Unlocking Alibaba's Potential: A Deep Dive into Growth and Strategy
Cloud Computing and AI Advancements Propel Alibaba's Market Position
Alibaba Group Holding Ltd. has seen its stock valuation rise, primarily fueled by the robust expansion of its cloud computing division and significant strides in artificial intelligence. This upward trend occurs despite prevailing concerns among investors regarding the intricate geopolitical landscape between the U.S. and China.
Expert Opinions on Alibaba's Trajectory
Financial experts at Goldman Sachs, Daiwa Securities, and China International Capital Corporation (CICC) have identified several factors contributing to Alibaba's recovery. They particularly emphasize the increasing strength of Alibaba Cloud and the initial signs of profitability emerging from its core e-commerce platforms, Taobao and Tmall, as critical elements driving this resurgence.
Goldman Sachs Raises Forecasts Amidst Strong Cloud Performance
Goldman Sachs highlighted that Alibaba's recent market performance has fundamentally shifted investment perceptions. The firm has revised its capital expenditure projections for Alibaba for the fiscal years 2026–2028 upwards, setting it at 460 billion Chinese yuan, one of the highest in the market. Cloud revenue growth forecasts were also elevated to 31%, 38%, and 37% annually over the next three fiscal years, attributing this to breakthroughs in multimodal AI models and a more resilient chip supply chain. Consequently, Goldman Sachs increased its price target for Alibaba from $179 to $205, reflecting improved visibility into e-commerce profitability and global cloud expansion, maintaining a 'Buy' recommendation and suggesting that any recent stock dips present an opportune moment for investment.
Daiwa Securities Anticipates Peak Losses and Future Recovery
Analysts at Daiwa Securities anticipate a relatively substantial EBITA loss for Alibaba in the third quarter of fiscal 2026, potentially reaching 35 billion Chinese yuan. However, they predict this loss will represent a peak, followed by a subsequent decline. They project that strategic reductions in marketing expenses, enhancements in supply chain efficiency, and optimized delivery logistics could significantly reduce the group’s EBITA loss to 17 billion Chinese yuan within a few months. Daiwa also forecasts a 30% year-over-year revenue growth for Alibaba Cloud in the second quarter of fiscal 2026 and expects the International Digital Commerce Group’s revenue growth to moderate to 16% during the same period. Despite a downward adjustment of EPS forecasts for fiscal years 2026–2028 by 2–15%, Daiwa reaffirmed its 'Buy' rating.
CICC's Projections and Strategic Investments Impact
CICC analysts estimate Alibaba's second-quarter fiscal 2026 revenue to increase by 3.8% year-over-year, reaching 245.5 billion Chinese yuan. Conversely, adjusted EBITA is expected to decrease by 83% to 7.1 billion Chinese yuan, falling short of consensus estimates. This decline is attributed to substantial investments in flash purchase services and widening losses across other business segments. CICC projects a 30% year-over-year growth for Alibaba Cloud revenue in the same quarter, an increase from 26% in the first quarter, with an EBITA margin of 9%. The firm highlighted Alibaba's unveiling of new AI models, applications, and hardware at the Apsara Conference, believing that the cloud unit’s inherent advantages will foster sustained revenue and profit growth, thereby enhancing its valuation. Despite lowering its fiscal 2026 revenue forecast by 1% to 1.06 trillion Chinese yuan and adjusting its adjusted net profit downward by 17% for 2026 and 4% for 2027, CICC maintained an 'Outperform' rating with a price target of $204, based on a Sum-of-the-Parts valuation methodology.