Should You Buy Alibaba (BABA) Stock Before Wednesday’s Earnings Report?

Key Takeaways

• Alibaba’s Q4 FY26 earnings arrive May 13, scheduled before U.S. markets open.
• Analysts anticipate EPS of $0.90, representing a decline from last year’s $1.83, while revenue forecasts point to approximately $36.35 billion (+12% YoY).
• Profit projections show net income at 11.71 billion yuan, compared to 12.96 billion yuan in the previous year.
• Intense competition in food delivery with JD.com and Meituan has created margin compression throughout the industry.
• The options market suggests a potential 6.88% price swing following the earnings announcement.

Shares of Alibaba (BABA) have declined approximately 6% year-to-date, with the stock hovering around $136.88 during Wednesday’s premarket session. Investor attention now shifts to the company’s upcoming financial results.

Alibaba Group Holding Limited, BABA

The e-commerce and cloud computing powerhouse will unveil its Q4 FY26 performance before U.S. trading begins on May 13. Analyst consensus points to earnings per share of $0.90, representing a significant contraction from the $1.83 reported during the comparable period last year.

On the revenue front, the outlook appears more optimistic. Forecasts suggest approximately $36.35 billion in sales, marking a 12% year-over-year expansion. In yuan, total revenue is projected at 282.44 billion, climbing from 255.29 billion in the prior-year quarter.

Profitability, though, faces headwinds. Wall Street estimates net profit at 11.71 billion yuan, declining from the 12.96 billion yuan recorded in Q4 FY25.

The margin pressure stems from two primary sources: substantial capital allocation toward AI infrastructure and persistent red ink from the company’s instant delivery and food services segment.

Alibaba has been locked in an aggressive pricing battle with JD.com and Meituan in the food delivery arena. While consumers benefit from lower prices, profit margins have taken a beating. JD.com’s Monday earnings revealed strength in its core retail operations despite facing identical competitive dynamics.

Market participants will scrutinize management’s commentary on reducing quick-commerce losses. That represents the immediate challenge. The strategic question centers on whether artificial intelligence investments can ultimately offset these near-term costs.

Artificial Intelligence Takes Center Stage

Morgan Stanley highlighted Alibaba’s expanding footprint in China’s AI ecosystem, noting increased enterprise adoption of its Qwen AI model. The investment bank views Alibaba as well-positioned to capture growing AI expenditures, given its comprehensive suite spanning cloud infrastructure, language models, and software applications.

Macquarie’s Ellie Jiang made a modest adjustment to her price objective, lowering it to $175.90 from $176.20 while maintaining an Outperform recommendation. Her thesis emphasizes cloud computing as a primary growth engine this quarter, driven by accelerating enterprise AI implementation.

Benchmark Research’s Fawne Jiang maintains a Buy rating alongside a $220 price objective. Her analysis acknowledges that current investment cycles may create temporary margin pressure, yet she characterizes AI as “a durable multi-year growth driver supporting both revenue growth and longer-term margin expansion.”

Options Activity Signals Volatility Ahead

Derivatives markets indicate significant anticipated movement. The at-the-money straddle pricing suggests a 6.88% post-earnings move in either direction.

That represents substantial volatility for a stock already trading 6% below its year-opening price. Concerns about China’s macroeconomic backdrop and elevated AI infrastructure costs have weighed on share performance.

Nevertheless, the analyst community maintains a generally bullish posture. Alibaba holds a Strong Buy consensus rating, with 14 Buy recommendations and two Hold ratings issued over the past three months.

The mean price target sits at $184.07, suggesting approximately 34% potential upside from current trading levels.

Alibaba’s Q4 results drop before Wednesday’s opening bell on May 13.

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