In the ever-evolving landscape of global e-commerce, Alibaba Group BABA and Amazon.com AMZN continue to dominate the digital marketplace. Both companies have transformed shopping habits across continents, built massive cloud computing operations, and expanded into various technological frontiers. While Amazon has established itself as the e-commerce leader in Western markets, Alibaba has cemented its position as the undisputed e-commerce powerhouse in China and is rapidly expanding its international presence.
Amazon and Alibaba share remarkable similarities in their business models, offering comprehensive e-commerce platforms, cloud services, and digital entertainment options. However, they operate in different primary markets with unique regulatory environments, growth trajectories and valuation metrics. With global digital transformation accelerating, particularly in emerging technologies like artificial intelligence, both companies are positioned at the intersection of commerce and technological innovation, making them worthy of close comparison.
Let's delve deep and closely compare the fundamentals of the two stocks to determine which one is a better investment now.
The Case for BABA Stock
Alibaba's business fundamentals have shown remarkable resilience and growth despite regulatory headwinds over the past few years. The company's December quarter financial results underscore its strong market position. Alibaba reported consolidated revenues of RMB280,154 million ($38,381 million), representing an 8% year-over-year increase. More impressively, the company's income from operations surged 83% from the same quarter in the previous year, reaching RMB41,205 million.
BABA's core e-commerce operations continue to thrive, with customer management revenues in its Taobao and Tmall Group growing 9% year over year. The company's focus on user experience and seller-friendly policies has yielded results, with 88 VIP members (Alibaba's highest spending consumer group) growing at double-digit rates to reach 49 million. This expansion in high-value customers establishes a solid foundation for sustained revenue growth.
Beyond e-commerce, Alibaba's cloud business is accelerating, with Cloud Intelligence Group revenues growing 13% year over year. The company has positioned itself at the forefront of AI innovation, with AI-related product revenues maintaining triple-digit growth for six consecutive quarters. Alibaba's recently launched QwQ-32B compact reasoning model performs comparably to larger models while requiring fewer resources, highlighting the company's commitment to cost-effective AI solutions. The company's strategic $53 billion investment in cloud computing and AI infrastructure over the next three years signals its determination to lead in this high-growth sector.
Internationally, Alibaba is gaining significant traction. Its International Digital Commerce Group saw an impressive 32% year-over-year growth, driven by strong cross-border business performance. The company continues to expand its global footprint, recently launching a cloud region in Mexico and a second data center in Thailand to meet increasing demand for cloud services in the AI era.
The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $138.29 billion, indicating 5.97% year-over-year growth. With the Zacks Consensus Estimate for fiscal 2025 earnings indicating an upward revision of 0.9% over the past 60 days to $8.80 per share, the market appears to be optimistic about Alibaba's growth trajectory.
Zacks Investment Research
Image Source: Zacks Investment Research
Find the latest earnings estimates and surprises on Zacks Earnings Calendar.
The Case for AMZN Stock
Amazon continues to demonstrate its dominance in the North American e-commerce landscape, with its fourth-quarter 2024 results showing 10% year-over-year revenue growth in its North America segment. The company reported total revenues of $187.79 billion, up 10.49% year over year, with strong growth across multiple business lines. AMZN's robust logistics network and continued focus on delivery speed have resulted in the delivery of more than nine billion units with same-day or next-day shipping worldwide in 2024.
The company's Prime membership program remains a key competitive advantage, bundling fast delivery with streaming content, music, prescription discounts and grocery delivery. The addition of notable brands like Clinique, Estee Lauder, and Armani Beauty has enhanced its product offerings.
Amazon Web Services (“AWS”) remains a significant growth driver, with revenues growing 19% year over year to reach a $115 billion annualized revenue run rate. The company is investing heavily in AI infrastructure, including the development of custom AI silicon like Trainium 2, which offers 30-40% better price performance than competing GPU-powered instances. Amazon's collaboration with Anthropic to build Project Rainier showcases its commitment to leading the AI infrastructure space.
Amazon's advertising business has also shown impressive growth, generating $17.3 billion in revenues in fourth-quarter 2024, up 18% year over year. The company has successfully leveraged its vast customer base and shopping data to create a powerful advertising platform that now generates an annual revenue run rate of $69 billion.
The Zacks Consensus Estimate for 2025 net sales is pegged at $696.84 billion, indicating growth of 9.23% from the prior-year reported figure. The Zacks Consensus Estimate for 2025 earnings is pegged at $6.32 per share, which indicates a jump of 14.29% from the year-ago period. The figure has remained unchanged over the past 30 days.
Zacks Investment Research
Image Source: Zacks Investment Research
Valuation and Stock Price Performance Comparison
When comparing these e-commerce giants through a valuation lens, Alibaba emerges with several advantages. Alibaba's price-to-cash flow ratio of 11.84X, while slightly higher than the Zacks Internet-Commerce industry average of 11.55X, is significantly more attractive than Amazon's 16.29X. This indicates that Alibaba offers better relative value for investors seeking exposure to the e-commerce and cloud computing sectors.
BABA’s Valuation Is Attractive Than AMZN
Zacks Investment Research
Image Source: Zacks Investment Research
Performance metrics further strengthen Alibaba's case. While Amazon shares have lost 5.6% over the past year, underperforming both the broader Zacks Retail-Wholesale sector's growth of 3% and the S&P 500's decline of 2.3%, Alibaba has delivered exceptional returns. BABA shares have surged 45.2% in the past year, substantially outperforming Amazon, the Zacks Retail-Wholesale sector and the S&P 500's return.
BABA Stock Outperforms AMZN & Sector
Zacks Investment Research
Image Source: Zacks Investment Research
Both companies face unique challenges but are making strategic investments in artificial intelligence, cloud infrastructure and international expansion. However, Alibaba's more favorable valuation, superior recent price performance, and ambitious growth initiatives in AI and cloud computing position it for potentially stronger returns moving forward.
Conclusion
While both Amazon and Alibaba represent compelling investments in the global e-commerce and cloud computing sectors, Alibaba currently offers superior growth potential at a more attractive valuation. The Chinese e-commerce giant's impressive financial performance, strategic AI initiatives, international expansion efforts, and relative valuation advantage give BABA a clear edge over AMZN.
Coupled with Alibaba's strong price momentum and aggressive infrastructure investments, particularly in cloud computing and AI technologies, investors may find significantly greater upside potential with BABA shares in the current market environment. For investors seeking exposure to the continued global digital transformation, Alibaba Group represents the stronger investment choice at this juncture. BABA currently carries a Zacks Rank #2 (Buy), whereas AMZN has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
