- Alibaba Targets Big AI Gains Even as Business Growth Falls Short
May 13, 2026
(Bloomberg) -- China’s twin technology leaders reported revenue that fell short of estimates, signaling the challenges in translating higher AI spending into profits. Yet investors piled into Alibaba Group Holding Ltd. after the company declared it’s on track to triple revenue from artificial intelligence services.
Most Read from Bloomberg
Ambani’s Cola War With Coke, Pepsi Spurs Fridge Bonanza in India Nvidia’s CEO Joins Trump in China With AI in the Spotlight Mamdani Scraps Property Tax Hike, Counts Second-Home Revenue Trump Lands in China for Xi Trade Summit With Iran War in Limbo
Chief Executive Officer Eddie Wu said Alibaba was prioritizing AI growth over the bottom line — meaning it’s likely to spend “far, far” more than previously targeted. Annual recurring revenue from models and services should hit 10 billion yuan ($1.5 billion) in June and was on track to surpass 30 billion yuan by the end of the year, he told analysts on a conference all. The firm’s US shares rose 8.2% despite recording its first operating loss since the depths of the Covid pandemic in 2021, partly because of the cash it’s funneling into AI initiatives.
Wu outlined his sales target after Tencent Holdings Ltd. reported its slowest pace of revenue growth in over a year, though it outpaced its arch-foe thanks to a resilient advertising and gaming business. The WeChat operator’s US stock gained almost 5%.
The twin reports reflect how China’s biggest tech firms are struggling to wring new revenue from AI despite billions of dollars of investment in the data centers, research and talent required to drive the technology’s development. Like their US peers, Alibaba and Tencent face increasing pressure from investors to translate their AI expenditures into lucrative returns — while at the same time coming under attack from lower-cost rivals such as Moonshot and MiniMax.
Alibaba Down With Results ‘Burdened’ By AI Spending: Street Wrap
Among major Chinese tech firms, Alibaba is one of the biggest spenders with a pledge to shell out some 380 billion yuan ($56 billion) on AI over a three-year span. Executives from both companies sought to assure investors that their endeavors in the field would soon bear fruit.
“While AI technology investment has weighed on profit, management noted it is a deliberate strategy to capture the enormous opportunity,” Citigroup analysts wrote, raising their price targets on Alibaba’s US shares.
Alibaba this year broadcast its intention to begin monetizing AI — making money off a plethora of initiatives from its cloud service to AI agents and enterprise software. The Chinese e-commerce pioneer raised prices for its AI and cloud services, pivoted to focus on proprietary models and restructured its teams to better profit from its AI capabilities. Wu has said the company aims to quintuple cloud and AI revenue to $100 billion annually in five years.
Story Continues
As part of commercialization efforts, Wu helped set up and lead a new business group — Alibaba Token Hub — to streamline operations by bringing most research functions as well as consumer and enterprise products under one umbrella.
On Wednesday, executives stressed that its cloud services business — one of China’s largest — was humming. The company now has an AI app integrated with shopping, navigation and payment tools, and offers an agentic tool dubbed WuKong targeting enterprise clients. It’s connected its Qwen AI app to its Taobao platform to drive e-commerce growth and raised its cloud service prices earlier this year, including hiking the cost of AI computing and storage products by as much as 34%.
Alibaba’s ambition goes beyond AI applications. Wu has said his company is committed to building all-stack AI capabilities including hardware. Alibaba is now planning to list its chipmaking unit T-Head to tap strong investor interest in Chinese alternatives to Nvidia Corp., after its semiconductor arm won mobile operator China Unicom as an external customer.
“We are confident in our business outlook and will continue to invest in AI + Cloud to strengthen our competitive advantages,” Chief Financial Officer Toby Xu said in a statement.
Tencent has shed roughly $160 billion — or 23% — of market value this year, far exceeding the slide by Alibaba. Investors in both Chinese internet icons have recently shifted their focus toward pure-play AI model creators like Zhipu and MiniMax Group Inc., whose valuations have multiplied since their stellar market debuts in January.
Shenzhen-based Tencent last month revealed a major upgrade to its foundation model, Hunyuan — the first high-stakes test after it restructured its AI operations under the stewardship of OpenAI hire Yao Shunyu. The open source model is now a leader among peers with similar parameter sizes, and has driven lasting demand on distribution platform OpenRouter, executives said Wednesday. Tencent also leverages DeepSeek to power its main ChatGPT-style chatbot, setting it apart from domestic internet peers.
What Bloomberg Intelligence Says
Alibaba’s “commerce + AI” margin slump to 1.3% in fiscal 4Q, from a historical midteens level, heightens the risk that a profit rebound for this combined group will miss consensus of a 44% jump, even if losses from quick commerce and AIDC narrow. Including the costs of its Qwen-led AI push, which are booked in the All Others segment, Alibaba effectively redeployed more than 90% of its March-quarter China e-commerce profit into Qwen user acquisition and adoption — a spending run rate that looks set to persist into fiscal 2027.
- Catherine Lim, analyst
Click here for the research.
Yet even as they focus on their internal endeavors, both Alibaba and Tencent are grappling with serious external competition in their core businesses.
Alibaba is engaged in a margin-eroding war of discounts and subsidies with Meituan and JD.com Inc. in food delivery. And Tencent continues to vie with TikTok owner ByteDance Ltd. for online users, though its advertising arm is thriving.
“Lower-than-expected operating expenses offset softer video-game sales,” Bloomberg Intelligence analyst Robert Lea wrote. “AI targeting boosted full-year ad sales growth to 19.8%, which is remarkable for a firm of this size.”
--With assistance from Debby Wu, Henry Ren, Yazhou Sun, Ville Heiskanen, Vlad Savov and Mayumi Negishi.
Most Read from Bloomberg Businessweek
Behind the Claude Frenzy That Ate Up All the Mac Minis The Tiny, Essential Building Blocks Powering the AI Boom Trump Is Losing the Voters He Needs Most Undersea Internet Cable Projects Are Getting Tangled in the Iran War At China Summit, Trump Has CEOs, But Xi Has Leverage
©2026 Bloomberg L.P.
View Comments
- JD.Com Analyst Raises Estimates On Recovering Profitability, Earnings Inflection
May 13, 2026
Shares of JD.Com Inc (NASDAQ:JD) surged on Wednesday after the company posted strong first-quarter (Q1) results.
Benchmark analyst Fawne Jiang said the Q1 results and second-quarter outlook point to "a clear earnings inflection point," with profitability growth "firmly back on track."
The JD.Com Analyst: Jiang, reiterated a Buy rating and raised the price target from $38 to $42.
The JD.Com Thesis: Despite a challenging backdrop, the company delivered modestly better-than-expected revenue, margin expansion, and a strong profitability performance, Jiang added
Check out other analyst stock ratings.
JD.Com generated 5% year-on-year revenue growth, slightly higher than consensus, he added.
View more earnings on JD
While concerns over margin dilution from higher food delivery investment led to a sell-off in the stock in 2025, the company now seems to be "returning to fundamentals," the analyst stated.
JD Retail's margin expanded despite some revenue headwinds, which was driven by mix improvement and operating efficiency, while losses from new initiatives narrowed 30% year-on-year, he added.
Room For Further Earnings Upside
"Core JD Retail is delivering higher-quality growth, led by sustained strength in general merchandise (GM), advertising, and marketplace monetization, driving margin expansion, while food delivery losses are narrowing faster than expected," Jiang wrote.
The company's investments in automation, robotics, and AI-driven logistics are driving the potential to improve operating leverage over time, which supports its long-term margin trajectory, he further said.
Jiang expects JD Retail to generate 5% revenue growth in 2026, with margins of 4.9%.
The analyst raised the full-year adjusted net income estimate to RMB 30 billion, from RMB 28 billion, to reflect stronger margins at JD Retail and a faster contraction of losses at the food delivery business. The forecast is conservative and leaves room for further earnings upside, he added.
Read Also: The Clarity Act Is One Vote Away: Here's What 50 Million Crypto Holders Get If It Passes
Price Action
Shares of JD.Com had risen by 7.90% to $33.98 at the time of publication on Wednesday.
Image: Shutterstock
View more ratings on JD
Up Next: Transform your trading with Benzinga Edge's one-of-a-kind market trade ideas and tools. Click now to access unique insights that can set you ahead in today's competitive market.
Get the latest stock analysis from Benzinga:
JD.COM (JD): Free Stock Analysis Report
This article JD.Com Analyst Raises Estimates On Recovering Profitability, Earnings Inflection originally appeared on Benzinga.com
© 2026 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
View Comments
- Alibaba’s Profit Plunges and the Stock Rises. Thank Trump and Xi.
May 13, 2026
Alibaba Group Holding stock was rising on Wednesday as reports of potential progress on lowering U.S.-China tariffs outweighed a mixed earnings report. Alibaba’s American depositary receipts were up 6.6% in morning trading. The ADRs were reversing earlier losses amid optimism that the summit between President Donald Trump and Chinese leader Xi Jinping will lead to lower import duties.
Continue Reading
- Asian Equities Traded in the US as American Depositary Receipts Wednesday Surge Higher in Wednesday Trading
May 13, 2026
Asian equities traded in the US as American depositary receipts were surging higher Wednesday mornin
PREMIUM
Upgrade to read this MT Newswires article and get so much more.
A Silver or Gold subscription plan is required to access premium news articles.
Upgrade
Already have a subscription? Sign in
- Alibaba’s Big AI Bet Isn’t Paying Off Yet and the Stock Is Suffering
May 13, 2026
Alibaba Group Holding stock was falling in premarket trading Wednesday as earnings showed a mixed picture around its artificial-intelligence progress with sales rising but adjusted profit plummeting. Alibaba reported a fiscal fourth-quarter net profit of 23.50 billion yuan ($3.41 billion), nearly double from the same period a year earlier due to gains on investments. Alibaba attributed the drop in adjusted earnings to investments in its technology and quick commerce businesses.
Continue Reading
- JD.com Inc (JD) Q1 2026 Earnings Call Highlights: Strong Growth in Service and Logistics Amidst ...
May 12, 2026
This article first appeared on GuruFocus.
Total Revenue: RMB316 billion, up 5% year-on-year. JD Retail Revenue Growth: 2% year-on-year. General Merchandise Revenue Growth: 15% year-on-year. Service Revenue Growth: 21% year-on-year. Marketplace and Marketing Revenue Growth: 19% year-on-year. JD Retail Operating Margin: 5.6%, up 0.7 percentage points year-on-year. JD Retail Gross Margin: 18.6%, up 1.8 percentage points year-on-year. Non-GAAP Net Profit: RMB7.4 billion. Operating Profit: RMB15 billion, up 16.5% year-on-year. JD Logistics Revenue Growth: 29% year-on-year. Free Cash Flow: RMB22 billion for the last 12 months. Cash and Cash Equivalents: RMB216 billion at the end of Q1. Share Repurchase: USD 631 million, approximately 44.5 million Class A ordinary shares. Annual Cash Dividend: USD 1.4 billion or $1 per ADS.
Warning! GuruFocus has detected 5 Warning Signs with JD. Is JD fairly valued? Test your thesis with our free DCF calculator.
Release Date: May 12, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
JD.com Inc (NASDAQ:JD) reported a 4.9% year-on-year revenue growth in Q1 2026, with a sequential acceleration in key growth drivers. JD Retail's operating margin expanded by 0.7 percentage points year-on-year to 5.6%, nearing historical highs. The general merchandise category saw a revenue growth acceleration to 14.9% year-on-year, contributing significantly to total GMV. JD's advertising and commission revenues experienced strong double-digit growth, becoming a powerful engine for high-quality growth. JD food delivery achieved a significant sequential loss reduction, contributing to advertising revenues and improving unit economics.
Negative Points
Revenues from electronics and home appliances were down 8.4% year-on-year, despite a sequential improvement. The high trading base and rising product prices for electronics are expected to temper growth in Q2. Total operating expenses as a percentage of revenues increased year-on-year, reflecting higher marketing spending and R&D investments. Free cash flow decreased to RMB22 billion from RMB38 billion in the prior year, primarily due to cash outflows associated with the trading program. JD Retail's marketing expense ratio has declined, but the company continues to face intense market competition in the supermarket sector.
Q & A Highlights
Q: Despite facing a high base in the first quarter, JD Retail delivered better-than-expected growth. Has management observed any shift in consumer behavior, particularly in the context of price increases in electronic categories? How should we think about the growth trend over the next two quarters? A: (Ran Xu, CEO) In Q1, JD Retail saw solid performance with revenue growth accelerating for electronics and home appliances. Despite a high base from last year, we leveraged our supply chain capabilities to consolidate market leadership. We observed a shift towards mid- to high-end models and top-tier brands due to price hikes in smartphones and PCs. While Q2 may face pressure, we expect stronger growth in the second half, especially in home appliances, as the comparison base normalizes.
Story Continues
Q: How should we assess JD Retail's margin trajectory given macro uncertainties, industry competition, and rising ASP in electronic products? A: (Unidentified Company Representative) JD Retail achieved double-digit growth in operating profit with a margin expansion to 5.6% in Q1. This was driven by gross margin expansion across categories and improved marketing efficiency. We remain committed to our long-term high single-digit margin target, leveraging our 1P supply chain strength, category improvements, and platform ecosystem development.
Q: With the launch of Joybuy in Europe, how should we view the near-term investment intensity and long-term impact on new business loss and ROI? A: (Ran Xu, CEO) Joybuy was launched in March, leveraging JD's supply chain and logistics capabilities. Investment in international business remained stable, and as order volume grows, economies of scale will improve unit economics. We will focus on key supply chain areas to enhance user experience and drive long-term ROI, maintaining financial discipline.
Q: How will JD leverage AI agents in retail, and what are the strategies regarding agent-to-agent interactions? A: (Ran Xu, CEO) JD is using AI to enhance user experience, reduce costs, and improve efficiency. Our AI agent, [Xin Yang], helps identify and match consumer demand, with significant growth in user engagement. We are deploying AI across procurement, sales, and logistics to create a seamless end-to-end workflow, enhancing overall efficiency.
Q: What is JD's strategy for the food delivery business, and does JD aim to operate it profitably? A: (Ian Su Shan, CFO) JD food delivery achieved significant loss reduction in Q1 while maintaining healthy order volume. We aim for profitability, leveraging synergies within our ecosystem. Food delivery drives traffic growth, enhances user engagement, and enriches our platform's supply, contributing to long-term strategic value.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
View Comments
- JD.com (JD) Earnings A Test For Michael Burry’s Bull Thesis
May 12, 2026
JD.com Inc. (NASDAQ:JD) is one of the 9 Stocks Big Short’s Michael Burry Is Betting On. On May 5, an SPDB analyst set a target price of HK$135 on JD.com Inc. (NASDAQ:JD) and maintained a Buy rating on the stock. This reflects a 14.5% upside from here on. Michael Burry usually backs stocks for much more upside than what the analyst suggests, and he often goes big. That is exactly what he is doing with JD, as he reported on April 10:
"I bought shares in JD.com and Alibaba today. JD is a significant add, and Alibaba is a new position, a little over 6%. JD is a bit more than that."JD.com Inc. (NASDAQ:JD) is one of the 9 Stocks Big Short’s Michael Burry Is Betting On.
Burry has called the recent price action an attractive entry point, but the upcoming earnings on May 12 could completely change that if things go wrong. The company is expected to report an equivalent of $519 million in net profit during the quarter. The revenue is expected to be around $45.6 billion. Analysts expect the company to continue narrowing its losses in the food-delivery business, which should further strengthen the bottom line.
JD.com Inc. (NASDAQ:JD) is an internet retail and supply chain-based technology company. It also acts as a service provider and has three segments: JD Retail, JD Logistics, and New Businesses. It is headquartered in Beijing, China.
While we acknowledge the potential of JD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 10 Best Stocks to Buy Before SpaceX IPO and8 Best Cloud Computing Stocks To Buy In 2026.
Disclosure: None. Follow Insider Monkey on Google News.
View Comments
- China's JD.com reports 5% rise in quarterly revenue, beating estimates
May 12, 2026
STORY: JD.com beat first-quarter revenue and profit expectations on Tuesday.It was seen as a positive sign by investors and shares rose about 1% after the update.Subsidies from local governments have proved helpful to JD.com.It's encouraged consumers to trade in old appliances and electronics, with JD.com the biggest retailer of these goods.Markets watchers will want to see if Beijing's subsidy program can help the firm keep up its momentum.Especially as tariff and consumer-demand pressure mounts.JD.com's home Chinese market has long struggled with weak consumer confidence.That's due to a property slump and higher tariffs imposed by the U.S. on many Chinese goods.The U.S.-Iran war has also raised fuel prices and the cost living - which has hit consumer spending power.JD.com said revenue for the quarter ended March was just under $46.5 billion - that was ahead of analyst forecasts.However, higher costs hit net income.JD.com has spent more on fulfilment costs, research and development as well as marketing.
View Comments
- JD.com Stock Rises After Earnings. It’s Shrugging Off China’s Price War.
May 12, 2026
Income for JD’s retail business jumped 17% from a year ago as the Chinese government rolls out subsidies to try to revive spending.
Continue Reading
- Alibaba Earnings Are Coming. Food-Delivery and AI Investment Could Hurt Profits.
May 12, 2026
Alibaba earnings are expected to show falling profit as it invests in artificial intelligence and food delivery.
Continue Reading
