By Annie

Source / Jiedian Finance

On November 25, Alibaba released its financial results for the second quarter of fiscal year 2026 (from July to September 2025). The group's revenue for the period was 247.795 billion yuan (RMB, same below), up 5% year-on-year. Excluding the income from disposed businesses, including Sun Art Retail and Intime, the revenue increased by 15% year-on-year on a like-for-like basis.

From the 120 billion yuan AI capital expenditure to the narrowing losses of Taobao Flash Sales, and then to the profitability of international operations, Alibaba's strategic choices and progress in key areas outline its development blueprint for the next stage.

Three issues in this financial report have drawn the most market attention: AI, food delivery, and internationalization. Jiedian Finance analyzes each of these issues in turn.

01. AI: 120 Billion Yuan in Capital Investment Over Four Quarters

In November, the 'Qianwen' App is making a remarkable entry into the market.

Within a week of its public beta, downloads of the 'Qianwen' App surpassed 10 million. This growth rate has surpassed that of ChatGPT, Sora, and DeepSeek, making it the fastest-growing AI application to date.

Previously, pioneers like ByteDance's Doubao and DeepSeek had already established strong user bases with monthly active users in the hundreds of millions, making Alibaba's large-scale push into the C-end market seem somewhat late. However, judging by the current pace, Alibaba is accelerating its 'conquest.'

As early as September this year, at the Yunqi Conference, Alibaba Cloud announced a major upgrade of its full-stack AI capabilities, covering everything from cutting-edge AI foundational models to high-performance AI infrastructure, including servers, high-performance networks, distributed storage, intelligent computing clusters, artificial intelligence platforms (PAI), and model training and inference services.

Now, the driving force of AI capabilities in business is evident in the financial report.

Alibaba Cloud's revenue reached 39.824 billion yuan, up 34% year-on-year, with AI-related product revenue achieving triple-digit growth for the ninth consecutive quarter.

Alibaba's investment in AI development is also 'hardcore.'

The financial report shows that Alibaba's capital expenditure for the quarter was 31.5 billion yuan. Over the past four quarters, Alibaba's capital expenditure on AI and cloud infrastructure has been approximately 120 billion yuan.

From Jiedian Finance's perspective, the ultimate determinant of AI capabilities still depends on whether customers are willing to pay.

According to a report by international authority Omdia, in the first half of 2025, Alibaba Cloud ranked first in China's AI cloud market share, accounting for 35.8%, surpassing the combined total of the second to fourth-ranked companies.

This means that Alibaba's AI products are being rapidly adopted by a wide range of enterprise customers, forming a positive cycle of technological investment and business growth.

In addition to recognition from B-end customers, the Qianwen App is accelerating its entry into the AI-to-C market.

It is predictable that in the future, Qianwen will gradually integrate into Alibaba's business ecosystem, including e-commerce, maps, and local life services. A typical example is the large-scale application of AI during Double 11.

It is reported that during Double 11, 5 million merchants used the AI tool 'Business Assistant,' achieving an average efficiency increase of 1.5 times; the AI customer service 'Dianxiaomi' served a cumulative 300 million consumers, helping merchants improve conversion efficiency by 30%.

Just a few days ago, Wu Jia, Alibaba Group's Vice President and head of the Qianwen application, made his first public appearance. He stated that the public's demand for AI assistants has not been well met. 'AI assistants compete on intelligence and practical abilities, not just as chat companions.'

Wu Jia said that Qianwen's rapid growth represents a critical moment for the explosion of AI applications. 'After three years of development, Alibaba's large models have made significant breakthroughs, making it possible to create a truly useful AI assistant.'

Immediately following the financial report on November 25, Alibaba CEO Wu Yongming reiterated that Alibaba would simultaneously focus on AI-to-B and AI-to-C lines. Especially for the C-end, it aims to create 'AI-native super applications,' bringing AI from enterprise tools to every ordinary person.

It is certain that building AI technology and infrastructure platforms and integrating AI capabilities into e-commerce will be the inevitable path for Alibaba to create long-term strategic value.

02. Food Delivery: High Investment for High Growth

This year, the food delivery platform has witnessed wave after wave of subsidy battles, which, besides creating 'high blood sugar levels for consumers,' have raised questions about the platforms' performance.

From Alibaba's financial report, the company has achieved high growth through substantial investment but also faces the risk of a significant drop in operating profit.

The financial report shows that Alibaba's sales and marketing expenses for the third quarter of this year were 66.5 billion yuan, up 104.8% year-on-year from 32.471 billion yuan in the same period last year.

So, a crucial question arises: What is the effect of this high investment?

Jiang Fan, CEO of Alibaba's E-commerce Business Group, disclosed the latest progress of the instant retail business at an analyst meeting after the financial report release.

Jiang Fan introduced that over the past few months, the company has focused on optimizing unit economic efficiency (UE) and achieved significant progress. Firstly, the order structure has continued to improve, and secondly, economies of scale have significantly reduced logistics costs.

From an order perspective, over the past two months, the proportion of high-value orders has increased, with non-tea drink orders accounting for over 75%. The latest average purchase price per order for Taobao Flash Sales has risen by double digits compared to August, and the increase in average order value has driven the overall GMV share of Taobao Flash Sales.

Additionally, as the order share expands, the logistics scale effect of Taobao Flash Sales has gradually become prominent—delivery times are better than last year, and the average logistics cost per order has significantly decreased. Currently, the average logistics cost per order is significantly lower than before the large-scale investment in Taobao Flash Sales.

Under the combined effect of these two factors, the established goal of halving the loss per order in July and August in the short term has been successfully achieved. At the same time, during the business convergence process, user retention and usage frequency have also been better than expected.

In other words, despite heavy investment, Alibaba has achieved the desired results. From Jiedian Finance's perspective, Jiang Fan's statement only addresses the surface logic of orders. For Alibaba, the food delivery battle has never been an isolated war. Its true core logic is to open up new traffic entry points and bring new growth space for the e-commerce business.

One piece of evidence is 'Double 11.' The 2025 'Double 11' is the first time Taobao Flash Sales fully participated. 'It is expected that in the next five years, Flash Sales will bring a trillion yuan in new increment to the platform,' said Chu Duan, President of Taobao at Alibaba China's E-commerce Business Group, at the opening of 'Double 11.'

For Alibaba, the Flash Sales format has enormous synergistic potential with the Alibaba ecosystem.

Let's look at Alibaba's traffic synergy effect. The financial report shows that in the third quarter of this year, the revenue of China's E-commerce Group business was 132.578 billion yuan, up 16% from 114.773 billion yuan in the same period last year; among them, e-commerce business revenue was 102.933 billion yuan, up 9% year-on-year.

Against the backdrop of slowing growth in the entire consumer industry, this growth remains a significant highlight.

Another market concern is whether food delivery subsidies will continue.

Xu Hong, Alibaba Group's Chief Financial Officer, stated that with the overall improvement in operational efficiency, significant improvement in UE, and stabilization of business scale for Taobao Flash Sales, it is expected that investment will significantly decrease next quarter. 'Of course, we will also dynamically adjust our investment strategy based on market competition trends.'

This implies that long-term subsidies are not sustainable.

Regarding this question, Jiang Fan also answered indirectly, stating that in the first stage, Taobao Flash Sales has completed rapid scale expansion. In the second stage, the optimization of the unit economic model for Taobao Flash Sales has met expectations, laying the foundation for the long-term sustainable development of the food delivery business.

'In the next stage, we will continue to refine the user experience, focus on operating high-value users, and focus on the development of retail categories. Taobao Flash Sales is one of the core strategies for upgrading the Taobao platform. Our goal is for it to bring trillion-yuan transaction volume to the platform in three years, driving the overall market share increase of related categories,' Jiang Fan said.

Long-term subsidies are difficult to sustain. For Alibaba, achieving a dynamic balance between scale expansion and profit optimization has become a crucial issue that cannot be avoided.

03. Internationalization: Refined Operations, Double-Digit Revenue Growth

Internationalization has been a highly anticipated business for Alibaba in recent years.

On the one hand, the domestic market is severely competitive, and consumer trends are shifting towards 'cost-effectiveness' and 'quality-to-price ratio'; on the other hand, the enormous opportunities in overseas markets represent new growth points for domestic platforms.

From Jiedian Finance's perspective, regarding this significant opportunity, Alibaba International has been heavily focusing on refined operations since last quarter.

Especially, the operational efficiency of AliExpress has significantly improved. For example, in this quarter, AliExpress upgraded its 'Super Brand Global Launch Plan' and launched the 'Brand+' project, openly announcing its alignment with Amazon, strengthening its platform positioning of 'brand global launch,' and recruiting well-known brands, including Tmall brands and Amazon top sellers.

Benefiting from AliExpress's contribution to performance, Alibaba International achieved profitability this quarter. In this quarter, Alibaba International's retail business revenue was 28.068 billion yuan, up 10% year-on-year.

Another noteworthy growth point is the managed inventory mode.

This mode suddenly emerged in 2023, with almost all platforms starting to 'popularize' the managed inventory mode. AliExpress also launched the Choice business, introducing various modes such as full managed inventory, semi-managed inventory, and overseas managed inventory. As early as the third quarter fiscal year 2024 financial report conference call, Jiang Fan stated that the proportion of AliExpress Choice business in cross-border business had significantly increased. The business is still in its early stages and needs to scale up before pursuing long-term loss convergence. He also mentioned that the next considerable period would be a period of large-scale investment for Alibaba International.

Now, it seems that the investment and judgment regarding this business were correct, as AliExpress is contributing to performance. In the financial report, Alibaba International stated that the overseas managed inventory mode has also expanded to over 30 countries.

Overall, Alibaba International Digital Commerce Group (AIDC) reported revenue of 34.799 billion yuan this quarter, up 10% year-on-year; adjusted EBITA was 162 million yuan in profit, compared to a loss of 290.5 million yuan in the same period last year. In the six months ending September 30, Alibaba International Digital Commerce Group's revenue was 69.54 billion yuan, up 14% year-on-year; adjusted EBITA was 103 million yuan in profit, compared to a loss of 661.1 million yuan in the same period last year.

This also means that Alibaba International has achieved the profitability goal set by Jiang Fan for fiscal year 2026.

Behind this financial report is the gradual implementation of Alibaba's strategic layout (translated as 'layout' in English, but kept as ' layout ' for context integrity if it's a term used in the original text to refer to a specific strategic plan) in the three core areas of AI, food delivery, and internationalization. With a 120 billion yuan investment in AI, explosive growth in C-end applications and increased B-end empowerment have occurred simultaneously; Taobao Flash Sales has achieved scale through high investment; and international operations have successfully turned profitable.

The impressive data indicates that Alibaba is adopting a more aggressive offensive. In the current market environment, how to continuously break through bottlenecks is a core proposition for every company. Under this 'sustainable development' proposition, Alibaba is providing a multi-dimensional answer through the above three strategic layout s (translated as 'layouts'). As for the score, it will require a longer time frame to evaluate.

*The featured image is generated by AI.