Hua Er Jie Jian Wen·2025-07-10 02:52Core Viewpoint - HSBC's latest report indicates that Alibaba will continue to increase investments in instant retail and food delivery services in the coming quarters, which may significantly impact short-term profitability, but these factors are already reflected in the stock price. The strong growth momentum in cloud computing and leading position in AI provide long-term value support. HSBC maintains a "Buy" rating on Alibaba but lowers the target price from $176 to $150, indicating a potential upside of 38.9% from the current stock price of $107.99 [1][9]. Investment and Market Competition - Since April 2024, competition in food delivery and instant retail has intensified, with Meituan launching a three-year support plan worth 100 billion RMB and JD.com initiating a one-year subsidy project worth 10 billion RMB. In contrast, Alibaba's food delivery subsidy plan, launched on July 2, is worth 50 billion RMB and comes relatively late [1][4]. Market Share Growth - Alibaba's market share in the food delivery and instant retail sectors has rapidly increased from over 20% in 2024 to 36% as of July 5, 2025, while Meituan holds 55% and JD.com 9%. This growth is attributed to the integration of Ele.me and Fliggy into Taobao and Tmall, leadership consolidation, aggressive subsidy strategies, and traffic support [4]. Financial Projections - HSBC has raised Alibaba's revenue forecasts for FY26-28 by 3-8%, reflecting accelerated growth in instant retail and food delivery order volumes, but has lowered profit expectations by 7-22%. For FY26, Alibaba is expected to incur losses of 2.7 RMB per order in food delivery and 3.7 RMB per order in instant shopping, with an overall loss of 55 billion RMB in local lifestyle services [11][12]. Cloud Computing Outlook - HSBC remains optimistic about Alibaba's cloud computing business, projecting over 20% year-on-year growth in cloud revenue for FY26, driven by strong AI demand. Although quarterly fluctuations in gross margin may occur, it is expected to maintain a high single-digit level [13]. AI Market Position - Alibaba ranks first in the generative AI infrastructure as a service (GenAI IaaS) market, with a market share of 23.5% in the second half of 2024. IDC forecasts a compound annual growth rate of over 60% for the GenAI IaaS market from 2024 to 2027, positioning Alibaba to benefit significantly from its leading scale, strong product capabilities, and large enterprise customer base [19]. Upcoming Earnings Expectations - Alibaba is expected to announce its Q1 FY26 results in August, with projected sales revenue growth of 4% year-on-year, customer management revenue growth of 11%, and cloud computing revenue growth of 23%. However, adjusted EBITA is expected to decline by 15% year-on-year to 38.3 billion RMB, with a profit margin of 15%, down 3.4 percentage points year-on-year [23].