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MercadoLibre (NASDAQ: MELI) and Alibaba (NYSE: BABA) delivered Q3 and Q2 earnings, respectively, that revealed two e-commerce giants pursuing radically different strategies. MercadoLibre is doubling down on logistics and fintech in Latin America while protecting margins. Alibaba is sacrificing near-term profitability to build AI and cloud infrastructure.
One Protects Margins. The Other Invests Through Pain.
MercadoLibre posted Q3 2025 revenue of $7.41 billion, up 39% year-over-year. The company beat on revenue but missed on earnings per share, delivering $8.32 against estimates of $9.52. That miss came from strategic choices, not execution failures. CEO Marcos Galperin is plowing capital into free shipping expansion across Brazil and social commerce initiatives. Total payment volume hit $71.2 billion, up 41%. Gross merchandise volume climbed 28% to $16.5 billion. Operating income grew 30% to $724 million, and the company generated $2.2 billion in free cash flow.
Alibaba took a different path in Q2 2026. Revenue came in at $34.81 billion, up just 5%. The company missed badly on earnings, reporting $0.08 per share against expectations of $5.60. Net income dropped 53% as Alibaba poured capital into AI infrastructure and quick commerce. Cloud Intelligence Group revenue jumped 34% to $5.59 billion. Quick commerce revenue surged 60% to $3.22 billion. CEO Eddie Wu framed the profitability hit as building for 2027 and beyond. Free cash flow went negative at −$3.1 billion as the company invested heavily in data centers and AI products.
Regional Dominance vs. Technology Infrastructure Bet
MercadoLibre is playing a market share game in Latin America, extending its logistics network for faster delivery and absorbing shipping costs to lock in customers. Mercado Pago is becoming the default payment rail across the region, creating switching costs that compound over time. MercadoLibre holds a 48.5x trailing price-to-earnings ratio and a forward multiple of 29.6x, reflecting investor confidence in its ability to dominate a growing e-commerce market. Analyst targets sit at $2,811, representing potential upside from current levels near $1,988.
Alibaba is building AI infrastructure and integrating quick commerce into Tmall to compete with platforms like Douyin. Cloud revenue growth of 34% suggests demand for AI services is real, but the profitability sacrifice is severe. The stock trades at 20.5x trailing earnings and 17.2x forward earnings, a valuation that looks cheap until you consider the −51.8% year-over-year earnings decline. Analysts see upside to $198.50, above the current price of $155.73.
Comparing Risk-Reward Profiles
MercadoLibre presents a different risk profile than Alibaba. The company is investing aggressively but still generating positive free cash flow and expanding operating income. Latin America’s e-commerce penetration remains low compared to developed markets, giving MercadoLibre years of runway. Mercado Pago is a genuine competitive advantage that Amazon cannot easily replicate in the region.
Alibaba offers more upside if China’s regulatory environment stabilizes and AI investments pay off, but that represents greater uncertainty. The negative free cash flow and profitability collapse make this a turnaround story, not a compounding growth story. Alibaba’s investment thesis depends on China’s regulatory environment stabilizing and AI investments generating returns. MercadoLibre’s thesis centers on Latin American e-commerce penetration growth with lower geopolitical risk and a management team executing while maintaining positive cash generation.
