Core Viewpoint - Analysts from Daiwa Capital Markets predict that Alibaba's performance for the third fiscal quarter of 2026 may be lackluster, but profit margins are expected to gradually improve as investments in the highly competitive instant delivery sector slow down [1] E-commerce Business - Analysts maintain a cautiously optimistic outlook on Alibaba's core e-commerce business, which faces challenges from high base effects and competition [1] Cloud Business - Daiwa forecasts a significant increase in Alibaba's cloud business revenue, projecting a 36% rise [1] Financial Projections - The firm estimates that quarterly customer management revenue will grow by 3.5% year-on-year, while non-GAAP net profit is expected to decline by 45% [1] Investment Rating - Daiwa maintains a "Buy" rating on Alibaba's H-shares with a target price of HKD 206, highlighting that Alibaba is the only publicly listed company in China with full-stack AI capabilities [1]

Core Viewpoint - Morgan Stanley predicts that Alibaba's comprehensive profitability will reach an inflection point in Q3 2025 and significantly recover in Q4, driven by a substantial reduction in losses from the food delivery business and accelerated growth in cloud services due to strong AI demand [1][2][3] Business Performance - The food delivery business is expected to see a 40% quarter-on-quarter reduction in losses, projected to narrow to approximately 21 billion yuan by Q4 2025 [1][3][4] - The cloud business is anticipated to grow by 37% year-on-year in Q4 2025, benefiting from robust AI demand [1][3][7] Strategic Shift - Alibaba's strategic focus is shifting from a user-scale-driven growth model to a more efficient, profitability-driven approach, indicating a fundamental transformation in its growth strategy [2][5][6] Financial Adjustments - Morgan Stanley has adjusted its revenue forecasts for Alibaba, lowering the projections for FY26 and FY27 by 1% and 2% respectively, due to high base effects impacting customer management revenue (CMR) growth [8] - Despite these adjustments, the firm maintains a positive outlook on Alibaba's stock, reiterating a "buy" rating and setting new target prices of $230 for US shares and HK$225 for Hong Kong shares [3][8] Market Dynamics - The flash purchase business is showing a clear path to profitability, with unit economic losses halving compared to July/August, driven by improved product mix and reduced delivery costs [4][6] - The cloud business is experiencing strong demand that exceeds supply capabilities, leading to potential increases in capital expenditures beyond the planned 380 billion yuan over three years [6][7]