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QS Research · Michael Burry's Scion Capital analyst template · 2006

Alibaba Group Holding Ltd (BABA)

As of 2026-11-02 · 11/15 boxes filled from SEC filings and market data

Conclusion: WATCH

Conviction low · base case -21% · downside -49% · upside +11%

Alibaba is down 39% over the past year but is not cheap on current earnings: using TTM net income of about $11.10B (FY Mar 2026 net income of $15.90B less the June 2025 quarter's inflated RMB42.38B gain plus the June 2026 quarter's RMB10.44B), the stock trades at roughly 21.6x, while its FY Mar 2026 EV/EBIT is 26.2x. The profit collapse is partly temporary—heavy AI/cloud capex and a contra-revenue business development program are suppressing reported earnings even as cloud revenue accelerates 45%—but the core CMR decline, regulatory overhang, and peer multiples of 5.6x-11.8x earnings suggest the problems could be more permanent. Applying 17x, 11x, and 24x to that TTM net income gives $81.25, $52.58, and $114.70 per ADS, respectively; none meets the long or short rule, so I would rather watch for clearer evidence that AI investment monetizes without further damaging the commerce cash cow.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    The oldest report (FY2021) describes Alibaba's revenue as principally customer management, membership, logistics, cloud, and goods sales. Six-year data show revenue grew from CN¥717.29B in FY2021 to CN¥1,023.67B in FY2026, but FY2026 operating income collapsed to CN¥50.15B and operating cash flow to CN¥76.21B. The latest 20-F does not restate segment economics; it focuses on regulatory risks, including SAMR quick-commerce scrutiny since early 2026.

  2. ✓ 2. Competitive advantage

    The FY2026 20-F does not present a durable moat; it describes competition from established Chinese and global players with strong brands, technology and financial resources. The financials show scale (FY2026 revenue CN¥1,023.67B, equity CN¥1,060.89B) but weakening operating results (FY2026 operating income CN¥50.15B, operating cash flow CN¥76.21B). Net income CN¥105.90B exceeds operating income, so bottom-line results include non-operating items. Regulated licenses exist through VIEs but are not positioned as a competitive advantage.

  3. ✓ 3. 10-Q takeaways

    Alibaba's June 2026 quarter revenue grew 9% YoY to RMB268,953 million, but customer management revenue fell 7% due to a new business development program contra revenue; like-for-like CMR would have grown 1%. Operating income fell 57% and net income fell 75% on tech investment, goodwill impairment/provision, and lower investment gains, while non-GAAP net income fell 38%. AI Cloud and Compute Services accelerated to 45% external revenue growth with AI-related product revenue up triple digits for the 12th straight quarter, but capex surged 75%, pushing free cash flow to an outflow of RMB44,670 million. The company reorganized into Alibaba E-commerce Group, AI Cloud and Compute Services, and AI Labs and Applications, and repurchased only US$162 million of stock.

  4. ✓ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ✓ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ○ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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