Chinese technology giant Alibaba (BABA) will report its financial results for the September quarter on Nov. 25. Heading into the announcement, BABA stock has lost some steam, falling about 17% from its recent peak of $192.67. Even with this pullback, Alibaba shares remain more than 80% higher year to date, reflecting optimism about the company’s advancements in artificial intelligence (AI).

However, investors’ enthusiasm is tempered by growing worries that the broader AI boom may be overheating. Notably, Alibaba has been pouring significant capital into its cloud division to strengthen its position in the AI race, investing heavily in new data centers, advanced infrastructure, and upgraded services designed to handle rising demand. While these efforts are essential for long-term competitiveness, they are likely to weigh on near-term margins and raise concerns about whether the current surge in AI-related spending will yield tangible returns.

Ahead of earnings, options data indicate traders are pricing in a move of roughly 6.1% in either direction for contracts expiring November 28, slightly lower than the average post-earnings swing of about 7.69% over the past year. It’s worth noting that after Alibaba’s last earnings release, shares jumped by about 12.9%.

Alibaba September Quarter: Here’s What to Expect

Alibaba’s September quarter is likely to get a boost from its Cloud Intelligence Group. The segment marked 26% year-over-year growth during the last reported quarter. The segment’s top line benefited from public cloud revenue growth, including the increasing adoption of AI-related products.  For eight straight quarters, AI-related products have delivered triple-digit revenue growth. As companies accelerate their use of AI, they are demanding more computing power, more storage, and more sophisticated cloud services, and Alibaba is benefiting directly from this shift.

Management has signaled that this trend should continue. On the previous earnings call, management noted that enterprises are rapidly integrating more advanced AI models into their operations, creating new applications, expanding use cases, and replacing traditional CPU-driven processes with large-model computing. As a result, demand for compute, storage, and other cloud resources has remained exceptionally strong. Alibaba believes this momentum will keep its cloud business on an upward trajectory in the coming quarters.

In e-commerce, Alibaba continues to operate in an increasingly competitive environment in China. To sharpen its focus, the company consolidated Taobao and Tmall Group, Ele.me, and Fliggy into the Alibaba China E-commerce Group. The goal is to compete more effectively while strengthening its most loyal customer base. Membership in its high-value 88VIP program grew at a double-digit pace and now exceeds 53 million users. Alibaba plans to deepen engagement with these premium shoppers by enhancing the value they receive from the program.

Revenue should also see support from customer management activity. Last quarter, this line item grew 10% year-over-year, helped by a higher take rate tied to new software service fees introduced last September and the broader adoption of Alibaba’s Quanzhantui, its AI-powered marketing tool.

Still, not everything is moving in Alibaba’s favor. While top-line performance appears strong, margins remain under pressure. Heavy investment in AI, cloud infrastructure, and quick-commerce initiatives is expected to weigh on profitability.

Analysts currently anticipate earnings of $0.49 per share for the September quarter, a steep 74.6% drop from the prior year. The company has also missed earnings expectations in three of the past four quarters, including a 3.1% miss last quarter.

Conclusion: Is BABA Stock a Buy Now?

The pullback in Alibaba stock reflects caution around the sustainability of the AI boom and the near-term drag from Alibaba’s heavy investment cycle. Yet the company’s core growth engines, especially cloud and AI, remain solid, supported by accelerating enterprise adoption and strengthening demand for advanced computing services. Further, the consolidation of its e-commerce platforms and a growing base of high-value customers position Alibaba for steadier growth in the competitive domestic market.

While margin pressure and a history of recent earnings misses introduce risk, the long-term outlook for Alibaba stock remains strong considering its growing AI capabilities. Analysts are also bullish about BABA stock and maintain a “Strong Buy” rating. Overall, the current pullback in Alibaba stock presents a buying opportunity.

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