January 8, 2026 06:01 AM GMT Alibaba Group Holding | Asia Pacific 3QF26 Preview: Cloud Intact; but Core E-comm Worsened | What's Changed | | | | --- | --- | --- | | Alibaba Group Holding (BABA.N) | From | To | | Price Target | US$200.00 | US$180.00 | Cloud acceleration to 35%+ reinforces the "China's Best AI Enabler" thesis – we expect it to accelerate further to 40% in F2027. But core e-comm businesses have started to worsen, due to weak consumption, which may remain under pressure in 1HF27 due to a high b ...

on 06-Jan-2026 6 January 2026 Global Software, U.S. and China Internet Cloud in the Quarter: How did the hyperscalers do in 3Q25? Mark L. Moerdler, Ph.D. +1 917 344 8506 mark.moerdler@bernsteinsg.com Mark Shmulik +1 917 344 8508 mark.shmulik@bernsteinsg.com Robin Zhu +852 2123 2659 robin.zhu@bernsteinsg.com Firoz Valliji, CFA Lavnik Balyan +1 917 344 8563 lavnik.balyan@bernsteinsg.com Wenhuan Chang +1 917 344 8546 wenhuan.chang@bernsteinsg.com Charles Gou +852 2123 2618 charles.gou@bernsteinsg.com The hyper ...

Summary of Alibaba Group Holding Conference Call Company and Industry - **Company**: Alibaba Group Holding (BABA.N) - **Industry**: China Internet and Other Services Key Points and Arguments 1. **Alicloud's Growth**: The latest CIO survey indicates a significant increase in interest in Alicloud services, particularly the Qwen model, suggesting that Alibaba is positioned as the leading AI enabler in China. Alicloud revenue is expected to accelerate in the second half of fiscal year 2026 [2][5][4] 2. **GenAI Investments**: 40% of CIOs plan to deploy Generative AI via public cloud within the next 12 months, a notable increase from 28% in the first half of 2025, highlighting the growing focus on AI in IT budgets [2][4] 3. **Hyperscaler Preference**: 47% of CIOs favor hyperscaler vendors for LLM deployments, a 10 percentage point increase from the first half of 2025. Interest in AI model development vendors has decreased by 7 percentage points to 40% [3][4] 4. **Market Share**: Alicloud holds a 35.8% market share in China's AI cloud services market as of the first half of 2025, surpassing the combined market share of the second to fourth players [5][4] 5. **Revenue Growth Projections**: Alicloud's revenue growth has accelerated for four consecutive quarters, with expectations of growth exceeding 35% in the second half of fiscal year 2026 and over 40% in fiscal year 2027 [5][4] 6. **Investment in Infrastructure**: Management indicated that a three-year capital expenditure plan of RMB 380 billion may be insufficient to meet the current demand for Alicloud services [5][4] 7. **Product Launch Success**: The Qwen3-Max model ranks among the top three globally, and the Qwen App achieved over 10 million downloads in its first week, indicating strong market traction [6][4] 8. **Future Projections**: In three years, Alibaba/Qwen is expected to lead the market with a projected share of 37%, ahead of competitors like DeepSeek and Huawei [3][4] Additional Important Insights 1. **Stock Rating**: Morgan Stanley rates Alibaba as "Overweight" with a price target of $200, indicating a potential upside of 27% from the current price of $157.60 [8][4] 2. **Market Capitalization**: As of November 26, 2025, Alibaba's market capitalization stands at approximately $374.3 billion [8][4] 3. **Risks**: Potential risks include increased competition, higher reinvestment costs, and regulatory scrutiny, which could impact growth and profitability [21][4] This summary encapsulates the key findings and projections regarding Alibaba Group Holding and its Alicloud services, emphasizing the company's strong position in the AI cloud market and its growth potential.

Summary of Alibaba Group Holding Conference Call Company Overview - **Company**: Alibaba Group Holding - **Industry**: China Internet and Other Services - **Market Cap**: US$381.76 billion - **Current Stock Price**: US$160.73 - **Price Target**: US$200.00, implying a 24% upside from the current price [7][19] Key Points Cloud Growth and Industry Demand - **Alicloud Growth**: Expected to grow at 35% in F3Q, 36% in F4Q, and 40% in F27, driven by strong industry demand [2][19] - **Capex Guidance**: Current 3-year capex guidance of Rmb380 billion may be insufficient to meet customer demand [2][19] - **AI Applications**: Recent launches like Quark AI assistant and Qwen app are anticipated to boost adoption [2][19] Customer Management Revenue (CMR) - **CMR Growth**: Slowed to 7.5% in F3Q due to a weaker macro environment and high base effects from last year [3][19] - **Online Retail Sales**: Slowed to 5% in October, with parcel volume declining to 8% [3][19] Quick Commerce (QC) Performance - **QC Loss**: Estimated QC loss of Rmb25 billion in F3Q, better than the forecasted Rmb37 billion [4][19] - **Execution**: BABA managed to cut UE loss by half, with GMV share at 40% [4][19] Financial Performance - **EBITA**: Estimated e-commerce EBITA at Rmb37 billion, down 40% YoY; total EBITA at Rmb32 billion, down 41% YoY [4][19] - **Revenue Estimates**: Total revenues expected to reach Rmb1,029 billion in 2026, Rmb1,124 billion in 2027, and Rmb1,221 billion in 2028 [12][19] Valuation and Price Target - **Valuation Methodology**: DCF-based price target maintained at US$200, with a WACC of 10% and terminal growth rate of 3% [5][19] - **SOTP Valuation**: Remains at US$250 [5][19] Risk and Reward - **Market Conditions**: The online regulatory environment is easing, which could benefit Alibaba as a key player in the market [24][19] - **Investment Drivers**: Expected growth in China retail marketplaces GMV, with a take rate projected at 4.1% in 2025 [29][19] Other Important Insights - **Cash Flow**: Strong cash flow generation capabilities, dividends, and share buybacks could provide downside support [24][19] - **Analyst Ratings**: 90% of analysts rate the stock as Overweight, indicating strong market confidence [26][19] This summary encapsulates the key insights from the conference call, highlighting Alibaba's growth prospects, financial performance, and market positioning.

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.