r/baba
Why Alibaba is tanking today
Alibaba is dropping as investors digest its shift to a high-capex, low-margin model resembling Amazon 2014-2018, delaying cash returns.
- Cloud business growth is showing positive momentum.
- Quick commerce unit economics are expected to turn positive by FY27.
- Customer management revenue is being effectively managed.
- Transitioning to a high-capex, low-margin model will suppress near-term earnings.
- Delayed cash returns and free cash flow reduce appeal for income-focused investors.
- Strategic pivot mirrors heavy investment eras, risking prolonged lack of shareholder payouts.
Is Alibaba willing to be a lower-margin, higher-capex, higher-strategic-optionality business for the next 3-5 years?
The letter says yes. Explicitly. The framing of “growth mindset,” “investing patiently,” and “long-term thinking” is the polite Chinese-tech way of telling shareholders: don’t expect cash returns soon, we’re building.
This is the single biggest risk to your hold. Not cloud growth (that’s working). Not quick commerce (UE turning FY27). Not CMR (managed). The risk is that you are now holding a company that will look more like Amazon 2014-2018 — heavy investment, suppressed earnings, deferred cash returns — than a Chinese e-commerce cash cow. If your portfolio framework prefers near-term FCF and capital return, this letter is a yellow flag.
Claude summed it up pretty well.
I made the query last night before markets opened
I guess the rest of the market finally digested it the same way today
It’s the hk market, not just baba
yup i think it is something to do with meeting putin and Xi saying stuff about US
The only caveat to this is margin expansion
There’s two way to look at the situation
- Market share at all cost, this is my sell signal. I don’t think Alibaba is going back to instant retail again. Not yet, but Chinese being Chinese stonks. Never say never because of big egos
- They’ve explicitly said margins will expand meaningfully in the coming quarters. We are seeing them raise prices in a meaningful way.
So not all is lost, but there is a rationale for the sell off
Each to their own. I’m so used to this shit I’m conditioned for pain
Overtime the position will become insignificant. Not because of selldown, but because other part of the portfolio grows. This shit is just glued to the floor
Long time no post
Good luck bag holders
It does not matter much, Tencent’s margin is in expansion, still dropping like a rock
For steady compound, Tencent is a better business vs Alibaba,
This didn’t change overnight. It’s basically bullshit to explain an overnight drop, but anyone with common sense knows that nothing fundamentally changed with the company overnight
No. Please look at other stocks on HK market. Tencent, Kuaishou, Xiaomi etc etc
Alibaba is actually doing relatively well compared to other HK stocks.
In fact, pretty sure there were just another thread about exactly this on this subreddit. You should take a look.
China is still trading more on vibes than fundamentals right now, and the consumption vibes are pretty weak (including the list I posted) with no obvious stimulus in sight.
The BABA bull thesis also depends heavily on how China AI and chips develop, which adds execution and policy risk.
At the same time, U.S. stocks have gotten cheaper, especially many SaaS names, so capital has more alternatives now.
All of that helps explain why BABA remains priced where it is.
That said, I still see BABA as a “heads I win big, tails I probably don’t lose much” setup. Either you 3-4x your money or you lose another 30%.
Yes, but the losing part is opportunity cost
You and I know best
I’ve taken the view that I might be right, but the sizing was wrong
Fkin pissed off…. Been a long road all the way down down down … from the 190s…. Relentless. 😰
i bought at $80 a couple years back. I can wait it out 😄
Lucky you… I’m bag holder lol 🥲
Not too lucky. It was down there for a long time plenty of opportunity.
That's untrue. Which part of higher gross margins from deployment of Zhenwu Chips to Alicloud Bailian platform do you not understand?
China will visit USA in September 2026.