in Q4 2026, Alibaba only disclosed that 88VIP membership surpassed 62 million, achieving double-digit YoY growth. However, the growth in Taobao and Tmall's core monthly active users was not disclosed.

This also raises questions about the long-tail effectiveness of boosting user engagement.

Alibaba's aggressive moves in the instant retail sector with substantial subsidies in 2025 and their impact on user retention need further observation.

Currently, Alibaba possesses a vast data foundation in e-commerce and local services, providing an excellent scenario for its AI e-commerce initiatives. Binding AI with e-commerce to enhance user experience and merchant operational efficiency will undoubtedly be a long-term strategy to solidify its foundation.

Moreover, the certainty gained from such investments is significantly higher than that from subsidy-burning.

Over the past year, Meituan's food delivery GTV declined to around 60%, with the company transitioning from profit to loss, facing severe challenges. Meanwhile, Taobao Flash Sales' instant transaction market share surged past 30%, with some regions even rivaling Meituan.

The instant retail market, represented by the food delivery market, differs from e-commerce's nationwide scale effects and winner-takes-all dynamics. This business resembles a "honeycomb"-shaped scale effect, requiring city-by-city conquest, further prolonging the battle lines and timeline.

In fact, the intense food delivery war has persisted to this day, with Alibaba, Meituan, and JD all remaining in the market.

The question remains: once subsidies decrease and traffic dividends fade, where should Taobao and Tmall allocate their "defense tax," and how can they better stabilize merchants and users? This remains a long-term proposition.

Thus, Taobao and Tmall must continue competing with Pinduoduo and Douyin E-commerce. Although each has strengths and weaknesses, Taobao and Tmall remain on the defensive.

If the aggressive heavy investment in instant retail is essentially Alibaba's defense of its e-commerce foundation amid multi-faceted pressures, it is ultimately a defensive strategy.

Then, the heavy investment in AI-to-C entry points and commercialization exploration represents Alibaba's latest offensive move to invigorate e-commerce traffic.

Two days before the earnings release, Qianwen fully integrated with Taobao, allowing users to select and order Taobao products within the Qianwen App or click on the "Qianwen AI Shopping Assistant" within the Taobao App.

This collaboration came just a quarter after Qianwen integrated with flash sales, demonstrating high efficiency.

Before formally validating these commercial paths, it is worth noting that Qianwen has already burned through significant funds.

In FY2026, Alibaba's adjusted EBITA for all other segments, including Qianwen's C-end, was a loss of RMB 35.737 billion, with the loss margin expanding by 276%.

In Q4 2026, the adjusted EBITA for the above business was a loss of RMB 21.16 billion, with the loss margin expanding by a staggering 520%.

Driven by the "burn money for growth" strategy, after the Spring Festival this year, Alibaba, ByteDance, Tencent, and Baidu collectively invested over RMB 8 billion to compete for AI-to-C entry points.

At that time, Qianwen launched the "RMB 3 billion Spring Festival Treat Plan" and extended voucher validity multiple times until March 3. Morgan Stanley estimated that the order subsidy portion alone reached RMB 5 billion, with actual expenditures exceeding RMB 5 billion after adding brand marketing expenses.

This led to Qianwen App's daily active users (DAUs) surging from 7.06 million to 58.48 million at one point, later breaking the 70 million mark. However, as subsidy enthusiasm waned, user behavior shifted more towards transactions than usage, causing Qianwen's DAUs to plummet to the 30 million range.

To some extent, the subsidy war in instant retail and the decline in Qianwen's DAUs post-subsidy follow a similar logic, once again proving that Alibaba's cultivation and creation of super C-end entry points, at this stage, may not be sufficient to completely reverse the situation with just Jiang Fan and Zhou Jingren.

III. The Long-Term Dual-Front War

At the earnings call, Alibaba Group CEO Wu Yongming mentioned that to achieve the goal of surpassing USD 100 billion in annual cloud and AI commercialization revenue in the next five years, Alibaba Cloud's future computing power center assets will be more than ten times those before the AI boom in 2022.

Moreover, capital expenditures over the next three years may far exceed the previously committed RMB 380 billion over three years.

This represents a proactive move to seize the initiative in the AI era and a strategic eastward advance to compete for survival space, perhaps also an inevitable AI arms race.

In 2025, ByteDance invested over RMB 150 billion in AI, planning to increase it to RMB 200 billion in 2026. Tencent, Baidu, and other companies are also continuously increasing their investments.

Currently, Alibaba is engaged in a dual-front war: on one hand, a heavy investment in instant retail to defend its e-commerce foundation, and on the other, a massive confrontation with domestic and global giants in AI.

To orchestrate the overall situation, Alibaba's headquarters needs to address various issues such as efficiency, synergy, and breaking down internal barriers, which are the main themes now and in the future.

However, victory in war often ultimately tests logistical support capabilities and self-sufficiency.

At the earnings call, Alibaba CFO Xu Hong mentioned that the company currently has approximately USD 38 billion in net cash. Excluding debt maturing in over five years, the net cash is approximately USD 59 billion, capable of supporting future continuous investments.

Notably, in terms of self-sufficiency capability competition, compared to Tencent's gaming and ByteDance's advertising, Alibaba's e-commerce foundation currently faces challenges from all directions, and its industry position is not absolutely leading.

During World War I and II, the failure of the dual-front wars on the European battlefield was, on the surface, due to missteps in resource allocation and strategic choices. The core reason, however, was the inherent weakness in their self-sufficiency capabilities, unable to withstand prolonged consumption.

After all, a long-term parallel dual-front war may be even harsher than the winter in Eastern Europe.