Alibaba Earnings Are Coming. AI, Price Wars, and Tariffs Could Leave Their Mark.

Alibaba is expected to report earnings early Friday. (Dreamstime)

When Chinese e-commerce conglomerate Alibaba Group Holding reports earnings Friday, investors will be watching much more than its online retail business.

Often seen as a bellwether for the Chinese economy, Alibaba has seen shares outperform the wider Chinese stock market this year, rising more than 40% compared with the MSCI China index , which is up about 28%. Alibaba was a Barron’s stock pick in October last year, due in large part to its cheap valuation and artificial-intelligence ventures.

But worries remain about the economic health of the world’s second largest economy and its companies, and Alibaba is facing fierce competition. Alibaba and rivals JD.com and Meituan have been waging a price war the past year, which has driven up volumes but is expected to dent profits.

China’s leading food-delivery group, Meituan , reported a whopping 89% drop in quarterly adjusted net profit on Wednesday, and warned about significant losses in the current quarter due to price competition in so-called instant retail, the delivery of goods within an hour after an order is placed.

Alibaba is expected to report fiscal first-quarter net income of $3.7 billion on revenue of $35.1 billion, according to analysts surveyed by FactSet. Its core commerce business, which includes online shopping platforms Taobao and Tmall, is expected to generate $27.6 billion in the quarter, while its cloud-business sales are forecast to generate $4.5 billion.

Even as its commerce business racks up far more revenue than all of its other segments combined, its smaller cloud operations and its logistics and delivery segments also attract close attention.

“Alibaba’s positioning as a leading GenAI and cloud infrastructure provider remains unchanged, underpinning a key pillar of our longer term positive view,” said Benchmark analyst Fawne Jiang in a preview last month. Jiang has a Buy rating on the company’s American depositary receipts, a $176 price target, and recommends investors build exposure to the stock on dips. Shares edged lower Thursday to trade around $120 ahead of the earnings report.

Sentiment around Chinese stocks has been hurt by concerns about tariffs and how they might affect large exporters to the U.S. Those worries come amid stubbornly soft demand from Chinese consumers, whose spending power has been reduced by slumping property prices.

Write to Elsa Ohlen at elsa.ohlen@barrons.com