Analysis of the Form 20-F | Fiscal year ended March 31, 2026
FY2026, closed on 31/03/2026. All amounts are in RMB million unless stated otherwise; the reporting currency is the Renminbi. One ADS represents eight ordinary shares.
What does Alibaba sell, to whom, and how is it paid? It runs consumer marketplaces in China and abroad and charges the merchants who sell on them, mainly for traffic: customer management fees billed per click, per thousand impressions, per period or as a share of the value sold. On Tmall commissions "typically range from 0.1% to 5.0%" depending on the category, and since September 2024 a software service fee has been levied on the value of completed transactions. Around this core sit businesses where Alibaba is itself the seller (Tmall Supermarket, Freshippo, Alibaba Health), a delivery and local-services platform paid by commission and delivery fees, a cloud business billed on consumption or subscription, and a set of smaller units.
The segment structure changed during the year. Taobao and Tmall, Ele.me and Fliggy were merged into Alibaba China E-commerce Group; Cainiao, Amap and the digital media group were moved into "All others", and comparatives were reclassified (N29).
| Segment (RMB million) | FY2026 | % of consolidated | FY2025 | FY2024 | YoY FY2026 |
|---|---|---|---|---|---|
| China E-commerce: customer management | 343,867 | 33.59% | 326,769 | 307,950 | 5.23% |
| China E-commerce: direct sales, logistics, other | 105,518 | 10.31% | 103,722 | 110,820 | 1.73% |
| China E-commerce: quick commerce | 78,520 | 7.67% | 53,588 | 50,852 | 46.53% |
| China E-commerce: wholesale | 26,312 | 2.57% | 24,301 | 20,479 | 8.28% |
| International Digital Commerce (AIDC) | 144,170 | 14.08% | 132,300 | 102,598 | 8.97% |
| Cloud Intelligence Group | 158,132 | 15.45% | 118,028 | 106,374 | 33.98% |
| All others | 254,367 | 24.85% | 338,347 | 317,539 | (24.82)% |
| Unallocated | 2,340 | 0.23% | 1,924 | 1,297 | — |
| Inter-segment elimination | (89,556) | (8.75)% | (102,632) | (76,741) | — |
| Total | 1,023,670 | 100.00% | 996,347 | 941,168 | 2.74% |
A revenue table by geographic area cannot be built. The document states that "substantially all of the Company's revenue is derived within the PRC" and presents no split, although one segment of RMB 144,170 million is international commerce through AliExpress, Trendyol and Lazada. The only geographic figure is in the tax note: pre-tax income of RMB 136,551 million inside the PRC and a pre-tax loss of RMB 7,164 million outside it.
Full-time employees were 131,462 at year-end, against 124,320 a year earlier; the fall from 204,891 two years ago coincides with the sale of Sun Art and Intime. Among the directors, Maggie Wu became a non-executive director from April 1, 2025; the CFO has held the role since April 2022. New this year in the document: the segment reorganization, the rebranding of Ele.me as Taobao Instant Commerce, the Qwen consumer app launched in November 2025, the exchangeable bonds on Alibaba Health shares, and a risk factor stating that "since early 2026" the market regulator has been scrutinizing quick-commerce platforms, Alibaba included, for "aggressive subsidies, price wars".
The year therefore reads as a group that reported 2.74% growth while shedding its offline retail, grew two businesses fast, and changed how it reports them in the same year.
Which kind of company is this, and what does that decide about where to look? The classification is solid (stalwart) in a self-imposed reinvestment phase, with one question borrowed from the asset-play category. Two figures support it. Reported revenue grew 2.74%, and 11% "on a like-for-like basis" according to the document, which removes Sun Art and Intime. The China E-commerce segment's EBITA margin, 38.01% a year earlier, fell to 19.40%.
It is not a turnaround: operating income stayed positive and the group holds net cash of RMB 260,828 million. It is not an asset play, because after removing net cash and investments the price still assigns 64.66% of market value to the operating business. This residual is our own construction: market value minus net cash and the carrying value of investments, used to isolate what the price pays for the businesses, and it is only as reliable as those carrying values. Nor is it fast growth at group level, although Cloud (33.98%) and quick commerce (46.53%) grew at that pace. The asset-play question is kept because investments and net cash equal 35.34% of the market value.
Three questions decide this case. The first is whether the fall in operating income, from RMB 140,905 million to RMB 50,150 million, is spending the company chose and could reduce, or a loss of earning power in the core marketplaces. The document answers half of it. It shows that sales and marketing rose by RMB 101,002 million and that advertising and promotion account for RMB 100,673 million of that rise; it does not give the quick-commerce result, order economics or the split of promotion between quick commerce, Taobao and the Qwen app. Sections 2 and 3 go deep here.
The second is whether the capital going into AI infrastructure earns a return. Capex was RMB 126,063 million and off-balance-sheet commitments, which include co-location and bandwidth, rose to RMB 200,062 million. The document gives Cloud revenue, EBITA and depreciation, but no return target and no utilization data. Sections 3-quater and 3-quinquies go deep here.
The third is how much of FY2026 net income comes from the businesses and how much from revaluing investments. The document answers this fully. Section 3-bis and section 6 carry it.
Several standard metrics are mute for this year: price to free cash flow and free cash flow yield (free cash flow is negative), debt to EBITDA as a solvency test (the group holds net cash), inventory turnover as a demand signal (inventory is 0.99% of assets), and the GAAP P/E as a measure of the operating business, since investment items supply 57.51% of pre-tax income.
Does the business earn its margins from something that is hard to copy, and can it grow without spending more to grow? This is where the first decisive question is examined, so this section goes further than the others.
What does the document show of an advantage, as distinct from what the company asserts? The measurable part is narrow. Customer management revenue, the fee merchants pay for traffic, grew 5.23% to RMB 343,867 million, which the document attributes to "the improvement of take rate"; the take rate itself and the GMV behind it are not disclosed. Retention of 88VIP members, the highest-spending users, is described only as "a similar level" to the prior year. Research spending (product development expenses) rose 16.42% to 6.50% of revenue in a year when operating income fell by almost two thirds, so the company did not cut it when profit was under pressure.
The rest is the company's own description: the largest retail commerce business by GMV and the largest Chinese public cloud provider, both attributed to third-party research houses, and Cloud services used by "approximately 67% of A-share listed companies". These are claims, not figures the statements verify. The document also shows a dependence: Alipay, owned by the equity investee Ant Group, processes payments for "a significant majority" of commerce, at a cost of RMB 18,019 million this year. Whether the advantage is widening or narrowing cannot be established from the document.
Did Alibaba raise what it charges, or pay to keep volume? Both happened, in different places. On the marketplaces the company describes a higher take rate and a new GMV-based software fee, and customer management revenue grew faster than consolidated revenue. In quick commerce the reverse: revenue is reported "net of subsidies that are contra revenue", so part of the subsidy cost never appears as an expense, and the document does not quantify it. Group-wide, advertising and promotional expenses rose 88.64% to RMB 214,246 million, 87.44% of sales and marketing.
The evidence therefore supports pricing power on merchants and the opposite on consumers, where Alibaba is buying demand.
How much of the growth is organic? Acquisitions were negligible: business combinations added RMB 2,297 million of goodwill and the document did not present pro forma results because they were "not material". The distortion runs the other way. The sale of Sun Art and Intime removed revenue; sales of goods fell 16.96% and "All others" fell 24.82%. The document quantifies the like-for-like growth at 11% but does not provide the underlying figures.
Two growth lines need a qualification. Quick-commerce revenue rose by RMB 24,932 million, which the document ties to order growth after the launch of Taobao Instant Commerce "at the end of April 2025"; that increase is 24.77% of the year's increase in advertising and promotion. In Cloud, revenue from related parties grew faster than the segment. Cloud revenue from Ant Group rose 72.18% to RMB 19,134 million. Cloud revenue from other investees rose 108.90% to RMB 9,415 million. Together they are 18.05% of Cloud segment revenue and 32.24% of its increase; segment revenue includes sales to Alibaba's own businesses, and the document does not give the external figure on which the share would be higher. The document says only that the company "believes" transactions on its platforms follow "normal commercial negotiation", and makes no such statement about cloud contracts in particular. In the same year cash spent on acquiring equity and debt securities rose from RMB 10,342 million to RMB 63,753 million, but the document does not name the investees, so whether any investee that bought cloud services also received capital cannot be checked.
Organic growth is therefore real but uneven: steady in the marketplaces, fast in two areas, one of which is partly bought with subsidies and the other partly sold to related parties.
Does revenue grow faster than costs? Not this year, and the cause sits in one line. Revenue grew 2.74% and cost of revenue 2.98%, so the gross margin held at 39.81%. General and administrative expenses fell 25.22%, which the document attributes to the FY2025 class-action provision and to "enhanced cost control measures". Product development rose 16.42%. Sales and marketing rose 70.13%, an increase of RMB 101,002 million. That is 3.70 times the increase in revenue. The document attributes the rise to "the investment in user experiences of Alibaba China E-commerce Group and user acquisition of Qwen app", without amounts.
The segment view confirms where it landed. China E-commerce added RMB 45,837 million of revenue and RMB 131,551 million of costs, and its EBITA fell by RMB 85,714 million, which the document ties to "the investment in quick commerce, user experiences, and technology". "All others", which carries the Qwen consumer business, saw its loss widen by RMB 26,238 million on "increased investment in technology businesses". International commerce cut its loss by RMB 13,086 million, and Cloud lifted EBITA by 35.14% while its depreciation rose 81.77%.
The business has not lost operating leverage in its cost of serving: it has added a marketing line whose size is a management decision. That is the reading the numbers support, but the document does not show whether the promotion can be withdrawn without losing the orders it bought.
How did a year of slower operating earnings show up in the three statements, and how strong is the balance sheet that carries it?
| RMB million | FY2024 | FY2025 | FY2026 | YoY FY2026 |
|---|---|---|---|---|
| Revenue | 941,168 | 996,347 | 1,023,670 | 2.74% |
| Cost of revenue | (586,323) | (598,285) | (616,136) | 2.98% |
| Gross profit | 354,845 | 398,062 | 407,534 | 2.38% |
| Product development | (52,256) | (57,151) | (66,533) | 16.42% |
| Sales and marketing | (115,141) | (144,021) | (245,023) | 70.13% |
| General and administrative | (41,985) | (44,239) | (33,082) | (25.22)% |
| Amortization and impairment of intangibles | (21,592) | (6,336) | (5,079) | |
| Impairment of goodwill | (10,521) | (6,171) | (9,515) | |
| Other gains, net | — | 761 | 1,848 | |
| Income from operations | 113,350 | 140,905 | 50,150 | (64.41)% |
| Interest and investment income, net | (9,964) | 20,759 | 87,512 | |
| Interest expense | (7,947) | (9,596) | (9,793) | |
| Other income, net | 6,157 | 3,387 | 1,518 | |
| Pre-tax income (before equity method) | 101,596 | 155,455 | 129,387 | (16.77)% |
| Income tax | (22,529) | (35,445) | (30,045) | |
| Share of equity method investees | (7,735) | 5,966 | 2,785 | |
| Net income | 71,332 | 125,976 | 102,127 | (18.93)% |
| Net income attributable to Alibaba | 80,009 | 130,109 | 103,592 | (20.38)% |
| Diluted EPS (RMB per ADS) | 31.24 | 53.59 | 44.00 | (17.90)% |
How did the year's result move from the top line to net income? Operating income fell 64.41% while net income fell 18.93%. The gap is interest and investment income, which turned from RMB 20,759 million to RMB 87,512 million. Interest income inside that line actually declined, to RMB 18,806 million; the rest is revaluation and disposal of investments, examined in 3-bis.
What does the group owe, and what does it hold against it?
| RMB million | Mar 31, 2025 | Mar 31, 2026 |
|---|---|---|
| Cash and cash equivalents | 145,487 | 131,530 |
| Short-term investments, unrestricted | 228,169 | 155,236 |
| Other treasury investments, unrestricted | 223,476 | 234,058 |
| Unrestricted liquidity | 597,132 | 520,824 |
| Current bank borrowings | 22,562 | 28,224 |
| Non-current bank borrowings | 49,909 | 47,450 |
| Unsecured senior notes | 122,398 | 117,485 |
| Convertible senior notes | 35,834 | 55,861 |
| Exchangeable bonds | — | 10,976 |
| Gross debt, excluding leases | 230,703 | 259,996 |
| Net cash, excluding leases | 366,429 | 260,828 |
| Operating lease liabilities | 17,407 | 21,726 |
| Total shareholders' equity | 1,009,858 | 1,060,886 |
| Noncontrolling interests | 68,535 | 57,539 |
Leases are kept outside the net-cash figure; including them, net cash is RMB 239,102 million. Net cash fell by RMB 105,601 million in the year because liquidity was drawn down while debt rose.
| RMB million | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Cash from operations (CFO) | 182,593 | 163,509 | 76,213 |
| Capex | (32,087) | (85,972) | (126,063) |
| Free cash flow (CFO − capex) | 150,506 | 77,537 | (49,850) |
| Share-based compensation, non-cash | 18,546 | 13,970 | 11,180 |
| Free cash flow after SBC | 131,960 | 63,567 | (61,030) |
| Share repurchases (cash) | (88,745) | (86,662) | (7,638) |
| Dividends paid | (17,946) | (29,077) | (33,732) |
| Income tax paid in cash | 32,486 | 33,409 | 34,013 |
Where did the cash go? Free cash flow is defined here as CFO minus all capex. The company's own measure, which leaves out office-campus construction, also deducts purchases of intangibles and adjusts for buyer-protection deposits, gives negative RMB 46,609 million; the RMB 3,241 million difference is reconciled in the data tables. Share-based compensation is RMB 14,821 million in the expense table of N8, spread across income-statement lines, and RMB 11,180 million in the cash flow statement: the gap of RMB 3,641 million is cash-settled awards, which the document notes as included in the first figure. The non-cash figure is the one used when adjusting cash flows.
Owner earnings are our own construction, not a figure the company publishes. They are built as net income plus depreciation, amortization and other non-cash items, excluding the add-back of share-based compensation (which is treated as a real cost) and removing unrealized investment gains, minus capex and minus the working capital absorbed in the year. On that basis they were negative RMB 61,030 million with working capital and negative RMB 38,483 million without it. The figure used in the judgment is the one with working capital, because the RMB 22,547 million absorbed this year is capital the business needed. Owner earnings are below free cash flow by exactly the RMB 11,180 million of share-based compensation, which free cash flow adds back and owner earnings do not.
| Metric | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Gross margin | 37.70% | 39.95% | 39.81% |
| Operating margin | 12.04% | 14.14% | 4.90% |
| Net margin (attributable) | 8.50% | 13.06% | 10.12% |
| EBITDA (EBIT + depreciation and impairment of PP&E + amortization and impairment of intangibles) | 161,582 | 176,501 | 92,296 |
| ROIC (NOPAT at 25% / year-end invested capital) | not available | 31.93% | 9.03% |
| EBIT / interest expense | 14.26x | 14.68x | 5.12x |
| FCF / net income | 210.99% | 61.55% | (48.81)% |
Debt to EBITDA is not shown, for the reason given in 1-bis. Interest expense absorbed 19.53% of operating income, against 6.81% a year earlier. Long-term debt of RMB 231,772 million equals 4.62 years of current operating income; a year earlier the equivalent figure was 1.48 years. The debt grew modestly, while the income behind it fell.
Multiples use the closing price of US$125.46 per ADS at March 31, 2026, the last day of the fiscal year, so that price and results share the same date. With 2.32 billion ADS-equivalents and the document's convenience rate of RMB 6.8980 per US dollar, market value is RMB 2,007,781.5 million. At that price the diluted P/E is 19.67x, and 32.29x on the company's non-GAAP EPS of RMB 26.80 per ADS. Enterprise value is RMB 1,812,337.5 million, or 36.14x operating income. It is 19.64x EBITDA and 15.97x the company's adjusted EBITDA. Price to book is 1.89x and price to tangible book 2.52x. The regular dividend of US$1.05 per ADS yields 0.84%. Price to free cash flow is not meaningful because free cash flow is negative.
The financial picture is one of a strong balance sheet carrying a year of weak operating earnings, with the reported net income held up by a line that is not operating.
Which numbers in this balance sheet are management's opinion, and how much does each weigh? The selection follows the auditor first, then the size and discretion of each note.
Goodwill (the Critical Audit Matter). The auditor's single Critical Audit Matter is the impairment test on goodwill for "two of the reporting units". Goodwill is RMB 247,378 million, 12.95% of assets. Of this, RMB 177,893 million sits in China E-commerce and RMB 45,011 million in "All others". One unit in "All others" was written down by RMB 9,515 million on a discounted cash flow; the other, formerly in the digital media group, passed. The judgment lies in "future growth rates and the weighted average cost of capital", and neither the rates nor the margin by which the passing unit cleared its test are disclosed. Goodwill impairments total RMB 26,207 million over the three years, and accumulated impairments are RMB 56,232 million, 18.52% of gross goodwill. A lower growth rate or a higher discount rate on the "All others" units would move the next charge; no sensitivity is given.
Investments measured by management. Equity securities and other investments total RMB 479,996 million, of which RMB 238,075 million are treasury deposits and debt. The judgment sits in the privately held companies, RMB 130,447 million, of which RMB 124,979 million are carried under the "measurement alternative": cost, adjusted when an orderly transaction in the same or a similar security is observed. In FY2026 these were written up by RMB 39,416 million and down by RMB 8,187 million. The upward adjustments alone equal 30.46% of pre-tax income. Unrealized gains on equity securities still held were RMB 56,295 million. The discretion lies in deciding which transactions are "orderly" and "similar", which the document calls a matter of "significant judgment". A new funding round at a lower price, or the absence of one, would move these values; listed holdings worth RMB 41,800 million are also under contractual sale restrictions that lapse within twelve months.
Removing the net gain on deemed disposals, disposals and revaluation of RMB 74,416 million and adding back RMB 7,724 million of investment impairments leaves net income of RMB 35,435 million, before tax effects that the document reports only in aggregate. That figure is our own construction: it is the company's net income without the investment portfolio's revaluation, used to see what the businesses earned, and its limit is that tax effects are not reallocated. On the same basis net income was RMB 126,013 million in FY2025, so the decline is 71.88%. In FY2024 it was RMB 105,235 million. The company's own non-GAAP net income, which also excludes these gains, fell 61.64% to RMB 60,658 million.
Taxes. The effective rate was 23.22% against the 25% statutory rate, but the reconciliation is two large offsets. The Hong Kong line, made mainly of non-taxable income net of non-deductible expenses, reduced tax by RMB 15,838 million, and the document does not say which income it is; the valuation allowance on deferred tax assets added RMB 20,873 million, 16 percentage points. That allowance now covers 83.79% of gross deferred tax assets, which the note groups as licensed copyrights and "tax losses carried forward and others". PRC tax losses of RMB 200,082 million expire over the next ten fiscal years. The note bases the allowance on "uncertainty surrounding their realization" for tax losses, non-deductible accruals, property and equipment and investments; "if events occur in the future that improve the certainty of realization", the document says, tax expense will be reduced. Tax was 47.92% of pre-tax income once investment items are removed; the document does not say which entities produce the losses that carry no tax relief, so the high rate cannot be traced further. The balance of the allowance rose by RMB 12,851 million, less than the RMB 20,873 million in the reconciliation, and the document does not reconcile the two. The gap between expense and cash taxes is set out in 3-quater.
Equity method investees. These are RMB 206,803 million, 10.83% of assets, and include the 33% stake in Ant Group, whose carrying value the document does not show separately. Alibaba's share of Ant's profit fell 60.09% to RMB 5,048 million, which the document attributes to Ant's spending on "new growth initiatives". The judgment is in the basis difference created when the stake was received and in the "other-than-temporary" impairment test; publicly traded investees carried at RMB 21,274 million have a market value of RMB 25,291 million, while the value of Ant's equity is set from valuation reports, as the share-award note describes. A lower Ant valuation in a future transaction would be the trigger.
Debt and convertible instruments. Senior notes are fixed-rate, with no principal due within twelve months and RMB 69,922 million due after five years. The 2024 convertible notes convert at about US$101.10 per ADS, below the year-end price, into about 49.5 million ADS. Holders may put them for cash in June 2029. The 2025 zero-coupon notes convert at about US$193.15 per ADS, with a put in September 2030. If settled in shares, which is at the company's election, together they could add 2.84% to the share count. Capped calls bought for RMB 5,921 million are "expected to reduce potential dilution", with initial cap prices of US$161.60 and US$235.46 per ADS. The exchangeable bonds of about HK$12 billion convert into Alibaba Health shares at about HK$6.23, so on exchange the company would deliver part of that stake, or cash at its election, rather than Alibaba shares. No financial covenants apply to the notes.
Share-based compensation. Cost not yet recognized is RMB 8,614 million, over 1.9 years for RSUs and 3.1 years for options; this is dilution already contracted. The document attributes the lower expense to a higher share of "long-term cash incentives", so part of former equity pay now passes through cash costs instead.
Revenue and deferred revenue. Deferred revenue and customer advances rose 12.94% to RMB 82,300 million, faster than revenue, with customer advances up 26.06%. The document says "substantially all" is recognized within a year and does not report remaining performance obligations. Gross versus net treatment is a stated judgment: sales of goods, RMB 227,747 million, are booked gross, which depresses the apparent margin of the "All others" segment and of direct sales, while quick-commerce subsidies are booked as a reduction of revenue.
Contingencies. No material loss contingency is accrued. The EU investigation of AliExpress under the Digital Services Act has preliminary findings against the company, and "any potential loss … is not reasonably estimable"; the regulator's review of quick-commerce subsidies carries no estimate either. The FY2025 class action was settled for US$433.5 million.
Leases, commitments and guarantees. Other commitments, which the note describes as co-location and bandwidth fees, licensed copyrights and marketing without splitting the total, rose 137.53% to RMB 200,062 million, of which RMB 133,598 million fall due in one to five years. The part that is computing capacity is spending already promised that does not appear in capex; the document does not say how large that part is. Alibaba also guarantees a HK$6.5 billion facility of Cingleot, a partly owned company developing a logistics center, with HK$5.5 billion drawn.
Related parties and subsequent events. Revenue from Ant Group was RMB 24,536 million and costs paid to it RMB 21,041 million. Cloud revenue from investees is treated in section 2; logistics revenue from them was RMB 3,301 million. Defined-benefit pension plans exist outside the PRC but no amounts are given. After year-end the board declared a regular dividend of US$1.05 per ADS, with no special component.
These notes shift the reading of the year: the balance sheet is sound, but a large share of the reported profit rests on management's valuation of private investments.
What sits inside the large lines? Seven asset lines exceed 5% of total assets. The largest is non-current equity securities and other investments at 23.56%, followed by PP&E at 14.80% and current prepayments and receivables at 13.19%. Goodwill (12.95%) and equity method investees (10.83%) come next. Short-term investments (8.13%) and cash (6.89%) close the list. On the other side, accrued expenses and payables are 18.85% and senior notes 6.15%, while shareholders' equity is 55.56%.
Current prepayments and receivables grew 24.56% to RMB 251,837 million, and one sub-line explains most of it. "Advances to/receivables from customers, merchants and others" rose 71.15% to RMB 90,671 million, an increase of RMB 37,695 million. No note describes what these balances are. Amounts due from related companies rose 79.03% to RMB 21,587 million. Together these two lines explain 69.52% of the cash that the cash flow statement shows as absorbed by prepayments, receivables and other assets. A balance that grows this fast without an explanation cannot be read either as merchant financing or as subsidy prepayment; the document leaves it open.
PP&E rose 39.02% to RMB 282,699 million. Gross computer equipment and software grew 51.83% to RMB 238,760 million, while construction in progress was almost flat at RMB 55,637 million. Accumulated depreciation fell to 34.79% of gross cost, from 38.71%: the asset base is younger, and the depreciation it will produce is still arriving. Computer equipment is depreciated over 3 to 5 years.
Intangibles are small, RMB 16,983 million net, nearly all acquired (user bases, trade names); development-phase software is capitalized under the policy, but the amount is not disclosed. Deferred tax assets are RMB 13,957 million net after the valuation allowance and depend on future taxable profit. Accrued expenses are broken down in N19: the largest items are payables for cost of revenue and marketing (RMB 131,127 million) and payables to merchants and affiliates (RMB 55,212 million).
Of the liquidity, RMB 42,038 million of restricted cash is excluded from net cash because most of it is buyer-protection money deposited by merchants. A wider restriction also applies: PRC subsidiaries' restricted net assets are RMB 344,580 million, which cannot be paid up to the parent as dividends. Working capital, measured in days on year-end balances for both years, is set out below.
| Days | FY2025 | FY2026 |
|---|---|---|
| Receivable days (on revenue) | 11.42 | 12.84 |
| Inventory days (on cost of revenue) | 11.52 | 11.20 |
| Payable days (on cost of revenue + sales and marketing) | 54.52 | 55.58 |
| Cash conversion cycle | (31.58) | (31.53) |
Payables are measured against cost of revenue plus marketing because the payable line includes marketing accruals. The negative cycle is the marketplace model: merchants and suppliers finance the group.
Equity holds RMB 57,539 million of noncontrolling interests, down after RMB 16,768 million spent buying out minorities, and a translation reserve that swung to negative RMB 13,404 million. Return on average equity was 10.01%, and 9.76% on year-end equity. Treasury shares at cost are only RMB 36,141 million because most repurchased shares are retired: adding them back to year-end equity gives 9.44%, a correction that understates the effect of the three years of repurchases set out in 5-bis. Retained earnings rose by RMB 62,904 million. Dividends and repurchases declared in FY2026 were 40.12% of attributable net income, against 88.38% a year earlier. Because the group keeps more of its earnings than before while the return on its capital has fallen, retained earnings must be read together with that return, quantified in 3-quinquies; a rising balance alone says nothing about whether the retained capital earned anything.
The asset side divides into three parts. Cash and instruments valued on an observable price are 35.07% of assets. Assets resting on management estimates (Level 3 instruments, the measurement alternative, goodwill, intangibles and deferred tax assets) are 21.71%. The remaining 43.22% is at historical cost or under the equity method.
Why did cash from operations halve when net income fell by a fifth? Net income of RMB 102,127 million was reduced by net non-cash items of RMB 3,367 million and by working capital of RMB 22,547 million. The non-cash total hides two opposite blocks. Investment gains of RMB 66,089 million and disposal gains of RMB 8,387 million brought no operating cash and were deducted. Against them, depreciation and amortization (RMB 47,118 million), impairments (RMB 11,244 million) and share-based compensation (RMB 11,180 million) were added back.
Third parties' money supported CFO: payables and accruals rose by RMB 37,933 million and deferred revenue and advances by RMB 9,462 million, net of RMB 38 million of lower merchant deposits. The total, RMB 47,357 million, equals 62.14% of CFO. Its share of free cash flow cannot be stated meaningfully because free cash flow is negative. Supplier-finance obligations rose from RMB 6,075 million to RMB 15,361 million; RMB 10,934 million of that is booked as bank borrowings, the rest inside payables.
Taxes paid in cash, RMB 34,013 million, exceeded the income statement charge by RMB 3,968 million and the current tax charge by RMB 1,440 million. The rate reconciliation points to the composition of profit: a large non-taxable component on one side, losses carrying a valuation allowance on the other.
Does reported capex capture all the capacity being built? It does not. Other commitments, which include co-location and bandwidth alongside licensed copyrights and marketing, reached 1.59 times the year's capex, and new leases added right-of-use assets of RMB 13,650 million. Because the note does not split the commitments, the share that is computing capacity cannot be measured. The test of whether more than a third of free-cash-flow growth comes from working capital does not apply, since free cash flow fell; the CFO that remains, however, leans on payables.
The cash flow of FY2026 is therefore lower than net income suggests and is partly carried by suppliers and merchants, while the true capital commitment to infrastructure is larger than the capex line.
Is the capital being added earning a return? With two balance sheets, every return measure below is a single point, not a trend. Per-share values, computed on the diluted average share count, come first.
| RMB per ADS | FY2024 | FY2025 | FY2026 |
|---|---|---|---|
| Revenue | 369.83 | 412.61 | 425.75 |
| Diluted EPS | 31.24 | 53.59 | 44.00 |
| Free cash flow | 59.14 | 32.11 | (20.73) |
| Shareholders' equity | 387.66 | 418.20 | 441.23 |
Revenue per ADS grew 15.12% over two years against 8.77% for total revenue. The difference is the 5.11% fall in the diluted share count in FY2025. In FY2026 the share count fell only 0.43%, and free cash flow per ADS turned negative.
Return on invested capital, our own construction, uses operating income taxed at the 25% statutory rate the document uses in its reconciliation, over invested capital defined as total equity plus mezzanine equity plus gross debt, minus unrestricted liquidity, non-treasury investments and equity method investees. The purpose is to measure the operating business without the portfolio; the limit is that leases are treated as operating liabilities and restricted cash stays in the base. On this definition ROIC fell from 31.93% to 9.03% (10.06% on average capital). The incremental return was negative 79.34%: invested capital rose by RMB 85,792 million and NOPAT fell by RMB 68,066 million. A single year cannot separate capacity not yet producing from capacity producing less; excluding construction in progress, ROIC is 10.42%, so idle construction explains little of it.
Reinvestment (capex minus depreciation and amortization, plus acquisitions and working capital absorbed) was RMB 102,704 million, 273.06% of NOPAT. Multiplied by ROIC it implies growth of 24.65%; operating income actually fell 64.41%. The gap has two causes the document allows to name. The capacity is still being installed: computer equipment (3-ter) and Cloud depreciation (section 2) grew faster than Cloud revenue. And the largest growth spending, the additional marketing seen in section 2, is expensed and so reduces NOPAT rather than appearing as reinvestment. What remains if the company stopped growing is only approximable: CFO less depreciation, used here as a proxy for maintenance capex, is RMB 39,146 million, and that figure still bears the full promotional spend, which the document does not split between maintenance and growth.
So the year shows an operation that reinvests far more than it earns at a return that has collapsed for now. Whether that return comes back is the second decisive question, and the document gives no target against which to test it.
Over the three years cumulative free cash flow was RMB 178,193 million. Repurchases net of share issues took RMB 181,150 million and dividends RMB 80,755 million. Net new debt brought in RMB 106,031 million. Together these distributions exceeded free cash flow by RMB 83,712 million, and the difference came from borrowing and from drawing down liquidity. In FY2026 alone, net new debt of RMB 39,032 million covered 30.96% of capex.
Capital intensity rose sharply. Capex relative to depreciation and impairment of PP&E went from 1.20x to 2.94x to 3.40x. Cumulative capex equals 81.53% of cumulative net income. The company is enlarging capacity, not maintaining it.
Operating income over enterprise value is 2.77%. Excluding the investment portfolio from enterprise value, a construction used because the portfolio's income is excluded from operating income, the yield is 3.68%, and it would be 10.33% on FY2025 operating income. A price-to-growth ratio is omitted because EPS fell. Product development spending over three years, RMB 175,940 million, is fully expensed, with development-phase capitalization undisclosed; revenue grew by RMB 82,502 million in the same period, a ratio distorted by the disposals.
Do the balance-sheet lines that usually move before revenue show stress? Year-on-year growth, FY2026 against FY2025:
| Comparison | Item growth | Reference growth | Gap (pp) |
|---|---|---|---|
| Inventory vs revenue | 0.12% | 2.74% | (2.63) |
| Receivables vs revenue | 15.55% | 2.74% | 12.81 |
| Allowance for doubtful accounts vs receivables | (13.04)% | 15.55% | (28.60) |
| Payables (cost of revenue and marketing) vs cost of revenue | 18.25% | 2.98% | 15.27 |
| Same payables vs cost of revenue + marketing | 18.25% | 16.01% | 2.24 |
| Advances to/receivables from customers, merchants vs revenue | 71.15% | 2.74% | 68.41 |
| Capitalized costs vs related expense | not available | not available | — |
| Revenue vs CFO | 2.74% | (53.39)% | 56.13 |
Four gaps exceed 5 points. Receivables grew 12.81 points faster than revenue, and the allowance shrank while they grew. It fell from 22.99% to 18.35% of receivables plus allowance. The charge for doubtful accounts fell to RMB 1,368 million from RMB 3,016 million. As arithmetic only, keeping the prior ratio would have meant an allowance RMB 2,049.5 million higher. The document does not say which receivables the allowance covers or why it fell, so the movement is unexplained. The payables gap disappears once marketing accruals are matched to marketing expense, so it is not evidence of stretched suppliers on its own; the growth in supplier-finance obligations is a separate signal. Advances to customers and merchants, the line already flagged in 3-ter, are the largest unexplained movement.
The last comparison is the most important, and the divergence goes to the weaknesses in section 9. Its causes are those identified in 3-quater: operating earnings reduced by marketing, and working capital absorbed largely by the unexplained advances.
Which metrics belong to this business, and which standard ones do not apply? Alibaba combines a consumer platform, which belongs with consumer and distribution, and a cloud and software business, which belongs with technology. Read alone, this section needs its own figures.
On the consumer side the document does not give GMV, the take rate, order counts, active buyers or same-store figures. It gives customer management revenue of RMB 343,867 million, up 5.23%. Quick-commerce revenue, net of subsidies, was RMB 78,520 million, up 46.53%. Advertising and promotional expense was RMB 214,246 million. The quick-commerce channel carried "nearly 5,000 Tmall brands", and 88VIP retention was "similar" to the prior year. Alibaba.com had "over 240,000 paying members" and "over 47 million buyers".
On the technology side, Cloud revenue was RMB 158,132 million, up 33.98%. Its EBITA was RMB 14,265 million, a 9.02% margin. Its depreciation was RMB 28,921 million, 18.29% of segment revenue. Cloud services revenue by type rose 32.61% to RMB 112,077 million. The chairman's letter states that AI-related products were 30% of Cloud's external revenue in the final quarter, a quarterly figure not in the financial statements. Related-party cloud revenue was 18.05% of the segment. Deferred revenue and advances total RMB 82,300 million; remaining performance obligations and renewal rates are not disclosed. Consumer AI is described by usage (Qwen above 295 million monthly users in March 2026) and DingTalk by "paying active daily users" above 36 million.
Standard metrics that do not apply: inventory turnover as a demand signal; the cash conversion cycle, negative by construction; debt to EBITDA, given net cash; ROIC including the investment portfolio, which would mix the operating return with market prices.
The thin consumer-side disclosure is itself information: the metrics that would show whether the marketing produced lasting volume are the ones the document does not provide.
Which risks does the document itself identify, and which have already materialized? Ten are listed below in order of severity, each with the fact as the document reports it and the figure that measures it.
The first two risks are the ones on which the year's numbers already depend; the others are conditions that have not yet produced a charge.
Which risk factors were added or removed this year? The comparison is not possible: the document does not mark changes against the prior year's filing, and that filing is not attached. The document does date two items within FY2026, the regulator's quick-commerce review "since early 2026" and the EU preliminary findings of June 18, 2025, but that does not establish what was added or removed.
Who controls the company, and how? There is one class of shares with one vote each, but the Alibaba Partnership has the exclusive right to nominate up to a simple majority of the board, and changing that right requires 95% of the votes present at a general meeting. The board has ten members, six independent and four nominated by the Partnership, which has 18 partners and "has not fully exercised its director nomination right". The chairman is Joe Tsai, the CEO Eddie Wu, the president J. Michael Evans and the CFO Toby Xu.
Directors and executive officers as a group beneficially own 1.9% of the shares; no shareholder above 5% is known to the company. Cash compensation for directors and officers was about RMB 250 million, plus awards over 28,088,000 shares. The annual cash bonus pool is a percentage of "adjusted pretax operating profits", a non-GAAP base, and part of it goes to the Partnership; the percentage is not disclosed. Related-party dealings are dominated by Ant Group, treated in 3-bis. The auditor, PricewaterhouseCoopers Zhong Tian, has served since 2023 and found internal control effective.
Governance therefore concentrates board control in a partnership whose members hold a small economic stake, with board seats as the mechanism rather than votes.
What did management do with the capital it controlled?
Capital allocation. Over three years the group generated RMB 422,315 million of CFO and borrowed net as shown in 3-quinquies. Capex took RMB 244,122 million, 43.12% of the uses itemized in the appendix, which leave out treasury and portfolio investment flows. Repurchases took RMB 183,045 million, more than twice what went to dividends. Buying out minority shareholders of subsidiaries took RMB 44,538 million. The composition changed in FY2026. Repurchases dropped from RMB 86,662 million to RMB 7,638 million, while capex rose 46.63%. Disposals of Sun Art and Intime produced losses of RMB 21,638 million in FY2025; the Trendyol GO sale produced a gain of about RMB 6,000 million this year. Acquisitions were small.
Share repurchases. The company bought 72,733,488 shares for US$1,046 million, all between April and August 2025. The average was US$115.05 per ADS, 8.30% below the year-end close. In RMB, the cost per ADS on the equity-statement basis was RMB 828.78, or 18.84 times FY2026 diluted EPS. In FY2025 the company had bought at 10.68 times EPS. The cash paid (RMB 7,638 million) and the cost recorded in equity (RMB 7,535 million) differ by RMB 103 million, which the document does not explain.
Net dilution. Shares issued for compensation exceeded shares retired by 106,138,570, adding 0.575% to the share count. The repurchase did not even plug the dilution from compensation: of the three years presented, this is the only one in which shares issued exceeded shares retired.
Accounting aggressiveness. Adjusted EBITA excludes share-based compensation, intangible amortization and impairment, and "impairment of goodwill, and others". The excluded amounts total RMB 110,104 million over three years, more than twice FY2026 operating income. Goodwill impairment alone recurs in every year presented, for RMB 26,207 million in total. The non-GAAP net income is symmetric in one respect that should be credited: it also removes investment gains, so in FY2026 it is RMB 41,469 million below GAAP net income.
Governance signals inside the document. Internal control was found effective, the auditor did not change, and the cover indicates no restatement. The two items inside the document that bear on governance are the related-party cloud revenue growth and the rise in supplier-finance obligations.
The year's decisions read together. On the asset side, the company sold 85% of Trendyol GO for about RMB 5,000 million in cash and spent RMB 16,768 million buying out minority shareholders. On the funding side, it raised about HK$12 billion against its Alibaba Health stake without selling it, and issued about US$3.2 billion of zero-coupon convertibles. It repaid the US$3.17 billion drawn under its restructured syndicated facility, stopped repurchases after August 2025 and cut the dividend to the regular component. It also raised other contracted commitments, which include co-location and bandwidth, by RMB 115,836 million. Taken together, cash was redirected from shareholder returns to computing capacity and consumer promotion. Part of it was raised through instruments that sell future equity, of Alibaba or of a subsidiary, at prices above where the company had been buying its own shares: the 2025 convertibles convert at 1.68 times the average repurchase price. What this changes in next year's accounts can be read now: depreciation will carry the equipment installed this year, and compensation dilution will stand without an offset unless repurchases resume. The diluted share count already carries the convertibles on an if-converted basis, while the exchangeable bonds bear on the Alibaba Health stake rather than on Alibaba's shares.
Does management put errors and setbacks in writing? Partly. The document states plainly that non-GAAP net income "decreased by 62%" and that operating income fell 64%, and it records the goodwill write-down set out in 3-bis. The explanation offered for the write-down is a single phrase, "considered the overall financial performance", without naming the unit, which is accounting more than candor. Elsewhere the text defends rather than admits: "acquired businesses operating at a loss do not detract from our total value because they bring clear strategic value". The document contains no statement that a target was missed, a project closed or a forecast revised down.
Which accounting choices move this year's earnings? The policies themselves did not change in a way that affects income. ASU 2023-09 was adopted prospectively, so the FY2026 tax reconciliation is laid out differently from the two prior years and its lines are not directly comparable.
The choices that move the result are four. The measurement alternative lets private holdings be revalued on observed transactions, which produced the upward adjustments quantified in 3-bis. The equity method records Ant Group one quarter in arrears and includes basis-difference amortization. The principal-versus-agent judgment books goods sales gross (3-bis), while quick-commerce subsidies are booked against revenue rather than as marketing, which makes quick commerce's revenue lower and the marketing line lower than they would otherwise be. Share-based compensation uses accelerated attribution and estimated forfeitures, which front-loads the expense.
GAAP and non-GAAP diverge in an unusual direction this year: non-GAAP net income is below GAAP net income, by the amount set out in 5-bis, because the company excludes investment gains as well as the usual non-cash charges. The effective tax rate differs from the statutory rate through tax holidays and the R&D super-deduction, worth RMB 22,771 million together. The Hong Kong line of non-taxable income and the valuation allowance, explained in 3-bis, offset each other in part. The reading of earnings quality is that operating income is clean but small, and net income is large but carried by marks.
What has the document already committed that will show in future results? Six items are written into the accounts or the risk factors, and none is a scenario built outside the document.
Each of them will show in the accounts without any assumption about demand; what each is worth to the shareholder does require one, and the document does not supply it.
Can the year's results be set against what the company said a year ago? Only partly, because the prior filing is not attached and this document does not restate its targets. What it allows is limited. Capex contracted at the start of the year was RMB 45,321 million, and capex in the year was RMB 126,063 million, so most of the spending was committed during the year. The FY2025 dividend of about US$4.6 billion was paid during the year as RMB 33,732 million. The repurchase authorization was used for US$1,046 million out of the remaining capacity. Investment commitments fell from RMB 20,341 million to RMB 14,501 million, but the flows cannot be matched to them. Margin or growth targets, if any were stated, cannot be compared.
Suppose that three years from now this investment has produced a permanent loss of capital. What must have happened?
The first path is that promotion becomes a permanent cost of keeping Taobao's users. Its measure today is sales and marketing at 23.94% of revenue and a China E-commerce EBITA margin of 19.40%, against 38.01% a year earlier. The signal would be advertising and promotion staying near RMB 214,246 million while customer management revenue grows at the 5.23% pace of this year.
The second path is that AI capacity is overbuilt relative to what customers pay for it. Its measure is RMB 200,062 million of other commitments, whose computing share is not disclosed, and Cloud depreciation at 18.29% of segment revenue, with related-party customers providing 18.05% of that revenue. The signal would be depreciation growing faster than Cloud revenue while the segment's EBITA margin stays near 9.02%.
The third path is that the investment marks reverse. Its measure is RMB 124,979 million carried on the measurement alternative with RMB 61,221 million of cumulative upward adjustments, and investment items supplying 57.51% of pre-tax income. The signal would be the interest and investment income line turning negative, as it was at negative RMB 9,964 million in FY2024.
What does the shareholder keep if growth stops? Tangible shareholders' equity is RMB 796,525 million, RMB 343.33 per ADS on the 2,320 million ADS-equivalents supplied rather than the diluted average of 3-quinquies, against a price of RMB 865.42. Net working capital is RMB 134,371 million and the current ratio 1.28x, down from 1.55x. Unrestricted liquidity is RMB 224.49 per ADS, and liquidity net of all financial debt RMB 112.43 per ADS. As shown in 3-ter, 35.07% of assets are cash or observable-price instruments and 21.71% rest on internal estimates.
If revenue stopped growing and operating margins returned to the 10.28% three-year average, liquidity and the quoted part of the portfolio would protect the shareholder, while goodwill, private-company marks and the young computing assets would not.
What do the answers to the three decisive questions add up to, and what does the price assume about them?
The first decisive question was whether the fall in operating income is chosen spending or lost earning power. The numbers point to chosen spending: gross margin held, customer management revenue grew, and the rise in advertising and promotion is larger than the whole fall in operating income. What the document cannot show is whether the spending can be withdrawn without losing what it bought, because it reports neither the quick-commerce result nor volumes. The reading holds as long as customer management revenue keeps growing while promotion falls as a share of revenue; it fails if promotion has to stay at this level to keep the marketplace's revenue where it is. The income statement line to watch is sales and marketing, and the China E-commerce EBITA margin beside it.
The second question was whether the AI capital earns a return. So far it does not at group level: ROIC fell to 9.03% and the incremental return is negative, while Cloud's EBITA margin barely moved as its depreciation grew faster than its revenue. The case for the investment rests on Cloud's revenue growth and on capacity not yet producing. The reading fails if Cloud depreciation keeps rising faster than Cloud revenue, or if the related-party share of Cloud revenue keeps rising; both are visible in the segment note and N25.
The third question was how much of net income is the business. About a third: net income without investment items was RMB 35,435 million, 34.70% of reported net income. That makes the GAAP P/E of section 3 misleading as a description of the operating business.
What the price implies can be stated arithmetically. At the supplied price, removing net cash and investments from market value leaves RMB 1,298,229.5 million for the operating businesses. That residual is 16.99 times FY2026 adjusted EBITA. It is 9.21 times FY2025 operating income. The same price is therefore a high multiple of this year's operating earnings and a moderate one of last year's; which base applies is the first decisive question, and the document does not settle it.
What did quick commerce earn or lose, and how much of the RMB 214,246 million of advertising and promotion went to it, to the Taobao marketplace and to the Qwen app? What are the advances of RMB 90,671 million to customers, merchants and others? Which investees received the RMB 63,753 million spent on securities, and do any of them buy cloud services? What utilization and return does the company expect from the committed capacity?
The next annual report will allow five things to be checked. No level is attached to any of them; the reader sets the threshold.
Taken together, the first two will show whether FY2026 was a spending phase and the third whether the capital behind it is earning. The last two show how much of the reported profit and working capital the business itself explains.
Report based on the Form 20-F of Alibaba Group Holding Limited for the fiscal year ended March 31, 2026, signed May 20, 2026. Multiples use the closing price of US$125.46 per ADS on the last day of the fiscal year and 2.32 billion ADS-equivalents, both supplied by the requester. Conversions use the document's convenience rate of RMB 6.8980 per US dollar. This report is for analysis purposes and does not constitute investment advice.
1. Company profile
1.1 Segment share: 554,217 / 1,023,670 = 54.14%; elimination (89,556) / 1,023,670 = (8.75)%; sum of shares = 100.00%.
1.2 Revenue YoY: 1,023,670 / 996,347 − 1 = 2.74%.
1.3 Employees YoY: 131,462 / 124,320 − 1 = 5.74%.
1-bis. Classification
1-bis.1 China E-commerce EBITA margin FY2026: 107,509 / 554,217 = 19.40%; FY2025: 193,223 / 508,380 = 38.01%; FY2024: 186,970 / 490,101 = 38.15%.
1-bis.2 Residual operating value: 2,007,781.5 − 448,724 − 260,828 = 1,298,229.5; share of market value: 1,298,229.5 / 2,007,781.5 = 64.66%.
1-bis.3 Liquidity + investments − debt: 520,824 + 448,724 − 259,996 = 709,552; / 2,007,781.5 = 35.34%.
1-bis.4 Inventory share of assets: 18,909 / 1,909,570 = 0.99%.
1-bis.5 Investment items share of pre-tax income: 74,416 / 129,387 = 57.51%.
2. Business quality
2.1 Advertising YoY: 214,246 / 113,573 − 1 = 88.64%; share of S&M: 214,246 / 245,023 = 87.44%.
2.2 Increase in advertising: 214,246 − 113,573 = 100,673; increase in S&M: 245,023 − 144,021 = 101,002.
2.3 Quick commerce increase: 78,520 − 53,588 = 24,932; / 100,673 = 24.77%.
2.4 Related-party cloud revenue: 19,134 + 9,415 = 28,549; / 158,132 = 18.05%; increase (19,134 − 11,113) + (9,415 − 4,507) = 12,929; / (158,132 − 118,028 = 40,104) = 32.24%.
2.5 Ant cloud YoY: 19,134 / 11,113 − 1 = 72.18%; investee cloud YoY: 9,415 / 4,507 − 1 = 108.90%.
2.6 Product development share: 66,533 / 1,023,670 = 6.50%; YoY 66,533 / 57,151 − 1 = 16.42%.
2.7 S&M increase over revenue increase: 101,002 / (1,023,670 − 996,347 = 27,323) = 3.70.
2.8 China E-commerce: revenue +45,837 (554,217 − 508,380); costs +131,551 (446,708 − 315,157); EBITA −85,714 (107,509 − 193,223).
2.9 All others loss change: −35,737 − (−9,499) = −26,238; AIDC: −2,051 − (−15,137) = +13,086.
2.10 Cloud EBITA YoY: 14,265 / 10,556 − 1 = 35.14%; Cloud depreciation YoY: 28,921 / 15,911 − 1 = 81.77%.
3. Financial analysis
3.1 Gross margin: 407,534 / 1,023,670 = 39.81%; 398,062 / 996,347 = 39.95%; 354,845 / 941,168 = 37.70%.
3.2 Operating margin: 50,150 / 1,023,670 = 4.90%; 140,905 / 996,347 = 14.14%; 113,350 / 941,168 = 12.04%.
3.3 Net margin: 103,592 / 1,023,670 = 10.12%; 130,109 / 996,347 = 13.06%; 80,009 / 941,168 = 8.50%.
3.4 EBITDA: 50,150 + 37,067 + 5,079 = 92,296; 140,905 + 29,260 + 6,336 = 176,501; 113,350 + 26,640 + 21,592 = 161,582.
3.5 Gross debt: 28,224 + 47,450 + 117,485 + 55,861 + 10,976 = 259,996.
3.6 Liquidity: 131,530 + 155,236 + 234,058 = 520,824. Net cash: 520,824 − 259,996 = 260,828; FY2025 597,132 − 230,703 = 366,429; change 105,601. Including leases: 260,828 − 21,726 = 239,102.
3.7 Interest cover: 50,150 / 9,793 = 5.12x; 140,905 / 9,596 = 14.68x; 113,350 / 7,947 = 14.26x. Interest / EBIT: 9,793 / 50,150 = 19.53%; 9,596 / 140,905 = 6.81%.
3.8 Long-term debt: 47,450 + 117,485 + 55,861 + 10,976 = 231,772; / 50,150 = 4.62 years; / 140,905 = 1.64 years at FY2025 EBIT on FY2026 debt (FY2025 debt 208,141 / 140,905 = 1.48 years).
3.9 FCF: 76,213 − 126,063 = (49,850); 163,509 − 85,972 = 77,537; 182,593 − 32,087 = 150,506. FCF / NI: (49,850) / 102,127 = (48.81)%; 77,537 / 125,976 = 61.55%; 150,506 / 71,332 = 210.99%.
3.10 Company FCF reconciliation: (49,850) + 4,042 (campus capex excluded) − 874 (intangibles) + 73 (buyer protection) = (46,609).
3.11 SBC bases: 14,821 − 11,180 = 3,641 cash-settled.
3.12 Owner earnings with working capital: 76,213 − 11,180 − 126,063 = (61,030); without: (61,030) + 22,547 = (38,483). Difference vs FCF: (49,850) − (61,030) = 11,180.
3.13 Market value: 125.46 × 2,320 = 291,067.2 (US$ million) × 6.8980 = 2,007,781.5. Price per ADS in RMB: 125.46 × 6.8980 = 865.42.
3.14 P/E diluted: 865.42 / 44.00 = 19.67x; on non-GAAP: 865.42 / 26.80 = 32.29x.
3.15 EV: 2,007,781.5 + 259,996 + 57,539 + 7,845 − 520,824 = 1,812,337.5. EV / EBIT = 1,812,337.5 / 50,150 = 36.14x; EV / EBITDA = 1,812,337.5 / 92,296 = 19.64x; EV / adjusted EBITDA = 1,812,337.5 / 113,483 = 15.97x.
3.16 P/B: 2,007,781.5 / 1,060,886 = 1.89x. Tangible equity: 1,060,886 − 247,378 − 16,983 = 796,525; P/TB = 2,007,781.5 / 796,525 = 2.52x.
3.17 Dividend yield: 1.05 / 125.46 = 0.84%.
3.18 ROIC: see 3-quinquies.
3.19 Income statement changes: G&A 33,082 / 44,239 − 1 = (25.22)%; S&M 245,023 / 144,021 − 1 = 70.13%; gross profit 407,534 / 398,062 − 1 = 2.38%; pre-tax 129,387 / 155,455 − 1 = (16.77)%; net income 102,127 / 125,976 − 1 = (18.93)%; attributable 103,592 / 130,109 − 1 = (20.38)%; diluted EPS per ADS 44.00 / 53.59 − 1 = (17.90)%; capex 126,063 / 85,972 − 1 = 46.63%.
3.20 FCF after SBC: 150,506 − 18,546 = 131,960; 77,537 − 13,970 = 63,567; (49,850) − 11,180 = (61,030).
3-bis. Notes
3-bis.1 Goodwill share: 247,378 / 1,909,570 = 12.95%. Impairments: 10,521 + 6,171 + 9,515 = 26,207. Accumulated / gross: 56,232 / 303,610 = 18.52%.
3-bis.2 Upward adjustments / pre-tax: 39,416 / 129,387 = 30.46%.
3-bis.3 Net income ex investment items (construction): FY2026 102,127 − 74,416 + 7,724 = 35,435; FY2025 125,976 − 8,764 + 8,801 = 126,013; FY2024 71,332 + 21,659 + 12,244 = 105,235. Change: 35,435 / 126,013 − 1 = (71.88)%. Non-GAAP change: 60,658 / 158,122 − 1 = (61.64)%.
3-bis.4 Valuation allowance share of gross DTA: 72,161 / 86,118 = 83.79%; balance change 72,161 − 59,310 = 12,851.
3-bis.5 Tax on pre-tax ex investment items: 30,045 / (129,387 − 74,416 + 7,724 = 62,695) = 47.92%.
3-bis.6 Cash tax vs expense: 34,013 − 30,045 = 3,968; vs current: 34,013 − 32,573 = 1,440.
3-bis.7 Equity method share of assets: 206,803 / 1,909,570 = 10.83%; Ant share change: 5,048 / 12,648 − 1 = (60.09)%.
3-bis.8 2024 convertible conversion price: 1,000 / 9.8915 = US$101.10 per ADS; ADS: 5,000 × 9.8915 / 1,000 = 49.46 million (about 49.5 million in the text). 2025 convertible: 1,000 / 5.1773 = US$193.15; ADS: 3,200 × 5.1773 / 1,000 = 16.57 million. Potential shares: (49.46 + 16.57) × 8 = 528.2 million; / 18,580.4 million = 2.84%. Capped calls: 4,612 + 1,309 = 5,921.
3-bis.9 Exchange price: 1,000,000 / 160,513.6 = HK$6.23.
3-bis.10 Unrecognized SBC: 6,694 + 1,920 = 8,614.
3-bis.11 Deferred revenue growth: 82,300 / 72,871 − 1 = 12.94%; advances: 36,221 / 28,733 − 1 = 26.06%.
3-bis.12 Other commitments growth: 200,062 / 84,226 − 1 = 137.53%.
3-ter. Balance sheet
3-ter.1 Shares of total assets: 449,942 / 1,909,570 = 23.56%; 282,699 / 1,909,570 = 14.80%; 251,837 / 1,909,570 = 13.19%; 155,310 / 1,909,570 = 8.13%; 131,530 / 1,909,570 = 6.89%; 359,893 / 1,909,570 = 18.85%; 117,485 / 1,909,570 = 6.15%; 1,060,886 / 1,909,570 = 55.56%.
3-ter.2 Current prepayments growth: 251,837 / 202,175 − 1 = 24.56%. Advances growth: 90,671 / 52,976 − 1 = 71.15% (+37,695). Related companies: 21,587 / 12,058 − 1 = 79.03% (+9,529). Share of working-capital line: (37,695 + 9,529) / 67,931 = 69.52%.
3-ter.3 PP&E net growth: 282,699 / 203,348 − 1 = 39.02%. Computer equipment: 238,760 / 157,252 − 1 = 51.83%. Accumulated / gross: 150,823 / 433,522 = 34.79%; 128,417 / 331,765 = 38.71%.
3-ter.4 Receivable days: 36,020 / 1,023,670 × 365 = 12.84; 31,172 / 996,347 × 365 = 11.42. Inventory days: 18,909 / 616,136 × 365 = 11.20; 18,887 / 598,285 × 365 = 11.52. Payable days: 131,127 / (616,136 + 245,023) × 365 = 55.58; 110,887 / (598,285 + 144,021) × 365 = 54.52. Cycle: 12.84 + 11.20 − 55.58 = (31.53); 11.42 + 11.52 − 54.52 = (31.58). (Rounded components; unrounded cycle (31.53) and (31.58).)
3-ter.5 ROE on average equity: 103,592 / ((1,009,858 + 1,060,886) / 2) = 10.01%. On year-end equity: 103,592 / 1,060,886 = 9.76%. With treasury shares on year-end equity: 103,592 / (1,060,886 + 36,141) = 9.44%. Repurchases three years: 88,745 + 86,662 + 7,638 = 183,045.
3-ter.6 Retained earnings: 645,478 + 103,592 − 34,031 − 5,965 − 692 = 708,382; increase 62,904. Payout declared: (34,031 + 7,535) / 103,592 = 40.12%; (29,340 + 85,650) / 130,109 = 88.38%; (18,542 + 89,076) / 80,009 = 134.51%.
3-ter.7 Asset buckets: observable 131,530 + 137,356 + 400,885 = 669,771; / 1,909,570 = 35.07%. Estimates: 11,216 + 124,979 + 247,378 + 16,983 + 13,957 = 414,513; / 1,909,570 = 21.71%. Remainder: 1,909,570 − 669,771 − 414,513 = 825,286 = 43.22%.
3-quater. Cash flow quality
3-quater.1 CFO bridge: 102,127 − 3,367 − 22,547 = 76,213. Non-cash sum: 99 + 529 − 66,089 − 992 − 8,387 + 37,067 + 10,051 + 11,180 + 7,724 + 11,244 − 1,848 − 2,785 − 2,528 + 1,368 = (3,367). Working capital: −67,931 − 1,973 + 37,933 − 38 + 9,462 = (22,547). D&A: 37,067 + 10,051 = 47,118.
3-quater.2 Third parties' money: 37,933 + 9,462 − 38 = 47,357; / 76,213 = 62.14%.
3-quater.3 Commitments / capex: 200,062 / 126,063 = 1.59.
3-quinquies. Returns and reinvestment
3-quinquies.1 ADS diluted (million): 19,235 / 8 = 2,404.375; 19,318 / 8 = 2,414.75; 20,359 / 8 = 2,544.875. Revenue per ADS: 1,023,670 / 2,404.375 = 425.75; 996,347 / 2,414.75 = 412.61; 941,168 / 2,544.875 = 369.83. FCF per ADS: (49,850) / 2,404.375 = (20.73); 77,537 / 2,414.75 = 32.11; 150,506 / 2,544.875 = 59.14. Equity per ADS: 1,060,886 / 2,404.375 = 441.23; 1,009,858 / 2,414.75 = 418.20; 986,544 / 2,544.875 = 387.66.
3-quinquies.2 Revenue per ADS over two years: 425.75 / 369.83 − 1 = 15.12%; total revenue: 1,023,670 / 941,168 − 1 = 8.77%. Diluted shares: 19,318 / 20,359 − 1 = (5.11)%; 19,235 / 19,318 − 1 = (0.43)%.
3-quinquies.3 NOPAT at 25%: 50,150 × 0.75 = 37,612.5; 140,905 × 0.75 = 105,678.75. Invested capital FY2026: 1,118,425 + 7,845 + 259,996 − 520,824 − 241,921 − 206,803 = 416,718; FY2025: 1,078,393 + 11,713 + 230,703 − 597,132 − 182,582 − 210,169 = 330,926. (Non-treasury investments: 100,594 + 130,447 + 10,880 = 241,921; 77,630 + 96,167 + 8,785 = 182,582.)
3-quinquies.4 ROIC: 37,612.5 / 416,718 = 9.03%; average 37,612.5 / ((330,926 + 416,718) / 2) = 10.06%; FY2025 105,678.75 / 330,926 = 31.93%. Excluding construction in progress: 37,612.5 / (416,718 − 55,637) = 10.42%.
3-quinquies.5 Incremental ROIC: (37,612.5 − 105,678.75) / (416,718 − 330,926) = (68,066.25) / 85,792 = (79.34)%. NOPAT change rounded in the text to 68,066.
3-quinquies.6 Reinvestment: 126,063 − 47,118 + 1,212 + 22,547 = 102,704; rate 102,704 / 37,612.5 = 273.06%; implied growth 273.06% × 9.03% = 24.65%. Actual EBIT growth: 50,150 / 140,905 − 1 = (64.41)%.
3-quinquies.7 CFO less depreciation (maintenance proxy): 76,213 − 37,067 = 39,146.
3-quinquies.8 Self-financing: FCF 150,506 + 77,537 − 49,850 = 178,193; equity net (843 − 88,745) + (10 − 86,662) + (1,042 − 7,638) = (181,150); dividends 17,946 + 29,077 + 33,732 = 80,755; debt net (20,570 − 13,092 − 5,013) + (52,788 − 43,678 + 35,665 + 35,979 − 16,220) + (84,228 − 78,458 + 22,276 + 10,986) = 2,465 + 64,534 + 39,032 = 106,031. Distributions over FCF, repurchases net of issues: 181,150 + 80,755 − 178,193 = 83,712. FY2026 debt share of capex: 39,032 / 126,063 = 30.96%.
3-quinquies.9 Capex / depreciation and impairment of PP&E: 32,087 / 26,640 = 1.20x; 85,972 / 29,260 = 2.94x; 126,063 / 37,067 = 3.40x. Cumulative capex / net income: 244,122 / 299,435 = 81.53%.
3-quinquies.10 EBIT / EV: 50,150 / 1,812,337.5 = 2.77%. EV ex investments (construction): 1,812,337.5 − 448,724 = 1,363,613.5; EBIT / EVx = 50,150 / 1,363,613.5 = 3.68%; FY2025 EBIT 140,905 / 1,363,613.5 = 10.33%.
3-quinquies.11 R&D: 52,256 + 57,151 + 66,533 = 175,940; revenue increase 1,023,670 − 941,168 = 82,502.
3-sexies. Deterioration signals
3-sexies.1 Inventory: 18,909 / 18,887 − 1 = 0.12%; gap 0.12 − 2.74 = (2.63) (unrounded).
3-sexies.2 Receivables: 36,020 / 31,172 − 1 = 15.55%; gap 12.81.
3-sexies.3 Allowance: 8,093 / 9,307 − 1 = (13.04)%; gap (13.04) − 15.55 = (28.60). Ratio: 9,307 / (31,172 + 9,307) = 22.99%; 8,093 / (36,020 + 8,093) = 18.35%. At prior ratio, unrounded: 44,113 × 9,307 / 40,479 = 10,142.5; difference 10,142.5 − 8,093 = 2,049.5.
3-sexies.4 Payables: 131,127 / 110,887 − 1 = 18.25%; cost of revenue 616,136 / 598,285 − 1 = 2.98%; gap 15.27. Cost of revenue + S&M: 861,159 / 742,306 − 1 = 16.01%; gap 2.24.
3-sexies.5 Advances: 71.15% − 2.74% = 68.41.
3-sexies.6 CFO: 76,213 / 163,509 − 1 = (53.39)%; gap 2.74 − (53.39) = 56.13.
3-septies. Sector metrics
3-septies.1 Cloud EBITA margin: 14,265 / 158,132 = 9.02%. Cloud depreciation share: 28,921 / 158,132 = 18.29%.
3-septies.2 Cloud services YoY: 112,077 / 84,517 − 1 = 32.61%.
4. Risks
4.1 Depreciation YoY: 34,963 / 24,515 − 1 = 42.62%.
4.2 Translation reserve change: −13,404 − 3,286 = (16,690).
5-bis. Management's record
5-bis.1 Uses itemized (excluding treasury, securities and equity-method investment flows): capex 244,122 + intangibles 1,716 + repurchases 183,045 + dividends 80,755 + minority buy-outs 44,538 + capped calls 5,921 + business combinations net 3,063 + dividends to minorities 2,527 + contingent consideration 500 = 566,187; capex share 244,122 / 566,187 = 43.12%. Repurchases over dividends: 183,045 / 80,755 = 2.27. CFO: 182,593 + 163,509 + 76,213 = 422,315.
5-bis.2 Repurchases: 427 + 210 + 168 + 154 + 87 = US$1,046 million; shares 72,733,488; per share 1,046 / 72.733488 = US$14.3813; per ADS × 8 = US$115.05; vs close 115.05 / 125.46 − 1 = (8.30)%.
5-bis.3 Cost per ADS (equity basis): 7,535 / 72.733488 × 8 = RMB 828.78; / 44.00 = 18.84x. FY2025: 85,650 / 1,197.058232 × 8 = 572.40; / 53.59 = 10.68x.
5-bis.4 Cash vs equity cost: 7,638 − 7,535 = 103.
5-bis.5 Net dilution: 178,872,058 − 72,733,488 = 106,138,570; / 18,474,235,708 = 0.575%.
5-bis.6 Adjusted EBITA exclusions: (165,028 − 113,350) + (173,065 − 140,905) + (76,416 − 50,150) = 51,678 + 32,160 + 26,266 = 110,104.
5-bis.7 GAAP vs non-GAAP: 60,658 − 102,127 = (41,469).
5-bis.8 Commitments increase: 200,062 − 84,226 = 115,836. Conversion over repurchase: 193.15 / 115.05 = 1.68.
5-bis.9 FY2025 disposal losses: 13,123 + 8,515 = 21,638.
6. Accounting
6.1 Tax holidays and R&D: 11,950 + 10,821 = 22,771.
8-ter. Downside protection
8-ter.1 Tangible equity per ADS: 796,525 / 2,320 = 343.33.
8-ter.2 Net working capital: 610,769 − 476,398 = 134,371; current ratio 610,769 / 476,398 = 1.28x; FY2025 674,049 / 435,346 = 1.55x.
8-ter.3 Liquidity per ADS: 520,824 / 2,320 = 224.49; net cash per ADS: 260,828 / 2,320 = 112.43.
8-ter.4 Average operating margin: (113,350 + 140,905 + 50,150) / (941,168 + 996,347 + 1,023,670) = 10.28%.
9. Judgment
9.1 Net income ex investment items / reported: 35,435 / 102,127 = 34.70%.
9.2 Residual operating value / adjusted EBITA: 1,298,229.5 / 76,416 = 16.99x; / FY2025 EBIT 140,905 = 9.21x.
9.3 S&M share of revenue: 245,023 / 1,023,670 = 23.94%.
The full data table behind this report — every line item with its source in the filing and the arithmetic checks — is published separately: Alibaba Group Holding Limited FY2026 data table.