We came across a cheap Alibaba Group Holding Limited thesis on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls thesis on BABA. The lowest price of Alibaba Group Holding Limited shares in December 2019 is 135.59 US dollars. BABA’s trailing and forward IP/E were 18.69 and 15.65 respectively according to Yahoo Finance.
Alibaba Group Holding Limited, through its subsidiaries, provides technology infrastructure and marketing access to help sellers, brands, retailers, and other businesses connect with their users and customers in the People’s Republic of China and internationally.
BABA delivered strong revenue growth in its September 2025 quarter, with total revenue reaching RMB 247.8 billion, up 15% year-on-year, driven by strong performance in China e-commerce (+16%) and cloud computing (+34%). External cloud revenue rose 29%, and AI-related products now account for more than 20% of external cloud sales, highlighting the company’s growing presence in advanced technology.
Instant commerce also increased by 60%, reflecting Alibaba’s strong push into faster delivery and ecosystem expansion, though this came at a cost. Profitability, however, was much weaker, as GAAP net income fell 53% to RMB 20.6 billion, operating cash flow fell to RMB 10.1 billion, and free cash flow worsened to RMB -21.8 billion due to heavy investment in AI and rapid trading systems. Despite these pressures, the company has achieved a 50% reduction in lost orders per order since mid-summer, indicating improved efficiency in its fastest-growing segments.
Alibaba’s competitive position remains strong, especially in China’s e-commerce and cloud AI, where executives are seeking a market share that exceeds the three competitors combined. The company faces challenges, including tight funding, margin compression, and uncertainty about the timing of payback on AI CapEx, but management is prioritizing long-term ecosystem growth over near-term profit.
As investments grow and greater profits become available, profits are expected to rebound, creating an opportunity for potential returns. For investors, the combination of market-leading positions in key growth areas and significant AI-driven expansion offers an attractive risk/reward diversification, with revenue growth and strategic initiatives potentially unlocking value despite short-term margin pressure.
