BABA 2Q25:Alicloud Revenue and Capex Both Surprised to the Upside, Q2 Growth May Approach 30%

We had provided a relatively constructive preview for Alicloud’s revenue trajectory and expected continued acceleration in the coming quarters, while remaining conservative on margin. The Q1 results largely validated our estimates.

Revenue Trends

Revenue growth accelerated from 18% last quarter to 26% YoY this quarter (external revenue +26%), surpassing buy-side expectations. The stronger-than-expected top-line suggests management’s confidence in sustaining high growth, even though they did not explicitly commit to 30% growth in FY26 Q2.

Channel checks and ecosystem conversations during our preview indicated that the acceleration trend, which began in July, remained solid. We continue to believe that Q2 growth could potentially approach the ~30% level.

Worth noting, Alibaba is expected to deliver a major model upgrade in September, most likely Qwen 3.5, a trillion-parameter foundation model. This launch could further boost AI-related cloud revenues.

Profitability