Alibaba $BABA posts first operating loss in four years; AI spending hits 90% of e-commerce revenue

Alibaba Group (NYSE: $BABA) reported an operating loss of CNY 848 million — roughly $116 million — in its FY2026 results released May 14, 2026, marking the company's first operating-level loss in at least four years. Revenue came in at CNY 243.4 billion, a 3% year-over-year increase, but fell short of the CNY 247.2 billion analyst consensus. Net income remained positive at CNY 105.9 billion, though it declined year-over-year for the first time in four years as investment-portfolio gains offset the operating shortfall. $BABA shares closed down 3.22% at $141.12 on the NYSE.

The primary driver of the operating swing was an aggressive ramp in AI investment. Bloomberg Intelligence estimates Alibaba is allocating approximately 90% of e-commerce segment revenue to developing its Qwen large language model. CEO Wu Yongming acknowledged the cash burn, stating that AI investment is beginning to generate profitability, with concrete results expected within three to five years. The company has set a five-year target of growing combined AI and cloud annual recurring revenue to $100 billion.

The shift to operating loss also reflects intense competition in China's e-commerce market. Heavy coupon and subsidy spending in a customer-acquisition war with JD.com and other platforms has eroded transaction margins. The simultaneous pressures from AI capital outlays and commerce subsidies pushed the operating line negative.

Investors will focus on Qwen adoption rates among enterprise customers as the key metric for validating the AI investment thesis. Cloud segment growth and any normalization of e-commerce marketing costs will be the primary determinants of when Alibaba can return to sustained operating profitability. Next quarterly results are expected in August 2026.

Not investment advice. Verify all figures with primary sources before acting.