Alibaba (BABA) reported Q2 2026 earnings, beating revenue but missing EPS estimates. Adjusted EBITDA fell 78% YoY, and stock closed lower. Despite this, BABA stock is up 85% for the year. Instant commerce investments impacted profits, but should boost earnings long-term. Stock trades at a forward P/E of 26x.

Alibaba’s instant commerce business is affecting profits, but subsidies to consumers are driving adoption. Economies of scale and higher order values are improving unit economics. Stock valuation at 26x forward P/E seems bloated, but China’s tech re-rating and progress in AI are positives. Analysts have a mean target price of $195.29.

Alibaba excels in AI with Qwen app downloads and a strong presence in China’s AI cloud market. AI chips development could become a significant business line. Earnings should improve as AI leverages other businesses. Analysts have a “Strong Buy” rating with a mean target price 23% higher than current price.

Alibaba’s stock saw over an 18% drawdown from its peak but remains a solid investment. Despite the recent fall, the stock is still attractive. The author remains bullish on BABA stock and would consider adding more shares if the stock falls further.

Read more at Yahoo Finance: Is BABA Still a Buy on AI and Instant Commerce Push?