BABA 2Q25:Revenue Acceleration Amid Margin Pressures

Q2 Revenue Growth: Signs of Acceleration

We expect Alibaba Cloud to demonstrate a steady acceleration in Q2, with revenue growth likely to show a meaningful uptick compared to last quarter’s YoY growth of 18% with extra 4-5% or more (22%-23%+)

Alibaba Cloud tends to leave a buffer for future revenue recognition. In the previous quarter, when we surveyed partners, channels, and industry experts familiar with Alibaba Cloud, estimates pointed to growth above 20%, with even the most conservative at 19%. However, the reported figure was 18%. Post‑earnings, we learned that some revenue that could have been recognized in the prior quarter was instead deferred into this fiscal year, effectively creating a buffer for FY26 growth acceleration.

For this quarter, our checks suggest revenue growth of ~25%. Following last quarter’s pattern, it is possible the reported figure may come in slightly lower (last quarter’s checks suggested 20% vs. the reported 18%) as management continues to defer some revenue recognition into future quarters. Based on this ~5% differential, we still see a high likelihood of a meaningful step‑up in reported growth.

There is also a possibility of even stronger acceleration if part of the revenue buffer created in the prior quarter is recognized this quarter, with less buffer carried forward. Our checks also indicated that July trends remained healthy, suggesting further upside potential.

Profitability Outlook: Limited Improvement Expected