Alibaba Shares Face Critical Test as Growth Engines Stutter

Alibaba Group is confronting significant market pressure as its stock faces a steep decline. With the broader technology sector experiencing widespread selling, investors are repositioning their holdings ahead of the company's quarterly earnings release scheduled for November 13. The current weakness raises fundamental questions about whether the company's promising cloud computing and artificial intelligence segments can sufficiently offset persistent challenges in its core e-commerce operations.

Market participants are seeking clarity on three pivotal issues when Alibaba discloses its financial results. First, analysts question whether the rapid expansion in cloud services and AI products can maintain its current pace while compensating for traditional business weaknesses. Second, stakeholders await evidence that international e-commerce expansion is finally yielding meaningful returns. Third, the impact of aggressive capital allocation strategies—including a $3.2 billion convertible bond issuance—on overall profitability remains under scrutiny.

Technology Sector Downdraft Weighs on Performance

The Hang Seng Tech Index's persistent decline has dragged Alibaba shares downward alongside other Chinese technology equities. Economic softness in China combined with concerns about the U.S. labor market has triggered a flight from riskier technology assets. Although the stock maintains a substantial year-to-date gain of nearly 76 percent, recent momentum has clearly faded. Shares currently trade approximately 10 percent below their October peak of €161.60, with the downward trend continuing.

Should investors sell immediately? Or is it worth buying Alibaba?

Core Business Challenges Intensify

The company's fundamental predicament lies in its domestic Chinese commerce operations, which face mounting pressure from consumer spending weakness and intense competitive forces. Projections for the upcoming earnings report paint a sobering picture: while modest revenue growth is anticipated, pre-tax profits and earnings per share are forecast to decline significantly. This deteriorating foundation increases pressure on emerging growth drivers to deliver accelerated performance, raising concerns about potential structural instability if current trends persist.

Cloud and AI: Growth Pillars Under Examination

As traditional business segments struggle, investor confidence increasingly hinges on the cloud computing and artificial intelligence divisions. Alibaba's cloud unit recently posted impressive 26 percent growth, while AI product revenue has been expanding at triple-digit percentage rates for multiple consecutive quarters. The crucial uncertainty facing investors is whether this exceptional momentum can be sustained through the coming quarters, and more importantly, whether it will prove substantial enough to counterbalance substantial challenges elsewhere in the business.