Alibaba Group Holding BABA faces a difficult path to stock recovery as its core e-commerce engine shows mounting signs of fatigue. The company's third-quarter fiscal 2026 results, covering the quarter ended Dec. 31, 2025, revealed a troubling deceleration that investors cannot easily dismiss.
Total revenues came in at RMB 284.8 billion ($40.7 billion), rising a thin 2% year over year — a sharp retreat from the 15% growth the company posted in the prior quarter (on a like-for-like basis, excluding disposed businesses). The figure missed expectations and underscored how difficult it has become to sustain momentum in China's increasingly saturated online retail landscape.
The most concerning data point was Customer Management Revenue (CMR), the key measure of advertiser and merchant monetization on Taobao and Tmall, which grew a mere 1% year over year. This compares unfavorably to the 9-10% CMR growth the company delivered just a quarter earlier, signaling weaker transaction activity and diminishing advertiser confidence in the platform's traffic quality. China E-commerce Group’s revenues overall grew 6%, but the underlying CMR softness suggests the top-line gain was propped up by lower-margin streams rather than core marketplace strength.
Profitability suffered significantly. GAAP net income fell 66% year over year, while non-GAAP diluted earnings per ADS dropped 67% to RMB 7.09. Adjusted EBITDA declined 57% as heavy investments in quick commerce — where losses remain deep despite 56% revenue growth — and AI infrastructure weighed on margins. Free cash flow plunged 71%.
The company is burning through profitability to fund a quick commerce business that might not reach its profitability target until fiscal 2029, per its own guidance, while its traditional e-commerce moat is visibly narrowing. Until CMR growth stabilizes and margin pressures ease, a sustained stock recovery remains an uphill task.