After a long, challenging period, Chinese e-commerce giant Alibaba (BABA -0.53%) has staged an impressive rebound in 2025; yet, even with shares up sharply on the year, the stock still looks undervalued given the progress across its businesses. Here are five reasons to keep buying the stock like there's no tomorrow.
1. A Chinese AI powerhouse
Despite chip export restrictions, Alibaba has emerged as one of China's leading artificial intelligence (AI) players. Its proprietary Qwen model family is at the center of its AI push, and it's been rolling out versions tailored for specific tasks like coding and advanced math. It even has industry-specific models. Its newest iteration, Qwen3, adds hybrid reasoning capabilities that go beyond traditional large language models (LLMs), positioning Alibaba to serve more demanding enterprise workloads.
That effort is already showing up in its numbers. Last quarter marked the seventh straight period of triple-digit AI-related revenue growth in its Cloud Intelligence business. Segment revenue, meanwhile, rose 18%, and adjusted earnings before interest, taxes, and amortization (EBITA) surged 69%.
Perhaps more importantly, Apple selected Alibaba's models to power its Apple Intelligence offering in China. While regulatory delays have held up the rollout, the partnership signals Alibaba's growing credibility as a key AI player, and it just launched its new Qwen3 AI models that are compatible with Apple devices.
Image source: Getty Images.
2. An e-commerce turnaround
Alibaba's domestic e-commerce segment is finally regaining momentum. Despite increased competition, Tmall and Taobao are still two of the largest online retailers in China, and the company has been investing to strengthen their positions. Gross merchandise volume (GMV) growth has improved, and Alibaba is now monetizing that better through a small software fee and its AI-powered marketing product, Quanzhantui.
In the most recent quarter, third-party revenue rose 12%, while overall e-commerce revenue climbed 9% and segment EBITA grew 8%. The company also continues to expand its 88VIP premium membership program, which grew by double digits and crossed 50 million members.
The next phase of growth could come from "instant commerce," with Alibaba looking to offer delivery on items purchased on Taobao within an hour. Management believes this could be a billion-customer opportunity over time. It also struck a smart deal with Rednote, a popular Chinese social media platform, to embed Taobao links directly into user posts. That's a smart way to tap into social commerce without building it from scratch.
3. Emerging businesses upside
In addition to its core e-commerce and cloud computing businesses, Alibaba operates several emerging businesses. The most important of these is its international segment, AIDC. The segment consists of its AliExpress cross-border business, which links up Chinese sellers and overseas buyers, and Trendyol, which is focused on local merchants in Turkey and the Middle East. Revenue for the segment jumped 22% last quarter, but it posted negative EBITA of $492 million, as the business has still not reached scale. However, management believes it can become profitable within the next fiscal year.
If AIDC flips to profitability, it could be a major tailwind for Alibaba's bottom line. It's already becoming a more strategic part of the business, especially as the company builds out logistics capabilities through Cainiao to support faster shipping for AliExpress. Shorter delivery windows could help it compete more directly with rivals like Temu and Shein in overseas markets.
At the same time, other segments like local services and digital media are still losing money, but Alibaba has the balance sheet and cash flow to invest where it sees long-term opportunities.
4. Operating leverage
One of the most under-appreciated stories in Alibaba's turnaround is its improving operating leverage. Last quarter, its total revenue grew 7%, but its adjusted EBITA surged 36%. That's the kind of operating leverage you want to see from a company exiting an investment cycle and beginning to scale its newer initiatives.
Its cloud computing business, in particular, showed impressive margin expansion, with adjusted EBITA up 69%. That's a good sign that the company's massive AI investments are starting to pay off. If AIDC can flip to profitability as planned, that could drive another leg of margin expansion. Alibaba is proving it can grow efficiently again, which should be good news for shareholders.
5. Alibaba's stock is attractively valued
Despite this year's rally, Alibaba still trades at a forward price-to-earnings ratio (P/E) of just 11.5 times fiscal 2026 analyst estimates (ending March 2026). That's about a third of the valuation of its closest U.S. counterpart, Amazon.
Alibaba also has $19.8 billion in net cash and short-term investments, as well as $56.6 billion in equity and other investments on its balance sheet. Combined, that accounts for nearly 28% of its market capitalization, placing the stock squarely in the bargain bin.
The bottom line
Alibaba is not without risks. As a Chinese stock, it can be prone to regulatory headwinds in China, while competition in the country can be fierce. That said, it is executing well across the board, and the stock is cheap. That makes it a solid long-term buy.
