Alibaba Group (NYSE : BABA) missed analyst revenue expectations by a noticeable margin but absolutely crushed profit forecasts - a contradiction that sent shares climbing 12.9% despite the initial wobble.
The Chinese e-commerce heavyweight posted revenue of RMB247.65 billion (US$34.6 billion), falling short of the 252.9 billion yuan consensus forecast that Wall Street was banking on.
Net income of 43.11 billion yuan obliterated expectations of 28.5 billion yuan.
The earnings surge came largely from gains in equity investments and offloading Turkish e-commerce firm Trendyol - which means the core operating engine actually lost steam.
Cloud becomes the hero
Cloud computing saved the quarter, with revenue rising 26% to 33.4 billion yuan - a meaningful acceleration from 18% growth in the prior quarter.
This marked Alibaba's strongest cloud performance in recent memory, with AI-related product revenue achieving triple-digit growth for the eighth consecutive quarter.
The AI boom provided crucial momentum for Alibaba's cloud division, which has spent years struggling to match the growth rates of Amazon Web Services or Microsoft Azure.
Meanwhile, Alibaba's core e-commerce business delivered mixed signals.
The main e-commerce division managed 10% revenue growth to 19.6 billion yuan, propped up by a 10% increase in customer management revenue - essentially the fees merchants pay to get noticed.
The All Others segment plunged 28% to 58.6 billion yuan, reflecting the deliberate disposal of physical retail assets that never quite worked as planned.
Alibaba's revenue miss - coming in 2.1% below consensus - reflected broader macroeconomic challenges facing Chinese technology companies rather than company-specific problems.
However, the substantial earnings beat and accelerating cloud growth driven by AI demand suggest Alibaba is positioning itself for the next wave of technology infrastructure spending, even as traditional e-commerce faces headwinds.
At the close of Friday's U.S. session, Alibaba (NYSE: BABA) direct receipts were trading at US$135.00, up 12.9% from Thursday's close of $119.57. Alibaba's market cap stands at $283.05 billion.
