Alibaba’s (BABA) latest fourth-quarter (Q4) earnings report sparked a selloff, with its shares tumbling 7.6% after missing Wall Street’s revenue and profit forecasts. Investors were disappointed, especially given BABA stock’s year-to-date rally. After such a run-up, falling short of expectations was bound to trigger a harsh market reaction.

However, looking beyond the headline miss, Alibaba’s underlying business momentum remains promising. The company continues to expand its key growth businesses, including AI and cloud computing, e-commerce, and its broader internet ecosystem. With the surge in AI adoption, Alibaba is doubling down on investments in AI infrastructure and advanced technologies. This will strengthen its competitive edge and position Alibaba well to capitalize on the significant long-term opportunities in the AI space.

Despite the earnings stumble, analysts see potential for a robust recovery. Wall Street's most bullish analysts see Alibaba stock climbing to $180 within the next 12 months, a potential upside of 45% from its current price.

Of course, reaching that price target won’t be easy. Still, Alibaba’s aggressive push in AI-driven innovations and the steady growth of its core businesses provide a solid foundation for strong growth. Let’s take a closer look.

Alibaba’s Growth Engine Roars

Despite recent market jitters, Alibaba’s core businesses are showing strong signs of acceleration, with its strategic bets on AI and cloud infrastructure starting to pay off.

In its latest quarter, Alibaba Cloud posted impressive growth, with revenue climbing 18%, a noticeable uptick from the 13% growth seen in the previous quarter. The booming demand for AI solutions is driving its cloud revenue. In fact, revenue from AI-related products has maintained triple-digit year-over-year growth for the seventh consecutive quarter, reflecting Alibaba's solid footing in AI.

For the full fiscal year, Alibaba Cloud delivered double-digit revenue growth, and management is bullish that AI will continue to be a significant growth catalyst. Despite ongoing concerns about AI supply chain bottlenecks, Alibaba believes the long-term demand for cloud and AI services will support its future growth. Supply chain hiccups may cause turbulence, but the underlying trajectory remains firmly upward.

Importantly, Alibaba isn’t slowing down its cloud and AI infrastructure investments. The company is doubling down on innovation, advancing large language model capabilities and maintaining its commitment to open-source development.

Meanwhile, Alibaba’s AI products are also seeing wider adoption across industries. What started in digital-native sectors is now spreading to traditional industries like manufacturing, reflecting the growing relevance of AI. This expanding industry penetration reflects Alibaba’s position as a leading AI and cloud services player.

On the e-commerce front, Alibaba focuses on user growth and experience improvements. The Taobao and Tmall Group reported stronger momentum, with its premium 88VIP membership base surpassing 50 million. Customer management revenue rose 12% year-over-year in Q4, while adjusted EBITDA grew by 8%.

International e-commerce has also been a bright spot. The company’s cross-border business achieved 22% year-over-year revenue growth this quarter, with operational and investment efficiencies improving. Management remains confident that Alibaba International Digital Commerce (AIDC) is on track to achieve quarterly profitability in fiscal 2026, despite uncertainties in global trade.

Beyond its core businesses, Alibaba’s other segments are holding up well. This quarter, the Digital Media and Entertainment Group turned profitable on an adjusted EBITDA basis, contributing to the company’s overall stability.

The Bottom Line

While Alibaba’s Q4 results were below Wall Street expectations, the underlying business momentum tells a more optimistic story. The company’s long-term growth drivers are intact, and its investments in AI, cloud, and international e-commerce are positioning it for future success.

This optimism is echoed by analysts. Every analyst covering Alibaba stock maintains a “Strong Buy” rating, signaling strong confidence in the company’s growth outlook.