Alibaba

EX-99.1 2 tm2623667d1_ex99-1.htm EXHIBIT 99.1 Exhibit 99.1 Alibaba Group Announces June Quarter 2026 Results Hong Kong, China, August 20, 2026 - Alibaba Group Holding Limited (NYSE: BABA and HKEX: 9988 (HKD Counter) and 89988 (RMB Counter), “Alibaba” or “Alibaba Group”) today announced its financial results for the quarter ended June 30, 2026. “We delivered a strong quarter, driven by the improving commercialization of our full-stack AI capabilities,” said Eddie Wu, Chief Executive Officer of Alibaba Group. “Alibaba Cloud’s external revenue growth accelerated to 45%, with AI-related product revenue delivering triple-digit growth for the twelfth consecutive quarter. We recently launched frontier language, coding, video, audio, image and music models, all delivering top-tier performance. We introduced QwenWork, an AI workforce agent that unleashes enterprise productivity and capabilities. With our full-stack AI strategy, we have put Alibaba in a superior position to capture the substantial growth of demand for artificial intelligence and AI compute.” “This quarter, we delivered robust revenue growth and margin improvement across our core businesses. Cloud segment revenue growth continued to accelerate, with quality earnings and operating leverage increasing EBITA margin to 12%. Our quick commerce business continued to improve unit economics while maintaining market share, and our overall e-commerce business delivered resilient profits,” said Toby Xu, Chief Financial Officer of Alibaba Group. “As synergies across our core businesses deepen and AI monetization ramps up, we have greater strategic and financial flexibility to make disciplined and sustained investments in full-stack AI capabilities.” BUSINESS HIGHLIGHTS In the quarter ended June 30, 2026: · Revenue was RMB268,953 million (US$39,639 million), an increase of 9% year-over-year. · Customer management revenue decreased by 7% year-over-year. Excluding the contra revenue impact from the new business development program, customer management revenue on a like-for-like basis would have grown by 1% year-over-year. · Income from operations was RMB15,161 million (US$2,234 million), a decrease of 57% year-over-year, primarily due to the decrease in adjusted EBITA, impairment of goodwill and a provision(1) recorded this year. Adjusted EBITA, a non-GAAP measurement, decreased 30% year-over-year to RMB27,329 million (US$4,028 million), primarily attributable to the investment in technology, partly offset by the improved operating results in our Cloud business, as well as enhanced operating efficiencies across various businesses. · Net income attributable to ordinary shareholders was RMB10,537 million (US$1,553 million). Net income was RMB10,444 million (US$1,539 million), a decrease of 75% year-over-year, primarily attributable to the decrease in income from operations, decrease in net gains from disposal of investments, and the decrease in net gain from mark-to-market changes of our equity investments. Non-GAAP net income in the quarter ended June 30, 2026 was RMB20,715 million (US$3,053 million), a decrease of 38% compared to RMB33,510 million in the same quarter of 2025. 1 · Diluted earnings per ADS was RMB3.71 (US$0.55). Diluted earnings per share was RMB0.46 (US$0.07 or HK$0.53). Non-GAAP diluted earnings per ADS was RMB8.52 (US$1.26), a decrease of 42% year-over-year. Non-GAAP diluted earnings per share was RMB1.07 (US$0.16 or HK$1.23), a decrease of 42% year-over-year. · Net cash provided by operating activities was RMB22,945 million (US$3,382 million), an increase of 11% compared to RMB20,672 million in the same quarter of 2025. Free cash flow, a non-GAAP measurement of liquidity, was an outflow of RMB44,670 million (US$6,584 million), compared to an outflow of RMB18,815 million in the same quarter of 2025. The decrease in free cash flow was mainly attributed to the increase in our cloud infrastructure expenditure. As of June 30, 2026, our cash and other liquid investments(2) were RMB474,505 million (US$69,933 million). Reconciliations of GAAP measures to non-GAAP measures presented above are included at the end of this results announcement. (1) See the section entitled “June Quarter Other Financial Results”. (2) Cash and other liquid investments represent cash and cash equivalents, short-term investments and other treasury investments included in equity securities and other investments on the consolidated balance sheets, of which that are unrestricted for withdrawal and use. BUSINESS AND STRATEGIC UPDATES During the quarter ended June 30, 2026, we undertook strategic combinations of certain businesses to realize synergies across our commerce platforms and strengthen our full-stack AI capabilities. Alibaba China E-commerce Group, Alibaba International Digital Commerce Group, together with Freshippo, were integrated to form Alibaba E-commerce Group. Cloud Intelligence Group and T-Head were combined to form AI Cloud and Compute Services. In addition, AI model labs, Qwen Consumer Business Group, QwenWork, all previously included in “All Others”, were consolidated to form AI Labs and Applications. Based on this strategic re-alignment, starting from this quarter, our segment reporting will present the following: (1) Alibaba E-commerce Group, (2) AI Cloud and Compute Services, (3) AI Labs and Applications, and (4) All Others. Alibaba E-commerce Group The new Alibaba E-commerce Group reflects our strategic focus on unlocking significant synergies across our domestic and cross-border e-commerce businesses. Starting from this quarter, we will present Alibaba E-commerce Group’s revenue as the following: (1) China E-commerce, (2) China Quick Commerce, (3) International E-commerce, and (4) Global Wholesale. We are deepening the integration of AI capabilities into our e-commerce platforms to enhance experiences for both consumers and merchants. On the consumer side, Qwen Shopping Assistant, a one-stop AI agent which delivers end-to-end assistance across the entire shopping journey from consumer idea inspiration to after-sales services on the Taobao app, demonstrated rapid growth in user adoption since its launch in May. For merchants, we have enhanced our merchant operations management platform with skill-based agentic capabilities that seamlessly automate end-to-end workflows, from product listing and store management to advertising and customer services. 2 In our China E-commerce business, CMR decreased 7% year-over-year during the quarter. Excluding the contra revenue impact from the new business development program, on a like-for-like basis, CMR would have grown 1% year-over-year. The slow-down in revenue growth was primarily due to weaker transaction activities. We saw incremental customer management revenue driven by the increase in monthly active consumers on the Taobao app because of our growth of quick commerce business. The China Quick Commerce business includes Taobao Instant Commerce, Freshippo, and other on-demand delivery business. Taobao Instant Commerce continued to improve its unit economics quarter-over-quarter, driven by higher average order value and enhanced fulfillment logistics efficiency, while maintaining market share. We improved the order mix through an increasing focus on high-value food orders and non-food categories. Meanwhile, Freshippo maintained robust year-over-year growth momentum in orders and revenue, driven by its expanding footprint into emerging cities and counties, as well as deeper collaboration with Taobao Instant Commerce to offer differentiated grocery and fresh produce products. The number of 88VIP members, our highest spending consumer group, continued to increase by double digits year-over-year to approximately 64 million as of June 30, 2026. We remain focused on the growth and retention of 88VIP members through enhanced value proposition to our most valued customers. In our International E-commerce business, AliExpress achieved operating profit this quarter, driven by logistics optimization and cost efficiency enhancement. We continued to diversify and enrich our product offerings by leveraging the supply chain advantages of the Alibaba ecosystem. The proportion of AliExpress’ sales that are contributed by local product supplies has continued to increase significantly year-over-year. AI Cloud and Compute Services For the quarter ended June 30, 2026, revenue from AI Cloud and Compute Services was RMB48,437 million (US$7,139 million). The year-over-year growth of total revenue and revenue from external customers both accelerated to 45%. This momentum was primarily driven by the increasing adoption of AI-related products. AI-related product revenue continued to show strong momentum, achieving RMB12,376 million (US$1,824 million) and delivering the twelfth consecutive quarter of triple-digit year-over-year growth. Cloud Alibaba Cloud continues to lead the market, driven by growing customer adoption of our full-stack AI capabilities across AI agents, AI models, AI cloud infrastructure, and orchestration software that manages heterogeneous chip clusters, including our own proprietary chips. Omdia’s “AI Cloud Market: China - 2025” reported that Alibaba Cloud ranked first in China’s AI cloud market with the largest share of 38.1%, highlighting our ability to outperform industry and lead China's fast-growing AI cloud market with our comprehensive full-stack AI capabilities. Chip Design – T-Head Semiconductor (“T-Head”) T-Head has established a portfolio of proprietary silicon, spanning GPU, CPU, storage and networking chips. This comprehensive chip portfolio enables integrated hardware optimization across compute, storage and networking, strengthening our ability to deliver high performance and efficiency in AI infrastructure. The Zhenwu chips, including Zhenwu M890, the latest AI processor, have achieved broad commercial adoption via Alibaba Cloud services from more than 650 external customers across over 20 industries, including autonomous driving, Internet, and financial services. This broad adoption demonstrates its ability to support AI workloads from training and fine-tuning to inference. 3 AI Labs and Applications Model Our model development has demonstrated a combination of capability and fast iteration, with our frontier language, coding, video, audio, image and music models all delivering top-tier performance. In August, we launched our flagship foundation model Qwen3.8-Max within three months of its prior version, and we opened its model weights with 2.4 trillion parameters. Qwen3.8-Max delivers comprehensive improvements across coding, real-world work, research, long-horizon tasks and multimodal agents, enabling it to complete complex tasks with greater reliability. QwenWork QwenWork is our flagship unified AI-native workforce agent. Through advanced AI models and agentic capabilities, QwenWork is designed to unlock productivity at the organizational level and drive operating efficiency. It also supports individual users with everyday workplace tasks. On distribution, QwenWork is deeply integrated with Alibaba Cloud and DingTalk’s ecosystem, providing a natural gateway to Alibaba's extensive enterprise user base and established workplace workflows. Its reach is further extended through broad integration with third-party business workflows and productivity platforms. Qwen App Qwen app, our flagship consumer-facing AI application, is adding diverse value-added offerings to meet user demands. Qwen app deepens its integration with core services across our ecosystem, including Taobao and Tmall, and Taobao Instant Commerce, to further expand the customer reach of our e-commerce business and enable a wider range of agentic use cases. 250 million users have had their first AI-driven shopping experience through Qwen app’s agentic features across an expanding range of e-commerce and other services since the launch of Qwen app. The integration also creates a flywheel across our AI and e-commerce businesses: broader AI adoption unlocks new growth opportunities, while feedback from real-world use cases enables us to enhance our models and user experiences. Share Repurchases During the quarter ended June 30, 2026, we repurchased a total of 13.4 million ordinary shares (equivalent to approximately 1.7 million ADSs) for a total of US$162 million. These purchases were made in the U.S. market under our share repurchase program. Capital Expenditures During the quarter ended June 30, 2026, capital expenditures were RMB67,678 million (US$9,975 million), an increase of 75% compared to RMB38,676 million in the same quarter of 2025, reflecting our continued investments in AI infrastructure to meet strong and growing customer demand. The significant year-over-year increase was due to several reasons, including fluctuations in procurement cycles, increase in CPU-compute capacity driven by anticipated growing customer adoption of AI agents, and higher pricing of a broad range of chip components. 4 JUNE QUARTER SUMMARY FINANCIAL RESULTS Three months ended June 30, 2025 2026 RMB RMB US$ YoY % Change (in millions, except percentages and per share amounts) Revenue 247,652 268,953 39,639 9 % Income from operations 34,988 15,161 2,234 (57 )%(2) Operating margin 14 % 6 % Adjusted EBITDA(1) 45,735 39,143 5,769 (14 )%(3) Adjusted EBITDA margin(1) 18 % 15 % Adjusted EBITA(1) 38,844 27,329 4,028 (30 )%(3) Adjusted EBITA margin(1) 16 % 10 % Net income 42,382 10,444 1,539 (75 )%(4) Net income attributable to ordinary shareholders 43,116 10,537 1,553 (76 )%(4) Non-GAAP net income(1) 33,510 20,715 3,053 (38 )%(3) Diluted earnings per share(5) 2.25 0.46 0.07 (79 )%(4)(6) Diluted earnings per ADS(5) 17.98 3.71 0.55 (79 )%(4)(6) Non-GAAP diluted earnings per share(1)(5) 1.84 1.07 0.16 (42 )%(3)(6) Non-GAAP diluted earnings per ADS(1)(5) 14.75 8.52 1.26 (42 )%(3)(6) (1) See the sections entitled “Non-GAAP Financial Measures” and “Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures” for more information about the non-GAAP measures referred to within this results announcement. (2) The year-over-year decrease was primarily due to the decrease in adjusted EBITA, impairment of goodwill and a provision recorded this year (see the section entitled “June Quarter Other Financial Results”). (3) The year-over-year decreases were primarily attributable to the investment in technology, partly offset by improved operating results in our Cloud business, as well as enhanced operating efficiencies across various businesses. (4) The year-over-year decreases were primarily attributable to the decrease in income from operations, decrease in net gains from disposal of investments, and the decrease in net gain from mark-to-market changes of our equity investments, while net income attributable to ordinary shareholders and earnings per share/ADS would further take into account the net loss attributable to noncontrolling interests. We excluded non-cash share-based compensation expense, gains/losses of investments, impairment of goodwill and intangible assets, and certain other items from our non-GAAP measurements. (5) Each ADS represents eight ordinary shares. (6) The year-over-year percentages as stated are calculated based on the exact amount and there may be minor differences from the year-over-year percentages calculated based on the RMB amounts after rounding. 5 JUNE QUARTER SEGMENT RESULTS Revenue for the quarter ended June 30, 2026 was RMB268,953 million (US$39,639 million), an increase of 9% year-over-year compared to RMB247,652 million in the same quarter of 2025. The following table sets forth a breakdown of our revenue by segment for the periods indicated: Three months ended June 30, 2025 2026 RMB RMB US$ YoY % Change (in millions, except percentages) Alibaba E-commerce Group: China E-commerce - Customer management 89,199 82,547 12,166 (7 )% - Direct sales, logistics and others(2) 31,675 28,353 4,179 (10 )% 120,874 110,900 16,345 (8 )% China Quick Commerce(3) 36,725 53,295 7,855 45 % International E-commerce 28,177 27,761 4,091 (1 )% Global Wholesale 13,036 13,906 2,049 7 % Total Alibaba E-commerce Group 198,812 205,862 30,340 4 % AI Cloud and Compute Services 33,418 48,437 7,139 45 % AI Labs and Applications 2,882 3,338 492 16 % All others 28,629 28,803 4,245 1 % Unallocated 519 783 116 Inter-segment elimination (16,608 ) (18,270 ) (2,693 ) Consolidated revenue 247,652 268,953 39,639 9 % (1) During the quarter ended June 30, 2026, we have implemented a new segment structure, to reflect the strategic re-alignment to realize synergies across our commerce platforms, strengthen our integrated AI infrastructure offering, and accelerate the development of our AI products and services, as follows: i) Alibaba E-commerce Group, a unified group formed by combining Alibaba China E-Commerce Group, Alibaba International Digital Commerce Group, together with Freshippo and certain commerce businesses within Cainiao. ii) AI Cloud and Compute Services, combining Cloud Intelligence Group with T-Head to strengthen the infrastructure and computing layer of our full-stack AI capabilities. iii) AI Labs and Applications, where AI model labs, Qwen Consumer Business Group and QwenWork, formerly classified under All others, were brought together to integrate the full value chain from AI model innovation through to consumer applications and enterprise productivity solutions. iv) All others include mainly Alibaba Health, Hujing Digital Media and Entertainment Group, Amap, Lingxi Games and other technology businesses. Accordingly, the above presentation has been recast to conform with the new reporting structure to reflect how our chief operating decision maker (“CODM”) reviews information under this new structure. (2) Direct sales, logistics and others revenue under China E-commerce business of Alibaba E-commerce Group primarily represents direct sales businesses of Tmall Supermarket (excluding on-demand delivery business), Tmall Global and other businesses, where revenue and cost of inventory are recorded on a gross basis within the business group, as well as revenue from logistics services and other value-added services. (3) China Quick Commerce revenue includes revenue generated by Taobao Instant Commerce, Freshippo, and on-demand delivery business of Tmall Supermarket. 6 The following table sets forth a breakdown of our adjusted EBITA by segment for the periods indicated: Three months ended June 30, 2025 2026 RMB RMB US$ YoY % Change(3) (in millions, except percentages) Alibaba E-commerce Group 39,988 39,749 5,858 (1 )% AI Cloud and Compute Services 2,419 5,628 830 133 % AI Labs and Applications (3,224 ) (13,861 ) (2,043 ) (330 )% All others 687 (3,343 ) (493 ) N/A Unallocated(2) (419 ) (163 ) (24 ) Inter-segment elimination (607 ) (681 ) (100 ) Consolidated adjusted EBITA 38,844 27,329 4,028 (30 )% Less: Non-cash share-based compensation expense (3,194 ) (2,962 ) (437 ) Less: Amortization of intangible assets (807 ) (665 ) (98 ) Less: Impairment of goodwill, and others 145 (8,541 ) (1,259 ) Income from operations 34,988 15,161 2,234 (57 )% (1) During the quarter ended June 30, 2026, we have implemented a new segment structure, to reflect the strategic re-alignment to realize synergies across our commerce platforms, strengthen our integrated AI infrastructure offering, and accelerate the development of our AI products and services, as follows: i) Alibaba E-commerce Group, a unified group formed by combining Alibaba China E-Commerce Group, Alibaba International Digital Commerce Group, together with Freshippo and certain commerce businesses within Cainiao. ii) AI Cloud and Compute Services, combining Cloud Intelligence Group with T-Head to strengthen the infrastructure and computing layer of our full-stack AI capabilities. iii) AI Labs and Applications, where AI model labs, Qwen Consumer Business Group and QwenWork, formerly classified under All others, were brought together to integrate the full value chain from AI model innovation through to consumer applications and enterprise productivity solutions. iv) All others include mainly Alibaba Health, Hujing Digital Media and Entertainment Group, Amap, Lingxi Games and other technology businesses. Accordingly, the above presentation has been recast to conform with the new reporting structure to reflect how our chief operating decision maker (“CODM”) reviews information under this new structure. (2) Unallocated primarily relates to certain costs incurred by corporate functions and other miscellaneous items that are not allocated to individual segments. (3) For a more intuitive presentation, widening of loss in YoY% is shown in terms of negative growth rate, and narrowing of loss in YoY% is shown in terms of positive growth rate. Alibaba E-commerce Group (i) Segment revenue · China E-commerce Business Revenue from our China E-commerce business in the quarter ended June 30, 2026 was RMB110,900 million (US$16,345 million), a decrease of 8% compared to RMB120,874 million in the same quarter of 2025. 7 Customer management revenue decreased by 7% year-over-year. Excluding the contra revenue impact from the new business development program, customer management revenue on a like-for-like basis would have grown by 1% year-over-year. Direct sales, logistics and others revenue under China E-commerce business in the quarter ended June 30, 2026 was RMB28,353 million (US$4,179 million), a decrease of 10% compared to RMB31,675 million in the same quarter of 2025, reflecting our planned reduction of certain direct sales businesses. · China Quick Commerce Business Revenue from our China Quick Commerce business in the quarter ended June 30, 2026 was RMB53,295 million (US$7,855 million), an increase of 45% compared to RMB36,725 million in the same quarter of 2025, primarily driven by Freshippo and Taobao Instant Commerce. · International E-commerce Business Revenue from our International E-commerce business in the quarter ended June 30, 2026 was RMB27,761 million (US$4,091 million), a decrease of 1% compared to RMB28,177 million in the same quarter of 2025. · Global Wholesale Business Revenue from our Global Wholesale business in the quarter ended June 30, 2026 was RMB13,906 million (US$2,049 million), an increase of 7% compared to RMB13,036 million in the same quarter of 2025, primarily due to the increase in revenue generated by cross-border related value-added services. (ii) Segment adjusted EBITA Alibaba E-commerce Group adjusted EBITA decreased by 1% to RMB39,749 million (US$5,858 million) in the quarter ended June 30, 2026, compared to RMB39,988 million in the same quarter of 2025, primarily due to our increased investment in user experiences and technology, partly offset by improved operating performance across various businesses. AI Cloud and Compute Services (i) Segment revenue Revenue from our AI Cloud and Compute Services in the quarter ended June 30, 2026 was RMB48,437 million (US$7,139 million), an increase of 45% compared to RMB33,418 million in the same quarter of 2025, primarily driven by public cloud revenue growth, including the increasing adoption of AI-related products. (ii) Segment adjusted EBITA AI Cloud and Compute Services adjusted EBITA increased by 133% to RMB5,628 million (US$830 million) in the quarter ended June 30, 2026, compared to RMB2,419 million in the same quarter of 2025, primarily due to revenue growth and improving operating efficiency, partly offset by the increasing investments in customer growth and technology innovation. 8 AI Labs and Applications (i) Segment revenue Revenue from AI Labs and Applications in the quarter ended June 30, 2026 was RMB3,338 million (US$492 million), an increase of 16% compared to RMB2,882 million in the same quarter of 2025. (ii) Segment adjusted EBITA AI Labs and Applications adjusted EBITA was a loss of RMB13,861 million (US$2,043 million) in the quarter ended June 30, 2026, compared to a loss of RMB3,224 million in the same quarter of 2025, primarily due to our increased investment in AI capabilities, and higher inference cost related to Qwen app. All Others (i) Segment revenue Revenue from All others segment was RMB28,803 million (US$4,245 million) in the quarter ended June 30, 2026, an increase of 1% compared to RMB28,629 million in the same quarter of 2025. (ii) Segment adjusted EBITA Adjusted EBITA from All others segment in the quarter ended June 30, 2026 was a loss of RMB3,343 million (US$493 million), compared to a profit of RMB687 million in the same quarter of 2025, primarily due to our increased investment in technology businesses. 9 JUNE QUARTER OTHER FINANCIAL RESULTS Costs and Expenses The following tables set forth a breakdown of our costs and expenses, share-based compensation expense, and costs and expenses excluding share-based compensation expense by function for the periods indicated: Three months ended June 30, % of 2025 2026 Revenue RMB % of Revenue RMB US$ % of Revenue YoY change (in millions, except percentages) Costs and expenses: Cost of revenue 136,429 55.1 % 166,096 24,480 61.8 % 6.7 % Product development expenses 15,001 6.1 % 22,529 3,320 8.4 % 2.3 % Sales and marketing expenses 53,178 21.5 % 47,625 7,019 17.7 % (3.8 )% General and administrative expenses 7,398 3.0 % 12,708 1,873 4.7 % 1.7 % Amortization of intangible assets 807 0.3 % 665 98 0.2 % (0.1 )% Impairment of goodwill – 0.0 % 4,458 657 1.7 % 1.7 % Total costs and expenses 212,813 254,081 37,447 Share-based compensation expense: Cost of revenue 463 0.2 % 424 62 0.2 % 0.0 % Product development expenses 1,466 0.6 % 1,477 218 0.5 % (0.1 )% Sales and marketing expenses 458 0.2 % 337 50 0.1 % (0.1 )% General and administrative expenses 1,158 0.5 % 1,066 157 0.4 % (0.1 )% Total share-based compensation expense(1) 3,545 3,304 487 Costs and expenses excluding share-based compensation expense: Cost of revenue 135,966 54.9 % 165,672 24,418 61.6 % 6.7 % Product development expenses 13,535 5.5 % 21,052 3,102 7.8 % 2.3 % Sales and marketing expenses 52,720 21.3 % 47,288 6,969 17.6 % (3.7 )% General and administrative expenses 6,240 2.5 % 11,642 1,716 4.3 % 1.8 % Amortization of intangible assets 807 0.3 % 665 98 0.2 % (0.1 )% Impairment of goodwill – 0.0 % 4,458 657 1.7 % 1.7 % Total costs and expenses excluding share-based compensation expense 209,268 250,777 36,960 (1) This includes both cash and non-cash share-based compensation expenses. Cost of revenue – Cost of revenue in the quarter ended June 30, 2026 was RMB166,096 million (US$24,480 million), or 61.8% of revenue, compared to RMB136,429 million, or 55.1% of revenue, in the same quarter of 2025. Without the effect of share-based compensation expense, cost of revenue as a percentage of revenue would have increased from 54.9% in the quarter ended June 30, 2025 to 61.6% in the quarter ended June 30, 2026, primarily driven by the increase in proportion of cloud and technology businesses in our revenue mix, as well as the contra revenue impact from the new business development program. 10 Product development expenses – Product development expenses in the quarter ended June 30, 2026 were RMB22,529 million (US$3,320 million), or 8.4% of revenue, compared to RMB15,001 million, or 6.1% of revenue, in the same quarter of 2025. Without the effect of share-based compensation expense, product development expenses as a percentage of revenue would have increased from 5.5% in the quarter ended June 30, 2025 to 7.8% in the quarter ended June 30, 2026, primarily due to investments in our technology infrastructure costs, as well as research and development personnel. Sales and marketing expenses – Sales and marketing expenses in the quarter ended June 30, 2026 were RMB47,625 million (US$7,019 million), or 17.7% of revenue, compared to RMB53,178 million, or 21.5% of revenue, in the same quarter of 2025. Without the effect of share-based compensation expense, sales and marketing expenses as a percentage of revenue would have decreased from 21.3% in the quarter ended June 30, 2025 to 17.6% in the quarter ended June 30, 2026, primarily due to the impact of our new business development program, where relevant subsidies previously recorded as sales and marketing expenses are now recorded as contra revenue item, as well as more efficient investment in Taobao Instant Commerce. General and administrative expenses – General and administrative expenses in the quarter ended June 30, 2026 were RMB12,708 million (US$1,873 million), or 4.7% of revenue, compared to RMB7,398 million, or 3.0% of revenue, in the same quarter of 2025. Without the effect of share-based compensation expense, general and administrative expenses as a percentage of revenue would have increased from 2.5% in the quarter ended June 30, 2025 to 4.3% in the quarter ended June 30, 2026, primarily due to a provision in relation to the fine imposed by the European Commission under the Digital Services Act of EUR550 million recorded this year. Share-based compensation expense – Total share-based compensation expense included in the cost and expense items above in the quarter ended June 30, 2026 was RMB3,304 million (US$487 million), compared to RMB3,545 million in the same quarter of 2025. The following table sets forth our analysis of share-based compensation expense for the quarters indicated by type of share-based awards: Three months ended June 30, 2025 2026 RMB RMB US$ YoY % Change (in millions, except percentages) By type of awards: Alibaba Group share-based awards(1) 2,321 2,461 363 6 % Others(2) 1,224 843 124 (31 )% Total share-based compensation expense(3) 3,545 3,304 487 (7 )% (1) This represents Alibaba Group share-based awards granted to our employees. (2) This represents share-based awards of our subsidiaries and Ant Group granted to our employees. (3) This includes both cash and non-cash share-based compensation expenses. Share-based compensation expense decreased in the quarter ended June 30, 2026 compared to the same quarter of 2025. We expect that our share-based compensation expense will continue to be affected by changes in the fair value of the underlying awards and the quantity of awards we grant in the future. 11 Amortization of intangible assets – Amortization of intangible assets in the quarter ended June 30, 2026 was RMB665 million (US$98 million), a decrease of 18% from RMB807 million in the same quarter of 2025. Impairment of goodwill – Impairment of goodwill of RMB4,458 million (US$657 million) was recorded in the quarter ended June 30, 2026. Impairment recorded represents the impairment of goodwill in relation to businesses in All others. Income from operations and operating margin Income from operations in the quarter ended June 30, 2026 was RMB15,161 million (US$2,234 million), or 6% of revenue, a decrease of 57% compared to RMB34,988 million, or 14% of revenue, in the same quarter of 2025, primarily due to the decrease in adjusted EBITA, impairment of goodwill and a provision in relation to the fine imposed by the European Commission under the Digital Services Act of EUR550 million recorded this year. Adjusted EBITDA and Adjusted EBITA Adjusted EBITDA decreased 14% year-over-year to RMB39,143 million (US$5,769 million) in the quarter ended June 30, 2026, compared to RMB45,735 million in the same quarter of 2025. Adjusted EBITA decreased 30% year-over-year to RMB27,329 million (US$4,028 million) in the quarter ended June 30, 2026, compared to RMB38,844 million in the same quarter of 2025, primarily attributable to the investment in technology, partly offset by the improved operating results in our Cloud business, as well as enhanced operating efficiencies across various businesses. A reconciliation of net income to adjusted EBITDA and adjusted EBITA is included at the end of this results announcement. Adjusted EBITA by segment Adjusted EBITA by segment as well as a reconciliation of income from operations to adjusted EBITA are set forth in the section entitled “June Quarter Segment Results” above. Interest and investment income, net Interest and investment income, net in the quarter ended June 30, 2026 was RMB9,004 million (US$1,327 million), a decrease of 48% compared to RMB17,376 million in the same quarter of 2025, primarily due to the decrease in net gains from disposal of investments and the decrease in net gain from mark-to-market changes of our equity investments. The above-mentioned investment gains and losses were excluded from our non-GAAP net income. Other income, net Other income, net in the quarter ended June 30, 2026 was RMB495 million (US$73 million), an increase of 42% compared to RMB348 million in the same quarter of 2025. Income tax expenses Income tax expenses in the quarter ended June 30, 2026 were RMB12,798 million (US$1,886 million), compared to RMB8,865 million in the same quarter of 2025. 12 Share of results of equity method investees Share of results of equity method investees in the quarter ended June 30, 2026 was RMB934 million (US$137 million), a decrease of 8% compared to RMB1,013 million in the same quarter of 2025. The following table sets forth a breakdown of share of results of equity method investees for the periods indicated: Three months ended June 30, 2025 2026 RMB RMB US$ (in millions) Share of profit of equity method investees - Ant Group 1,547 1,563 230 - Others 455 605 89 Others(1) (989 ) (1,234 ) (182 ) Total 1,013 934 137 (1) “Others” mainly include basis differences arising from equity method investees, share-based compensation expense related to share-based awards granted to employees of our equity method investees, as well as gain or loss arising from the deemed disposal of the equity method investees. We record our share of results of all equity method investees one quarter in arrears. The year-over-year share of profit of Ant Group remained stable, as the net increase in fair value gains was offset by the increased investments in new growth initiatives and technologies. Net income and Non-GAAP net income Our net income in the quarter ended June 30, 2026 was RMB10,444 million (US$1,539 million), compared to RMB42,382 million in the same quarter of 2025, primarily attributable to the decrease in income from operations, decrease in net gains from disposal of investments and the decrease in net gain from mark-to-market changes of our equity investments. Excluding non-cash share-based compensation expense, gains/losses of investments, impairment of goodwill and intangible assets, and certain other items, non-GAAP net income in the quarter ended June 30, 2026 was RMB20,715 million (US$3,053 million), a decrease of 38% compared to RMB33,510 million in the same quarter of 2025, primarily attributable to the investment in technology, partly offset by the improved operating results in our Cloud business, as well as enhanced operating efficiencies across various businesses. A reconciliation of net income to non-GAAP net income is included at the end of this results announcement. Net income attributable to ordinary shareholders Net income attributable to ordinary shareholders in the quarter ended June 30, 2026 was RMB10,537 million (US$1,553 million), compared to RMB43,116 million in the same quarter of 2025, primarily attributable to the decrease in income from operations, decrease in net gains from disposal of investments and the decrease in net gain from mark-to-market changes of our equity investments. Diluted earnings per ADS/share and non-GAAP diluted earnings per ADS/share Diluted earnings per ADS in the quarter ended June 30, 2026 was RMB3.71 (US$0.55), compared to RMB17.98 in the same quarter of 2025. Excluding non-cash share-based compensation expense, gains/losses of investments, impairment of goodwill and intangible assets, and certain other items, non-GAAP diluted earnings per ADS in the quarter ended June 30, 2026 was RMB8.52 (US$1.26), a decrease of 42% compared to RMB14.75 in the same quarter of 2025. Diluted earnings per share in the quarter ended June 30, 2026 was RMB0.46 (US$0.07 or HK$0.53), compared to RMB2.25 in the same quarter of 2025. Excluding non-cash share-based compensation expense, gains/losses of investments, impairment of goodwill and intangible assets, and certain other items, non-GAAP diluted earnings per share in the quarter ended June 30, 2026 was RMB1.07 (US$0.16 or HK$1.23), a decrease of 42% compared to RMB1.84 in the same quarter of 2025. 13 A reconciliation of diluted earnings per ADS/share to non-GAAP diluted earnings per ADS/share is included at the end of this results announcement. Each ADS represents eight ordinary shares. Cash and cash equivalents, short-term investments and other treasury investments As of June 30, 2026, cash and cash equivalents, short-term investments and other treasury investments included in equity securities and other investments on the consolidated balance sheets, of which that are unrestricted for withdrawal and use, were RMB474,505 million (US$69,933 million), compared to RMB520,824 million as of March 31, 2026. Other treasury investments consist of fixed deposits, certificates of deposit and marketable debt securities with original maturities over one year for treasury purposes. The decrease of RMB46,319 million during the quarter ended June 30, 2026, was primarily due to (i) free cash flow outflow of RMB44,670 million (US$6,584 million), (ii) effect of exchange rate changes of RMB5,853 million (US$863 million) mainly due to the depreciation of the U.S. dollar against Renminbi, partly offset by (iii) net proceeds from bank borrowings of RMB11,005 million (US$1,622 million). Net cash provided by operating activities and free cash flow During the quarter ended June 30, 2026, net cash provided by operating activities was RMB22,945 million (US$3,382 million), an increase of 11% compared to RMB20,672 million in the same quarter of 2025. Free cash flow, a non-GAAP measurement of liquidity, was an outflow of RMB44,670 million (US$6,584 million), compared to an outflow of RMB18,815 million in the same quarter of 2025. The decrease in free cash flow was mainly attributed to the increase in our cloud infrastructure expenditure. A reconciliation of net cash provided by operating activities to free cash flow is included at the end of this results announcement. Net cash used in investing activities During the quarter ended June 30, 2026, net cash used in investing activities of RMB18,964 million (US$2,795 million) primarily reflected capital expenditures of RMB67,678 million (US$9,975 million), partly offset by net decrease in short-term investments and other treasury investments by RMB50,452 million (US$7,436 million). The significant year-over-year increase in capital expenditures was due to several reasons, including fluctuations in procurement cycles, increase in CPU-compute capacity driven by anticipated growing customer adoption of AI agents, and higher pricing of a broad range of chip components. Net cash provided by financing activities During the quarter ended June 30, 2026, net cash provided by financing activities of RMB9,469 million (US$1,395 million) primarily reflected cash provided by net proceeds from bank borrowings of RMB11,005 million (US$1,622 million). Employees As of June 30, 2026, we had a total of 132,165 employees, compared to 131,462 as of March 31, 2026. 14 WEBCAST AND CONFERENCE CALL INFORMATION Alibaba Group’s management will hold a conference call to discuss the financial results at 7:30 a.m. U.S. Eastern Time (7:30 p.m. Hong Kong Time) on Thursday, August 20, 2026. All participants must pre-register to join this conference call using the Participant Registration link below: English: https://s1.c-conf.com/diamondpass/10055637-sjr4i0.html Chinese: https://s1.c-conf.com/diamondpass/10055638-wgmt8s.html Upon registration, each participant will receive details for the conference call, including dial-in numbers, conference call passcode and a unique access PIN. To join the conference, please dial the number provided, enter the passcode followed by your PIN, and you will join the conference. A live webcast of the earnings conference call can be accessed at https://www.alibabagroup.com/en/ir/earnings. An archived webcast will be available through the same link following the call. A replay of the conference call will be available for one week from the date of the conference (Dial-in number: +1 855 883 1031; English conference PIN 10055637; Chinese conference PIN 10055638). Please visit Alibaba Group’s Investor Relations website at https://www.alibabagroup.com/en/ir/home on August 20, 2026 to view the earnings release and accompanying slides prior to the conference call. ABOUT ALIBABA GROUP Alibaba Group is a global technology company focused on AI + Cloud and consumption. We provide the technology infrastructure and marketing reach to help merchants, brands, retailers and other businesses to engage with their users and customers and operate efficiently. We empower consumers and enterprises with our full-stack AI capabilities and services. Our AI technology based on Qwen (Chinese: Qianwen), a family of large language and multimodal models, powers the intelligence behind our services across enterprise solutions, e-commerce and other Internet platforms. Investor Relations Contact Lydia Liu Head of Investor Relations Alibaba Group Holding Limited [email protected] Media Contacts Cathy Yan [email protected] Ivy Ke [email protected] EXCHANGE RATE INFORMATION This results announcement contains translations of certain Renminbi (“RMB”) amounts into U.S. dollars (“US$”) and Hong Kong dollars (“HK$”) for the convenience of the reader. Unless otherwise stated, all translations of RMB into US$ were made at RMB6.7851 to US$1.00, the exchange rate on June 30, 2026 as set forth in the H.10 statistical release of the Federal Reserve Board, and all translations of RMB into HK$ were made at RMB0.86855 to HK$1.00, the middle rate on June 30, 2026 as published by the People’s Bank of China. The percentages stated in this announcement are calculated based on the RMB amounts and there may be minor differences due to rounding. 15 SAFE HARBOR STATEMENTS This results announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “may,” “will,” “expect,” “anticipate,” “future,” “aim,” “estimate,” “intend,” “seek,” “plan,” “believe,” “potential,” “continue,” “ongoing,” “target,” “guidance,” “is/are likely to” and similar statements. In addition, statements that are not historical facts, including statements about Alibaba’s strategies and business and operational plans, Alibaba’s beliefs, expectations and guidance regarding the growth of its business, its operating and financial results, return on investments, strategic investments and dispositions and share repurchases, and the business and industry outlook and quotations from management in this results announcement, are or contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to: Alibaba’s ability to compete, innovate and maintain or grow its business; risks associated with sustained investments in Alibaba’s businesses; risks related to strategic transactions; fluctuations in general economic and business conditions in China and globally; uncertainties arising from competition among countries and geopolitical tensions, including national trade, investment, protectionist or other policies and export control, economic or trade sanctions; changes to our shareholder return initiatives; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Alibaba’s filings with the U.S. Securities and Exchange Commission and announcements on the website of The Stock Exchange of Hong Kong Limited. All information provided in this results announcement is as of the date of this results announcement and is based on assumptions that we believe to be reasonable as of this date, and Alibaba does not undertake any obligation to update any forward-looking statement, except as required under applicable law. NON-GAAP FINANCIAL MEASURES To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: for our consolidated results, adjusted EBITDA (including adjusted EBITDA margin), adjusted EBITA (including adjusted EBITA margin), non-GAAP net income, non-GAAP diluted earnings per share/ADS and free cash flow. For more information on these non-GAAP financial measures, please refer to the table captioned “Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures” in this results announcement. We believe that adjusted EBITDA, adjusted EBITA, non-GAAP net income and non-GAAP diluted earnings per share/ADS help identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in income from operations, net income and diluted earnings per share/ADS. We believe that these non-GAAP measures provide useful information about our core operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. We present three different income measures, namely adjusted EBITDA, adjusted EBITA and non-GAAP net income in order to provide more information and greater transparency to investors about our operating results. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic corporate transactions, including investing in our new business initiatives, making strategic investments and acquisitions and strengthening our balance sheet. 16 Adjusted EBITDA, adjusted EBITA, non-GAAP net income, non-GAAP diluted earnings per share/ADS and free cash flow should not be considered in isolation or construed as an alternative to income from operations, net income, diluted earnings per share/ADS, cash flows or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here do not have standardized meanings prescribed by U.S. GAAP and may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. Adjusted EBITDA represents net income before interest and investment income, net, interest expense, other income (expense), net, income tax expenses, share of results of equity method investees, certain non-cash expenses, consisting of share-based compensation expense, amortization and impairment of intangible assets, impairment of goodwill, depreciation and impairment of property and equipment, and operating lease cost relating to land use rights, and others (including provision in relation to matters outside the ordinary course of business), which we do not believe are reflective of our core operating performance during the periods presented. Adjusted EBITA represents net income before interest and investment income, net, interest expense, other income (expense), net, income tax expenses, share of results of equity method investees, certain non-cash expenses, consisting of share-based compensation expense, amortization and impairment of intangible assets, impairment of goodwill, and others (including provision in relation to matters outside the ordinary course of business), which we do not believe are reflective of our core operating performance during the periods presented. Non-GAAP net income represents net income before non-cash share-based compensation expense, amortization and impairment of intangible assets, gain or loss on deemed disposals/disposals/revaluation of investments, impairment of goodwill and investments, and others (including provision in relation to matters outside the ordinary course of business), and adjustments for the tax effects. Non-GAAP diluted earnings per share represents non-GAAP net income attributable to ordinary shareholders divided by the weighted average number of outstanding ordinary shares, in each case for computing non-GAAP diluted earnings per share on a diluted basis. Non-GAAP diluted earnings per ADS represents non-GAAP diluted earnings per share after adjusting for the ordinary share-to-ADS ratio. Free cash flow represents net cash provided by operating activities as presented in our consolidated cash flow statement less purchases of property and equipment (excluding acquisition of land use rights and construction in progress relating to office campuses) and intangible assets (excluding those acquired through acquisitions), as well as adjustments to exclude from net cash provided by operating activities the buyer protection fund deposits from merchants on our marketplaces. We deduct certain items of cash flows from investing activities in order to provide greater transparency into cash flow from our revenue-generating business operations. We exclude “acquisition of land use rights and construction in progress relating to office campuses” because the office campuses are used by us for corporate and administrative purposes and are not directly related to our revenue-generating business operations. We also exclude buyer protection fund deposits from merchants on our marketplaces because these deposits are restricted for the purpose of compensating buyers for claims against merchants. The table captioned “Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures” in this results announcement has more details on the non-GAAP financial measures that are most directly comparable to GAAP financial measures and the related reconciliations between these financial measures. 17 ALIBABA GROUP HOLDING LIMITED UNAUDITED CONSOLIDATED INCOME STATEMENTS Three months ended June 30, 2025 2026 RMB RMB US$ (in millions, except per share data) Revenue 247,652 268,953 39,639 Cost of revenue (136,429 ) (166,096 ) (24,480 ) Product development expenses (15,001 ) (22,529 ) (3,320 ) Sales and marketing expenses (53,178 ) (47,625 ) (7,019 ) General and administrative expenses (7,398 ) (12,708 ) (1,873 ) Amortization of intangible assets (807 ) (665 ) (98 ) Impairment of goodwill – (4,458 ) (657 ) Other gains, net 149 289 42 Income from operations 34,988 15,161 2,234 Interest and investment income, net 17,376 9,004 1,327 Interest expense (2,478 ) (2,352 ) (346 ) Other income, net 348 495 73 Income before income tax and share of results of equity method investees 50,234 22,308 3,288 Income tax expenses (8,865 ) (12,798 ) (1,886 ) Share of results of equity method investees 1,013 934 137 Net income 42,382 10,444 1,539 Net (income) loss attributable to noncontrolling interests (1,733 ) 170 25 Net income attributable to Alibaba Group Holding Limited 40,649 10,614 1,564 Reversal of accretion (Accretion) of mezzanine equity 2,467 (77 ) (11 ) Net income attributable to ordinary shareholders 43,116 10,537 1,553 Earnings per share attributable to ordinary shareholders(1) Basic 2.32 0.56 0.08 Diluted 2.25 0.46 0.07 Earnings per ADS attributable to ordinary shareholders(1) Basic 18.57 4.51 0.67 Diluted 17.98 3.71 0.55 Weighted average number of shares used in calculating earnings per ordinary share (million shares)(1) Basic 18,570 18,671 Diluted 19,142 19,324 (1) Each ADS represents eight ordinary shares. 18 ALIBABA GROUP HOLDING LIMITED UNAUDITED CONSOLIDATED BALANCE SHEETS As of March 31, As of June 30, 2026 2026 RMB RMB US$ (in millions) Assets Current assets: Cash and cash equivalents 131,530 142,914 21,063 Short-term investments 155,310 154,653 22,793 Restricted cash and escrow receivables 42,038 42,585 6,276 Equity securities and other investments 30,054 88,130 12,989 Prepayments, receivables and other assets 251,837 296,572 43,709 Total current assets 610,769 724,854 106,830 Equity securities and other investments 449,942 343,018 50,555 Prepayments, receivables and other assets 94,996 119,377 17,594 Investment in equity method investees 206,803 203,207 29,949 Property and equipment, net 282,699 312,497 46,056 Intangible assets, net 16,983 16,700 2,461 Goodwill 247,378 242,456 35,734 Total assets 1,909,570 1,962,109 289,179 Liabilities, Mezzanine Equity and Shareholders’ Equity Current liabilities: Current bank borrowings 28,224 30,614 4,512 Income tax payable 10,630 9,204 1,357 Accrued expenses, accounts payable and other liabilities 359,893 412,767 60,834 Merchant deposits 236 233 34 Deferred revenue and customer advances 77,415 79,439 11,708 Total current liabilities 476,398 532,257 78,445 19 ALIBABA GROUP HOLDING LIMITED UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED) As of March 31, As of June 30, 2026 2026 RMB RMB US$ (in millions) Deferred revenue 4,885 4,682 690 Deferred tax liabilities 46,060 48,725 7,181 Non-current bank borrowings 47,450 56,007 8,254 Non-current unsecured senior notes 117,485 115,716 17,054 Non-current convertible unsecured senior notes 55,861 54,905 8,092 Non-current exchangeable bonds 10,976 9,288 1,369 Other liabilities 24,185 26,635 3,926 Total liabilities 783,300 848,215 125,011 Commitments and contingencies Mezzanine equity 7,845 7,584 1,118 Shareholders’ equity: Ordinary shares 1 1 – Additional paid-in capital 385,086 387,610 57,127 Treasury shares at cost (36,141 ) (37,236 ) (5,488 ) Statutory reserves 16,628 16,814 2,478 Accumulated other comprehensive loss (13,070 ) (20,066 ) (2,957 ) Retained earnings 708,382 701,915 103,449 Total shareholders’ equity 1,060,886 1,049,038 154,609 Noncontrolling interests 57,539 57,272 8,441 Total equity 1,118,425 1,106,310 163,050 Total liabilities, mezzanine equity and equity 1,909,570 1,962,109 289,179 20 ALIBABA GROUP HOLDING LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended June 30, 2025 2026 RMB RMB US$ (in millions) Net cash provided by operating activities 20,672 22,945 3,382 Net cash provided by (used in) investing activities 18,328 (18,964 ) (2,795 ) Net cash (used in) provided by financing activities (2,731 ) 9,469 1,395 Effect of exchange rate changes on cash and cash equivalents, restricted cash and escrow receivables (958 ) (1,519 ) (224 ) Increase in cash and cash equivalents, restricted cash and escrow receivables 35,311 11,931 1,758 Cash and cash equivalents, restricted cash and escrow receivables at beginning of period 189,268 173,568 25,581 Cash and cash equivalents, restricted cash and escrow receivables at end of period 224,579 185,499 27,339 21 ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE U.S. GAAP MEASURES The table below sets forth a reconciliation of our net income to adjusted EBITA and adjusted EBITDA for the periods indicated: Three months ended June 30, 2025 2026 RMB RMB US$ (in millions) Net income 42,382 10,444 1,539 Adjustments to reconcile net income to adjusted EBITA and adjusted EBITDA: Interest and investment income, net (17,376 ) (9,004 ) (1,327 ) Interest expense 2,478 2,352 346 Other income, net (348 ) (495 ) (73 ) Income tax expenses 8,865 12,798 1,886 Share of results of equity method investees (1,013 ) (934 ) (137 ) Income from operations 34,988 15,161 2,234 Non-cash share-based compensation expense 3,194 2,962 437 Amortization of intangible assets 807 665 98 Impairment of goodwill, and others (145 ) 8,541 1,259 Adjusted EBITA 38,844 27,329 4,028 Depreciation and impairment of property and equipment, and operating lease cost relating to land use rights 6,891 11,814 1,741 Adjusted EBITDA 45,735 39,143 5,769 22 ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE U.S. GAAP MEASURES (CONTINUED) The table below sets forth a reconciliation of our net income to non-GAAP net income for the periods indicated: Three months ended June 30, 2025 2026 RMB RMB US$ (in millions) Net income 42,382 10,444 1,539 Adjustments to reconcile net income to non-GAAP net income: Non-cash share-based compensation expense 3,194 2,962 437 Amortization of intangible assets 807 665 98 Gain on deemed disposals/disposals/revaluation of investments (13,128 ) (5,364 ) (791 ) Impairment of goodwill and investments, and others 1,013 9,202 1,356 Tax effects(1) (758 ) 2,806 414 Non-GAAP net income 33,510 20,715 3,053 (1) Tax effects primarily comprise tax effects relating to non-cash share-based compensation expense, amortization and impairment of intangible assets and certain gains and losses from investments, and others. 23 ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE U.S. GAAP MEASURES (CONTINUED) The table below sets forth a reconciliation of our diluted earnings per share/ADS to non-GAAP diluted earnings per share/ADS for the periods indicated: Three months ended June 30, 2025 2026 RMB RMB US$ (in millions, except per share data) Net income attributable to ordinary shareholders – basic 43,116 10,537 1,553 Dilution effect on earnings arising from non-cash share-based awards operated by equity method investees and subsidiaries (162 ) (109 ) (16 ) Adjustments for interest expense attributable to convertible unsecured senior notes 71 80 12 Dilution effect on earnings arising from assumed exchange of exchangeable bonds – (1,556 ) (229 ) Net income attributable to ordinary shareholders – diluted 43,025 8,952 1,320 Non-GAAP adjustments to net income attributable to ordinary shareholders(1) (7,734 ) 11,631 1,714 Non-GAAP net income attributable to ordinary shareholders for computing non-GAAP diluted earnings per share/ADS 35,291 20,583 3,034 Weighted average number of shares on a diluted basis for computing non-GAAP diluted earnings per share/ADS (million shares)(2) 19,142 19,324 Diluted earnings per share(2)(3) 2.25 0.46 0.07 Non-GAAP diluted earnings per share(2)(4) 1.84 1.07 0.16 Diluted earnings per ADS(2)(3) 17.98 3.71 0.55 Non-GAAP diluted earnings per ADS(2)(4) 14.75 8.52 1.26 (1) Non-GAAP adjustments exclude the attributions to the noncontrolling interests for computing non-GAAP diluted earnings per share/ADS. See the table above for items regarding the reconciliation of net income to non-GAAP net income (before taking into account the dilutive impact and excluding the attributions to the noncontrolling interests). (2) Each ADS represents eight ordinary shares. (3) Diluted earnings per share is derived from dividing net income attributable to ordinary shareholders by the weighted average number of outstanding ordinary shares, on a diluted basis. Diluted earnings per ADS is derived from the diluted earnings per share after adjusting for the ordinary share-to-ADS ratio. (4) Non-GAAP diluted earnings per share is derived from dividing non-GAAP net income attributable to ordinary shareholders by the weighted average number of outstanding ordinary shares, in each case for computing non-GAAP diluted earnings per share. Non-GAAP diluted earnings per ADS is derived from the non-GAAP diluted earnings per share after adjusting for the ordinary share-to-ADS ratio. 24 ALIBABA GROUP HOLDING LIMITED RECONCILIATIONS OF NON-GAAP MEASURES TO THE NEAREST COMPARABLE U.S. GAAP MEASURES (CONTINUED) The table below sets forth a reconciliation of net cash provided by operating activities to free cash flow for the periods indicated: Three months ended June 30, 2025 2026 RMB RMB US$ (in millions) Net cash provided by operating activities 20,672 22,945 3,382 Less: Purchase of property and equipment (excluding land use rights and construction in progress relating to office campuses) (38,629 ) (67,660 ) (9,972 ) Less: Changes in the buyer protection fund deposits (858 ) 45 6 Free cash flow (18,815 ) (44,670 ) (6,584 ) 25