November 25, 2025 10:52 PM GMT Alibaba Group Holding | Asia Pacific Alicloud Thesis Remains Intact We expect F3Q cloud growth to remain solid at 35%, supported by robust industry demand, while CMR could slow to 7.5% as a weak macro environment offsets take rate improvement. We estimate a F3Q QC loss of Rmb25bn, which should be in line with market expectations. OW. Alicloud thesis intact: Although management did not commit to cloud acceleration as in previous quarters, we expect the Alicloud thesis to remain ...

Core Viewpoint - Alibaba Group Holding Limited is highlighted as a significant AI stock to monitor, with Bernstein raising its price target from $167 to $200 while maintaining an Outperform rating, driven by positive momentum post-Q1 and confidence in its AI strategy [1] Group 1: Financial Performance and Projections - Bernstein expects Alicloud revenue to continue accelerating, contributing to the overall positive outlook for Alibaba shares [1] - The company's Gross Merchandise Volume (GMV) share in China has stabilized at approximately 15-20%, indicating a solid market position [2] Group 2: Market Dynamics and Competition - The firm expresses concerns about competition in the domestic e-commerce space, suggesting that a stable equilibrium may be difficult to achieve [3] - Despite the current valuation entering a complex territory, Bernstein believes Alibaba shares will remain well-supported in the near term [2]

Summary of Conference Call on Greater China Semiconductors Industry Overview - **Industry**: Greater China Semiconductors, specifically focusing on cloud semiconductors - **Key Players**: Aspeed, OpenAI, Alibaba, NVIDIA, Oracle, Amazon, Microsoft, Meta, Google Core Insights 1. **Strong Demand for AI**: The semiconductor sector is experiencing robust demand for AI technologies, highlighted by a strategic partnership between OpenAI and NVIDIA to deploy at least 10GW of NVIDIA systems for AI infrastructure, equivalent to millions of GPUs, with the first 1GW expected in 2H26 [2][5] 2. **Cloud Demand**: Cloud demand remains strong, with Alibaba reporting a 10x increase in global data center power usage by 2032 compared to 2022, and token usage doubling every 2-3 months [2][5] 3. **Aspeed's Revenue Guidance**: Aspeed's 4Q25 revenue guidance is set at NT$2-2.1 billion, aligning with estimates, and gross margin guidance is between 66.5-67.5%, indicating a better product mix [3][9] 4. **Substrate Shortage**: A substrate shortage is expected to constrain Aspeed's growth in 1H26, but supply constraints are anticipated to ease in 2H26 as Nitto Boseki expands capacity [4][9] 5. **Positive Outlook for Aspeed**: Despite current revenue caps due to supply issues, Aspeed is well-positioned for growth in 2026, with potential market share expansion in new product lines [5][39] Financial Projections 1. **Earnings Estimates**: Aspeed's earnings estimates for 2025-2027 have been fine-tuned, with a projected revenue increase of 4%, 6%, and 8% respectively, driven by higher shipment forecasts [36][39] 2. **Price Target**: The price target for Aspeed remains unchanged at NT$6,100, reflecting a positive outlook based on revised earnings estimates [5][39] 3. **Gross Margin Trends**: Gross margins are expected to remain stable, with a forecast of 67.2% in 2025, up from 64% in 2024 [48][39] Additional Insights 1. **Cloud Capex Growth**: The top 11 cloud providers are expected to allocate $445 billion to capital expenditures in 2025, indicating a significant increase from previous estimates [27][28] 2. **Market Dynamics**: The semiconductor market is experiencing a correlation between cloud capex and global semiconductor revenue, with a noted increase in capital intensity expected to exceed 20% of revenue in 2026 [28][35] 3. **Risks and Opportunities**: Potential risks include intensified competition and policy tightening in China, while opportunities lie in expanding share in the BMC market and accelerating cloud spending from customers [60] Conclusion The semiconductor industry, particularly in the cloud segment, is poised for growth driven by AI demand and cloud infrastructure investments. Aspeed is strategically positioned to capitalize on these trends despite current supply constraints, with a positive outlook for future earnings and market share expansion.

Summary of Key Points from the Investor Presentation: China Internet and Other Services Industry Overview - **Industry**: China Internet and Other Services - **Analyst**: Gary Yu, Morgan Stanley Asia Limited - **Industry View**: Attractive [145][1] Company Highlights Tencent Holdings Ltd. (0700.HK) - **Price Target**: HK$700 [3][10][29] - **Revenue Growth**: Expected to increase by 13% YoY in 2025 [4][9] - **Gross Profit Growth**: Anticipated to grow by 18% YoY in 2025 [5][9] - **Operating Profit Growth**: Projected to rise by 16% YoY in 2025 [7][9] - **AI Integration**: Significant advancements in AI monetization, particularly in 2C AI through WeChat [16][10] - **Video Accounts Revenue**: Estimated to generate Rmb9 billion in quarterly ad revenue, with long-term annual revenue projected to reach Rmb50 billion [24][27] - **Gaming Sector**: Dominates the Multiplayer Online Battle Arena (MOBA) and is expanding into the fast-growing First-Person Shooter (FPS) genre, with international games growth expected at 28% and domestic growth at 15% in 2025 [22][17] Alibaba Group Holding (BABA.N) - **Price Target**: US$200 [29][34] - **Valuation**: Base-case sum of the parts valuation at US$250 [37][40] - **Alicloud Growth**: Revenue expected to grow by 34% CAGR over three years [41][9] Meituan (3690.HK) - **Price Target**: HK$135 [42][60] - **Total Revenue Growth**: Expected to increase by 10% in 2025 [42][60] - **Food Delivery Losses**: Projected operating loss of Rmb17 billion in 2025 [44][60] - **On-Demand Retail Market**: Targeting a Rmb2.5 trillion market by 2030, with a 64% order share [61][65] Baidu Inc. (BIDU.O) - **Price Target**: US$140 [67][79] - **Core Revenue**: Expected to remain flat YoY in 2025, with core ads projected to decline by 15% YoY [69][71] - **Cloud Growth**: Anticipated growth of 32% YoY in 2025 [72][79] Risks and Opportunities - **Risks to Upside**: - Solid execution in new game launches and market share gains in social and short video ads [83][84] - Resilience in social network and online entertainment competition [83][84] - Increased demand for AI driving cloud revenue [83][84] - **Risks to Downside**: - Intensified competition and regulatory scrutiny [84][86] - Weaker-than-expected macro conditions impacting consumption [84][86] Additional Insights - **Advertising Monetization**: Ads are seeing the quickest monetization through AI integration [11][14] - **Market Dynamics**: The gaming industry is facing regulatory uncertainties, while the food delivery market is experiencing intensified competition [83][84] This summary encapsulates the key insights and projections regarding the China Internet and Other Services industry, focusing on major players like Tencent, Alibaba, Meituan, and Baidu, along with their growth trajectories and associated risks.

Core Insights - Alibaba Group Holding Limited (NYSE:BABA) is being closely monitored by investors as a significant AI stock, with Morgan Stanley reiterating an "Overweight" rating and increasing its price target from $165 to $200 per share due to accelerating growth in its cloud division and sustained momentum in core operations [1] Group 1: Cloud Growth Estimates - Morgan Stanley has raised its cloud growth estimates to 32% for fiscal year 2026 and 40% for fiscal year 2027, driven by increased capital expenditures, model upgrades, strategic partnerships, and accelerated international expansion [2] - The firm is more optimistic about Alicloud following insights gained from the company's Apsara Conference [2] Group 2: Capital Expenditure and Demand - Capital expenditure estimates have been increased to Rmb130-135 billion annually for fiscal years 2026-2028, up from previous estimates of Rmb100 billion-108 billion, with an assumption of 10-15GW additional datacenter capacity by 2032 [3] - There is solid demand for Alibaba's services, with the number of tokens reportedly doubling every 2-3 months [3] Group 3: Market Position - Alibaba Group is recognized as an internet giant providing e-commerce services both in China and internationally [3]

Summary of Alibaba Group Holding Conference Call Company Overview - **Company**: Alibaba Group Holding (BABA.N) - **Industry**: China Internet and Other Services - **Current Market Cap**: US$408.31 billion - **Price Target**: Raised from US$165.00 to US$200.00, implying a 16% upside from the current price of US$171.91 [1][22][31] Key Points Cloud Growth and Capital Expenditure - **Cloud Growth Estimates**: Increased to 32% for F26 and 40% for F27, up from 30% for both years previously, driven by increased capital expenditure (capex), model upgrades, strategic partnerships, and international expansion [1][3] - **Capex Estimates**: Raised to Rmb130-135 billion annually for F26-28, from Rmb100-108 billion, anticipating an additional 10-15GW of data center capacity by 2032 [2][22] Demand and Product Developments - **Solid Demand**: Management reported that the number of tokens has doubled every 2-3 months, indicating strong demand for cloud services [3] - **New Developments**: Announced flagship model Qwen3-Max, partnership with NVIDIA for physical AI, and the launch of data centers in Brazil, France, and the Netherlands [3] Core Business Performance - **Customer Management Revenue (CMR)**: Expected to sustain 10% growth in F2Q and F26, supported by improved take rates and contributions from quick commerce [4] - **Operational Efficiency**: Management aims to reduce unallocated expenses (UE) losses by half in October, with estimated QC losses of Rmb35 billion in 2QF26 and Rmb80 billion for F26 [4] Financial Projections - **Revenue Estimates**: Revenue estimates for F26 and F27 increased by 1-2% due to cloud growth acceleration and sustained core business growth [5][21] - **Valuation Metrics**: DCF-based price target of US$200 implies a 17x F28 non-GAAP P/E ratio, with a SOTP valuation rising to US$250 from US$200 [5][22] Risk and Reward Analysis - **Investment Thesis**: Alibaba is positioned to benefit from the current AI cycle in China, with expectations of business reacceleration and improved monetization [27][31] - **Regulatory Environment**: The easing of the Internet regulatory environment is seen as a positive for Alibaba, enhancing its position as a proxy for China [31] Financial Summary - **Projected Revenue**: Expected to reach Rmb1,018.88 billion in F26, with net income projected at Rmb119.01 billion [21][24] - **Earnings Per Share (EPS)**: Projected GAAP EPS for F26 is Rmb50.08, with non-GAAP diluted EPS at Rmb51.20 [21][24] Additional Insights - **Market Position**: Alibaba holds the largest cloud infrastructure in China, which is expected to capture market share amid increasing AI adoption [31] - **Cash Flow and Dividends**: Strong cash flow generation capabilities and ongoing share buybacks are anticipated to provide downside support [32] Conclusion The conference call highlighted Alibaba's robust growth prospects in cloud services, driven by strategic investments and product innovations. The company is well-positioned to capitalize on the evolving AI landscape in China, with a favorable regulatory environment supporting its growth trajectory.

Summary of Alibaba Group Holding Conference Call Company Overview - **Company**: Alibaba Group Holding (BABA.N) - **Industry**: China Internet and Other Services - **Current Market Cap**: US$320.646 billion - **Price Target**: Raised from US$150.00 to US$165.00, with a SOTP valuation of US$200.00 [1][5][7] Key Points Financial Performance - **1Q26 Results**: - Total revenues increased by 2% YoY, reaching Rmb996.3 billion, in line with expectations [11] - Customer Management Revenue (CMR) grew by 10% YoY, driven by improved take rates [3][11] - Cloud revenue (Alicloud) grew by 26% YoY, exceeding market expectations [2][11] - Adjusted EBITA decreased by 14% YoY, but still beat market estimates [11] Cloud Business (Alicloud) - **Growth Expectations**: Alicloud is expected to accelerate growth to over 30% in F2Q, with AI contributing over 20% of cloud revenue [2][5] - **Strategic Partnerships**: Collaborations with companies like SAP are expected to enhance product offerings and drive demand [2] - **Profit Margins**: Margins are anticipated to remain stable at high single digits percentage [2] Quick Commerce (QC) Investments - **Investment Losses**: QC losses are projected to widen to Rmb35 billion in F2Q, marking the peak of investments [4] - **Future Focus**: Alibaba plans to shift focus to non-food categories to improve user experience and reduce losses [4] - **Growth Targets**: The company aims for incremental GMV targets of Rmb1 trillion by FY28 [4] Market Outlook - **E-commerce Growth**: CMR is expected to sustain a growth rate of approximately 10% despite a high base effect from last year [3] - **Regulatory Environment**: The easing of the Internet regulatory environment in China is seen as a positive for Alibaba [32] Valuation and Investment Thesis - **Valuation Methodology**: The price target is based on a discounted cash flow model with a WACC of 11% and a terminal growth rate of 3% [15][24] - **Investment Drivers**: - Strong cash flow generation capabilities and ongoing share buybacks provide downside support [32] - Alibaba is positioned to capture rising AI-related demand as the primary cloud service provider in China [5][32] Risks and Considerations - **Potential Risks**: - Increased competition and higher-than-expected reinvestment costs could impact profitability [41] - Weaker consumer spending and regulatory scrutiny remain concerns [41] Consensus and Analyst Ratings - **Consensus Rating**: 93% Overweight, indicating strong market confidence in Alibaba's growth potential [34] - **Analyst Estimates**: Adjusted net profit estimates for FY26 have been reduced by 11% due to widening QC investments [5][14] Additional Insights - **Stock Performance**: The stock closed at US$135.00 on August 29, 2025, with a potential upside of 22% to the new price target [7][27] - **Market Dynamics**: The company is expected to benefit from the ongoing digitalization trends and increased demand for AI solutions [32][41] This summary encapsulates the key insights from the conference call, highlighting Alibaba's financial performance, growth strategies, market outlook, and associated risks.

Investment Rating - The industry investment rating is "Attractive" [6]. Core Insights - The resumption of H20 chip sales to China is viewed as a positive catalyst for BAT (Baidu, Alibaba, Tencent) as it is expected to accelerate hyperscalers' capital expenditures in the second half of the year, driven by cloud growth [3][6]. - Tencent is highlighted as the top pick in the industry due to its strong revenue and earnings growth, particularly in AI applications and adtech upgrades [4][5]. - Alibaba is recognized as the best AI enabler, with expectations of cloud revenue growth accelerating to 22% in Q2 compared to 18% in Q1 [5]. Summary by Sections Industry Overview - The report indicates that China's AI adoption is increasing, evidenced by an 18% growth in Alicloud in Q1, with expectations for further acceleration in the coming quarters [3]. Company Specifics - Tencent has announced a capital expenditure of approximately Rmb95 billion for fiscal year 2025, while Alibaba plans to invest Rmb380 billion over the next three years [3]. - The report emphasizes Tencent's early monetization through AI adtech upgrades, which have shown consistent double-digit growth in advertising revenue [4]. - Alibaba's current share price does not reflect the value of its cloud business, which is expected to be a significant growth driver [5]. Stock Preferences - Tencent is preferred due to its robust growth in consumer-facing AI applications and limited competition risks [4]. - Alibaba is positioned well to capture rising AI demand through its cloud services, despite recent market focus shifting towards food delivery and quick commerce [5].

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the hyperscale cloud market, which is a significant segment within the Software/Cloud/Internet industry, estimated to be worth $1.3-1.5 trillion [3][4]. Core Companies Discussed - Major players in the hyperscale cloud market include Amazon (AWS), Microsoft (Azure), Google (GCP), Alibaba (Alicloud), and Oracle (OCI) [3][4]. Key Insights and Arguments 1. **Growth and Trends in Cloud Services** - Concerns about cloud optimization and market saturation have diminished, with Generative AI emerging as a primary growth driver [1][2]. - Microsoft is noted for its slowing capital expenditures (CAPEX) while experiencing accelerating revenue growth from both AI and non-AI segments [1][8]. 2. **Capacity Constraints** - Cloud Service Providers (CSPs) are facing capacity constraints, particularly related to GPUs, but are expanding data center footprints and compute capacity [2][10]. - The industry is questioning whether stable growth is the new norm and if AI is driving increased cloud IT budgets [2]. 3. **Company-Specific Performance** - **Microsoft (MSFT)**: Azure reported a 35% year-over-year growth in constant currency, with AI services contributing significantly to this growth. CAPEX is expected to moderate, and Azure is showing strength in both traditional and AI workloads [8][16]. - **Oracle (ORCL)**: OCI grew 52% year-over-year, with expectations for continued acceleration in FY26. Oracle's unique technological positioning is allowing it to capture market share in sub-markets of IaaS/PaaS [9][19]. - **Amazon (AMZN)**: AWS growth decelerated to 17% year-over-year, with AI contributions growing significantly. Supply constraints are impacting growth, but management expects improvements [10][21]. - **Google (GOOGL)**: Google Cloud grew 28% year-over-year, with strong performance in core and AI products. Margins improved despite capacity constraints [11][33]. - **Alibaba (BABA)**: Alicloud revenue grew 17.7% year-over-year, with AI-related products seeing triple-digit growth for seven consecutive quarters. However, margins declined due to increased R&D spending [13][18]. 4. **Investment Implications** - Microsoft is rated as an "Outperform" with a target price of $540, driven by its strong Azure performance and AI growth [8]. - Oracle is also rated as "Outperform" with a target price of $225, reflecting increased investor confidence in its cloud strategy [9]. - Amazon's target price is set at $235, with expectations of improved margins and growth in AI contributions [10]. - Google is rated as "Market-Perform" with a target price of $185, reflecting solid growth but facing supply constraints [11]. Additional Important Insights - The hyperscale cloud market is characterized by significant competition, with companies vying for market share in AI and traditional cloud services [2][4]. - The long-term outlook for the industry remains positive, with expectations for continued growth driven by advancements in AI and cloud technology [4][5]. - The conference highlighted the importance of understanding the capital intensity of IaaS/PaaS and the implications of AI-driven CAPEX on overall profitability [5][19]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future outlook of the hyperscale cloud market and its major players.