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Alcoa Earnings Send Shares Lower—Buy the Dip or Wait?
By Chris Markoch. Originally Published: 1/23/2026.
Key Takeaways
- Alcoa beat expectations in Q4 2025 with strong EPS and revenue, along with improved profitability and free cash flow, but the stock pulled back on cautious near‑term guidance.
- Operational strength—including record production, tariff‑supported pricing, and a stronger balance sheet—positions Alcoa for sustained margin health and capital returns in 2026.
- Despite recent volatility and sell‑the‑news action, trend indicators and analyst support suggest patient accumulation could reward long‑term investors.
Alcoa Corp. (NYSE: AA) reported a strong fourth-quarter earnings report after the market closed on Jan. 22. The industrials giant beat both the top and bottom lines, posting earnings per share (EPS) of $1.26 versus estimates of $0.95. Revenue was $3.45 billion, ahead of expectations for $3.28 billion.
However, AA stock opened about 5% lower on Jan. 23. The sell‑the‑news reaction likely reflects management guidance that suggests near‑term pressure on earnings and free cash flow.
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Despite the pullback, Alcoa's long-term outlook remains bullish, so investors may want to consider the fundamentals that could make AA a buying opportunity.
The Fundamentals of the Business Are Driving Alcoa Higher
Beyond the headline numbers, Alcoa showed meaningful improvements in profitability and cash generation. Adjusted EBITDA rose sharply from the prior quarter, as higher aluminum prices, an improved shipment mix and cost actions flowed through the income statement. Management highlighted record production levels at several smelters and a key refinery, underscoring that the stronger results were driven by operations rather than one‑time items.
The balance sheet is improving. The company generated robust operating cash flow and free cash flow, enabling it to finish 2025 with a sizable cash balance while continuing to reduce gross and net debt. That combination gives the company more flexibility to fund growth projects, pursue portfolio optimization and return capital to shareholders over time.
Looking ahead, management signaled confidence that favorable aluminum fundamentals, tariff‑related pricing support, and ongoing productivity initiatives can sustain healthy margins in 2026, even as alumina markets remain mixed. The quarter reinforced the view that Alcoa is operating from a position of strength rather than merely recovering from the prior downcycle.
Could AA Stock Reach New Highs in 2026?
Analysts have been bullish since Alcoa's October 2025 report, and the AA share price is up more than 58% over that period.
That rally has pushed the stock to more than 22% above its consensus price target, and AA has outperformed many industrial peers during that stretch.
About a week before earnings, Wells Fargo & Co. raised its price target on AA to $71 from $58, even as it downgraded the shares to Equal Weight from Overweight.
That target sits above the stock's 52‑week high reached in mid‑January.
Investors will be watching for analyst reactions following Alcoa's report; those updates may influence how to approach AA in the coming weeks.
Patient Accumulation Is a Sound Strategy
Alcoa shares were up 19% in 2026 heading into earnings, briefly hitting an all‑time high before easing back into the low $60s. The rally pushed the price well above its rising 20‑day and 50‑day moving averages (SMAs), a classic sign of strong momentum rather than an early‑stage breakout.
That raises the question of whether the earnings were already priced in, which could explain the sell‑the‑news reaction.
That's not unusual. The key question is how far the pullback might go. The first logical support area sits near the 20‑day moving average in the low $60s, along with the recent gap and congestion zone in the high $50s to low $60s.
A routine pullback or sideways consolidation into that band would relieve overbought conditions without necessarily threatening the larger uptrend. A full retest of the 50‑day moving average — currently well below the share price — seems less likely unless the aluminum or macro outlook materially changes.
This setup favors patience over chasing strength. Trend followers may buy partial positions on pullbacks to the 20‑day average or after a brief consolidation that lets the stock "cool off" while moving averages catch up. Long‑term investors might use 5–10% dips to build positions gradually, placing stop‑losses just below recent swing lows or the 20‑day average to guard against a deeper reversal.
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