Is Alibaba Group Holding Limited (BABA) A Good Stock To Buy Now?

We came across a bullish thesis on Alibaba Group Holding Limited on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on BABA. Alibaba Group Holding Limited's share was trading at $135.59 as of March 3rd. BABA’s trailing and forward P/E were 18.69 and 15.65  respectively according to Yahoo Finance.

Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally.

BABA delivered robust revenue growth in its September 2025 quarter, with total revenue reaching RMB 247.8 billion, up 15% year over year, driven by strong performances in China e-commerce (+16%) and cloud intelligence (+34%). External cloud revenue rose 29%, and AI-related products now account for over 20% of external cloud sales, highlighting the company’s growing presence in advanced technologies.

Quick commerce also surged 60%, reflecting Alibaba’s aggressive push into faster delivery and ecosystem expansion, although this came at a cost. Profitability, however, weakened sharply, with GAAP net income declining 53% to RMB 20.6 billion, operating cash flow falling to RMB 10.1 billion, and free cash flow turning negative at RMB –21.8 billion due to substantial investments in AI and quick commerce initiatives. Despite these pressures, the company has achieved a 50% reduction in per-order losses since mid-summer, signaling improving operational efficiency in its high-growth segments.

Alibaba’s competitive positioning remains strong, particularly in China's e-commerce and AI cloud, where management claims market share exceeding the combined next three competitors. The company faces challenges, including capital intensity, margin compression, and uncertainty around the timing of returns on AI CapEx, but management is prioritizing long-term ecosystem growth over near-term earnings.

As investments mature and scale benefits materialize, profitability is expected to recover, creating a potential rerating opportunity. For investors, the combination of market-leading positions in key growth areas and significant AI-driven expansion provides an attractive risk/reward dynamic, with revenue growth and strategic initiatives likely to unlock value despite short-term margin pressure.

Previously, we covered a bullish thesis on Alibaba Group Holding Limited (BABA) by Kontra Investments in March 2025, highlighting strong e-commerce and cloud growth, AI expansion, and stable profitability. BABA’s stock price has appreciated by approximately 0.3% since our coverage. Sergey shares a similar view but emphasizes the recent surge in quick commerce and AI investments, which have pressured near-term profitability while positioning the company for long-term upside.

Alibaba Group Holding Limited is on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 115 hedge fund portfolios held BABA at the end of the fourth quarter which was 130 in the previous quarter. While we acknowledge the risk and potential of BABA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BABA and that has 10,000% upside potential, check out our report about this cheapest AI stock

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