On May 13, Alibaba unveiled its financial results for the fourth quarter and full fiscal year of 2026.

This financial report painted a striking picture of “two extremes” in the capital market: on one hand, Alibaba reported a rare quarterly operating loss (RMB 848 million) since going public; on the other, its stock price soared against the market trend post-report, with gains surpassing 8% and 6% in the US and Hong Kong stock markets, respectively.

The crux of this seemingly paradoxical “profit decline but stock price surge” lies in Alibaba's “strategic investments” in new retail, user experience, and AI infrastructure.

Behind the cold, hard financial data, we witness not just an e-commerce behemoth chasing short-term gains, but a commercial empire leveraging short-term setbacks to secure strategic footholds for the next decade.

1

Strategic Losses Amidst New Retail Ventures

In the fourth quarter of fiscal year 2026, Alibaba posted revenue of RMB 243.38 billion, marking a 3% year-on-year increase. Excluding the impact of divested businesses (such as Sun Art Retail and Intime), its core business revenue growth rate reached 11% on a like-for-like basis.

However, beneath this steady revenue growth lurked a sharp profit decline.

The financial report revealed an operating loss of RMB 848 million for the quarter, compared to an operating profit of RMB 28.465 billion in the same period last year; adjusted EBITA (Earnings Before Interest, Taxes, and Amortization) plummeted by 84% year-on-year to RMB 5.102 billion.

Alibaba's management candidly stated during the conference call that this performance fluctuation stemmed primarily from high-intensity investments in instant retail, user experience enhancements, and technological infrastructure (especially AI).

This was no “unexpected downturn” due to poor operations but a calculated “strategic loss.”

In today's internet stock landscape, Alibaba is willingly sacrificing some short-term profits to reinvest heavily in the growth drivers of its core businesses.

This “profit-for-growth” strategy was particularly evident in the instant retail sector (the epicenter of new retail competition).

2

Instant Retail: The “Scale vs. Efficiency” Conundrum Behind 57% Growth

As the vanguard of Alibaba's new retail strategy, the instant retail business delivered stellar performance this quarter. The financial report showed a 57% year-on-year surge in revenue from the instant retail segment, including Taobao Flash Sales, with a stable market footprint.

1. Investment Front: Subsidies to Capture User Loyalty and Market Share
In the new retail arena, fulfillment capabilities and user loyalty are the keys to success.

A significant portion of Alibaba's hefty investments this quarter went towards building the fulfillment network for instant retail and offering user subsidies.

Through the “subsidies-for-growth” strategy, Alibaba is solidifying its foundation in the new retail sector and countering fierce competition from rivals like Meituan and JD.com.

This high-intensity investment directly impacted quarterly profit performance but successfully spurred a surge in order volume and user engagement.

2. Output Front: Notable Improvement in Unit Economics (UE)
The era of blindly burning money for growth is over. Alibaba's investments in new retail are beginning to show signs of “high-quality growth.”

A promising signal in the financial report is the quarter-on-quarter improvement in both the unit economics (UE) and average order value (AOV) of the instant retail business.

This indicates that as order density rises and fulfillment routes optimize, Alibaba's losses per instant retail order are narrowing, with some scenarios even nearing break-even.

Management disclosed that, thanks to optimizations in order structure and increases in AOV, the instant retail business is expected to achieve positive UE before the new fiscal year ends.

This shift from “scale expansion” to “efficiency enhancement” underscores that Alibaba's investments in new retail are entering a virtuous cycle, with promising future profitability.

3

AI Reshaping New Retail: From “Traffic Gateway” to “Efficiency Enhancer”

If instant retail is the “body” of Alibaba's new retail, then AI is its “soul.”

In this quarter's financial report, the synergy between AI and new retail emerged as a recurring theme.

Alibaba CEO Wu Yongming clearly stated, “Alibaba's full-stack AI technology investments have officially transitioned beyond the initial cultivation phase and entered a positive cycle of large-scale commercial returns.”

1. Consumer Front: Qianwen App Revolutionizes E-commerce
On the consumer side, Alibaba is harnessing AI to reshape the traffic gateways of new retail. The “Qianwen AI Shopping Assistant” launched on the Taobao App offers end-to-end services spanning inspiration, product discovery, in-sale support, and after-sale services.

Meanwhile, the consumer-facing Qianwen App fully integrates the e-commerce capabilities of Taobao and Tmall, becoming China's first all-in-one personal assistant to bridge life, work, and learning scenarios.

This deep integration of “AI + e-commerce” significantly enhances user shopping experience and conversion rates.

By maximizing the value of each customer, Alibaba is comprehensively improving the monetization efficiency of individual transactions.

For new retail, AI is not just a chatbot but a super sales assistant capable of precisely capturing user needs and shortening decision-making paths.

2. Business Front: “Wukong” Agent Empowers Merchant Operations
On the merchant side, Alibaba introduced the enterprise-grade AI-native work platform “Wukong.” This is no traditional Q&A AI but an intelligent agent capable of autonomously planning steps and completing a full closed loop from information gathering to final delivery.

Currently, numerous new retail and manufacturing enterprises have begun leveraging “Wukong” to enhance operational efficiency. For instance, in e-commerce operations, retail store management, and order processing, “Wukong” can replace manual labor in performing tedious data analysis and process operations.

This AI capability output not only strengthens merchant adhesion to Alibaba's ecosystem but also opens up new B-end commercialization avenues for Alibaba.

4

Cloud and AI: The “Computing Power Backbone” of New Retail

The rapid advancement of new retail would be impossible without underlying computing power support. This quarter, Alibaba Cloud's revenue grew by 38% year-on-year, with external commercialization revenue increasing by 40% year-on-year. AI-related product revenue accounted for over 30% for the first time, with annualized revenue exceeding RMB 35.8 billion.

Alibaba is positioning itself as a “provider of AI foundational capabilities.” Wu Yongming likened AI to manufacturing, proposing the construction of “AI training factories” and “AI inference factories.”

Currently, “almost no card is idle” in Alibaba's servers, and T-Head's self-developed GPU chips have achieved mass production, with over 60% of computing power serving external commercial clients.

For the new retail business, this means Alibaba now boasts a self-controlled and highly cost-effective computing power foundation. Whether handling massive concurrent orders in instant retail or providing real-time inference responses for AI shopping assistants, all rely on robust cloud infrastructure support.

Although Alibaba's multi-billion-dollar investments in cloud and AI have weighed down profits in the short term, they are crucial for building new retail's defensive moat in the long run.

Reviewing Alibaba's performance in the fourth quarter of fiscal year 2026, we see a tech giant navigating a “transitional pain period” but with a clear sense of direction.

In the new retail sector, Alibaba is engaged in a “protracted war.” It is no longer content with simple traffic monetization but is constructing barriers through high-intensity investments in instant retail fulfillment efficiency, AI-driven user experience, and underlying computing power infrastructure.

In the short term, this “strategic loss” may render financial statements less appealing, and the pressure on free cash flow is an inevitable transformation cost.

However, in the long run, when instant retail achieves positive UE, AI commercialization fully blossoms, and the cloud business becomes a core growth engine, these current investments will translate into enormous future commercial returns.

For investors and industry observers, Alibaba's financial report sends a resounding signal: in the second half of the deep integration between AI and new retail, only enterprises bold enough to make “heavy investments” in core technologies and high-frequency scenarios can weather cycles and secure the future.

Alibaba's “payback” is just beginning.

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