BABA Earnings Bonanza Behind Apple AI Deal

The Chinese e-commerce and tech behemoth is riding the AI wave as investors prepare to examine its latest earnings to see whether its momentum can persist.

A New High, and Beyond?

Ahead of its earnings release, Alibaba is trading at its highest level in three years, with a notable 48% upside so far this year. While the recent partnership with Apple to advance AI finally propelled BABA above last year's stimulus-driven peak and above pandemic-era levels, the stock had already been trending higher. DeepSeek's popularity prompted investors to pour billions into Chinese AI stocks. Goldman Sachs estimates that up to $200 billion could be invested, benefiting companies like Alibaba, which offers its own AI services in competition with DeepSeek.

Nevertheless, the recent AI deal with Apple is likely to be a focal point for investors when Alibaba reports before the market opens on Thursday. The deal would see the e-commerce giant provide AI services for Apple devices in China, the second-largest iPhone market globally. Analysts have noted how AI in China has been gaining traction thanks to DeepSeek's notoriety, which is expected to fuel the demand for cloud computing, one of Alibaba's primary growth units.

Has the Turnaround Arrived?

Last quarter, BABA dropped despite posting strong earnings, as investors had expected stronger growth, and the limited stimulus from the Chinese government at the time was seen as disappointing. The e-commerce giant is considered a barometer for the Chinese economy, and slower consumer spending could undermine growth in its retail arm. However, CEO Eddie Wu highlighted in the last earnings report that the company was seeing growth in its cloud and AI-related businesses and would concentrate efforts there. This could allow the company to outperform the broader retail market.

The consensus among analysts is that Alibaba's Q4 earnings will improve to $19.50 per share from $18.97 per share a year ago, with revenue growing at 7.1% to reach $278.9 billion. In the area of interest for traders, the company reported last quarter that its Cloud Intelligence Group saw revenue of $4.22 billion, a 7% increase over the year. Any commentary executives might make about the impact of tariffs and the Trump Administration targeting "de minimis" small packages sent by post could also garner attention.

C&H Breakout or Breakdown?

The technical picture for BABA reveals an interesting junction, with a cup and handle (C&H) pattern potentially setting the stage for a move higher. As projected by the measured move, a sustained breakout above the handle resistance at around $120 could propel prices up to $170. Interim resistance sits at the $140 handle. Conversely, a breakdown below $110 could expose double digits below the $100 round support, signalling a deeper correction with $80 as a last point of hope.

Source: SpreadEx / Alibaba Group

Key Takeaways

BABA surged recently on the back of the AI boom and support from the recent partnership with Apple to advance AI services in China. Ahead of its earnings report, investors eagerly wait to gauge if the growth momentum can be sustained. While the company's cloud and AI-related businesses are expected to drive growth, the impact of tariffs and the Trump Administration's policies on small packages will also be closely watched.