Chinese tech giant Alibaba (BABA) will announce its fiscal Q4 results on Thursday, May 15. So far, 2025 has been a strong year for Alibaba, with its stock surging over 57% in the year-to-date. This impressive rally reflects acceleration in its businesses and an improving macro backdrop.

Alibaba’s fourth-quarter financials will benefit from the continued strength in its e-commerce, AI, and cloud computing businesses. Beyond its internal performance, external factors are also working in Alibaba's favor. The recent easing of trade tensions between the United States and China has helped reduce market uncertainties, providing a favorable backdrop for Chinese tech stocks. These improved relations could translate into more stable economic conditions, which, in turn, support Alibaba’s growth trajectory.

Analyst sentiment is also bullish on BABA stock ahead of the earnings release. All these factors suggest that current momentum in BABA stock could extend further if the company exceeds the Street’s forecasts.

Alibaba: Q4 Expectations

The momentum in Alibaba’s top line will likely sustain in Q4. Despite challenges in the broader economy, Alibaba’s focus on strengthening its core businesses is paying off and will drive its financials.

Alibaba’s efforts to boost its domestic e-commerce platforms, Taobao and Tmall, are paying off. Investments to improve user experience and attract new shoppers translate into higher order volumes. Meanwhile, the company’s premium loyalty program, 88VIP, continues to thrive, reaching an impressive 49 million members in the third quarter. This segment of high-spending customers not only enhances Alibaba’s revenue quality but also underpins the long-term success of its membership-driven strategies.

In addition to user growth, Alibaba’s e-commerce marketplaces benefit from rising customer management revenue (CMR). Factors such as increasing gross merchandise volume, merchant-friendly initiatives, and a better take rate are driving this improvement. Tools like Quanzhantui, Alibaba’s artificial intelligence (AI)- powered digital marketing solution, are gaining traction, further supporting revenue growth. Moreover, increasing software service fees will support the segment’s top line.

Internationally, Alibaba’s e-commerce business shows positive trends, particularly in cross-border trade. Alibaba’s efforts to streamline operations and improve efficiency are helping to bolster its global footprint.

One of Alibaba’s key growth catalysts is its cloud computing and AI business. The segment has been delivering accelerating revenue growth, thanks to a strong performance in the public cloud space. AI continues to be a major driver, with AI-related product revenue maintaining triple-digit growth for six consecutive quarters. Management has highlighted surging demand for AI inference workloads, which account for over 60% to 70% of new customer demand. This demand is expected to broaden Alibaba’s AI applications across industries, driving scale and improving profit margins in its AI infrastructure.

Despite the heavy investments in cloud and AI capabilities, Alibaba’s focus on operational efficiency is helping to cushion its bottom line. Analysts project that Alibaba will report earnings of $1.27 per share for Q4, reflecting a healthy 20.95% increase year-over-year. However, Alibaba’s aggressive push in emerging technologies continues to weigh on near-term margins. Notably, the company has a mixed track record in recent earnings, beating Wall Street estimates in two of the last four quarters but falling short by 2.46% in the previous quarter.

Conclusion

The momentum in Alibaba’s core businesses will continue to drive its financials. A major focus for Alibaba is its cloud and AI infrastructure. These investments are expected to significantly improve how the company procures hardware and manages infrastructure build-out costs. As Alibaba scales up these operations, the benefits should multiply, streamlining costs, making it easier to attract new customers, and boosting overall efficiency.

Wall Street remains bullish on Alibaba’s prospects. All analysts covering the stock rate it a “Strong Buy.” 

Analysts’ average price target of $158.20 implies nearly 20% upside potential from current levels.