Alibaba has a better valuation than the big three AI cloud stocks.There are a few different ways to invest in artificial intelligence (AI) cloud stocks. Some of the biggest companies in the world -- Amazon (AMZN +0.68%), Microsoft, and Alphabet -- are the industry leaders in the cloud computing space, occupying the top three positions with Amazon Web Services (AWS), Microsoft Azure, and Google Cloud, respectively.But if you're looking for a sleeper pick for 2026 that potentially could do just as well or eve ...

Core Insights - Meituan reported its first loss in nearly three years, with an EPS of -0.64, which was below the estimated EPS of -0.52 [2][5] - The company's revenue for Q3 2025 was approximately $13.49 billion, falling short of the estimated $13.79 billion, indicating financial strain from aggressive discounting strategies [2][5] Financial Performance - The price-to-sales ratio of Meituan is 1.54, and the enterprise value to sales ratio is 1.40, reflecting the market's valuation of the company's sales performance [4] - The enterprise value to operating cash flow ratio stands at 10.73, indicating how the market values its cash-generating ability [4] - Meituan maintains a relatively low debt-to-equity ratio of 0.28, and a current ratio of 1.93 suggests a strong ability to cover short-term liabilities [4] Strategic Discussion - Key figures from Meituan, including Scarlett Xu, Xing Wang, and Shaohui Chen, discussed the company's financial performance and strategic direction during the Q3 2025 earnings call [3] - Analysts from major financial institutions, including Goldman Sachs and Morgan Stanley, attended the earnings call, highlighting the significance of Meituan's financial results and future plans [3]

The Chinese shopping-and-delivery platform has been aggressively offering discounts to attract customers, a move seen as necessary to defend its market share against Alibaba's Ele.me and JD.com. ...

Financial Performance - Total revenue increased by 5% year-over-year to RMB 247795 million for the quarter ended September 30, 2025[10] - Income from operations decreased significantly by 85% year-over-year to RMB 5365 million[10] - Adjusted EBITA decreased by 78% year-over-year to RMB 9073 million[10] - Net loss from free cash flow was RMB 21840 million, compared to a positive free cash flow of RMB 13735 million in the same quarter of 2024[10] Segment Performance - Alibaba China E-commerce Group revenue increased by 16% year-over-year[7] - Alibaba International Digital Commerce Group (AIDC) revenue increased by 10% year-over-year[7] - Cloud Intelligence Group revenue increased significantly by 34% year-over-year[7] - All Others segment revenue decreased by 25% year-over-year[25] Business Highlights - Quick commerce revenue increased by 60%, driven by order growth from "Taobao Instant Commerce"[31] - Customer management revenue increased by 10% year-over-year, driven by improved take rate[8] - The company repurchased 17 million ordinary shares (equivalent to approximately 2 million ADSs) for a total of US$253 million[14]

Group 1: Alibaba's Strategic Shift - Alibaba is retiring the Ele.me brand, which has been synonymous with food delivery in China, and is transitioning to a broader "instant commerce" strategy under the Taobao brand [3][4] - This rebranding aligns Alibaba with competitors like JD.com and Meituan, which have unified their delivery services under a single brand, enhancing customer navigation within Alibaba's ecosystem [4] - The shift acknowledges past shortcomings, as Ele.me has lagged behind Meituan in market share since its acquisition by Alibaba in 2018, indicating a renewed focus on the delivery business [5][6] Group 2: WuXi AppTec's Move to Saudi Arabia - WuXi AppTec is pivoting towards the Middle East, planning to build a new facility in Saudi Arabia while selling off non-core assets, driven by U.S.-China trade tensions [7][8] - The move is motivated by financial incentives from Saudi Arabia, which is diversifying its economy away from oil and gas, and is actively attracting high-tech and biotechnology industries [8] - Establishing a manufacturing base in Saudi Arabia allows WuXi AppTec to mitigate risks associated with U.S.-China relations and label its products as made in Saudi Arabia, creating a separation from Beijing [10]

Delivery couriers for Alibaba's Ele.me, left, and Meituan in Shanghai. Betting on the widening gap in stock performance of two of China’s biggest internet companies has been a slam-dunk this year, and analysts say the trade may have further to run. Going long on Hong Kong-listed Alibaba Group Holding Ltd. combined with a short on Meituan would have delivered a return of 130% year to date. That’s come as Meituan shares slumped on market share loss to Alibaba in food delivery, while Alibaba’s stock has dou ...

Core Insights - Alibaba's stock has rebounded significantly following its latest earnings call, driven by a shift in focus towards cloud computing, artificial intelligence, and international growth, despite ongoing challenges in its core e-commerce business [1][24]. Earnings Overview - For Q1 FY2026, Alibaba reported revenue of RMB 247.7 billion (US$34.6 billion), reflecting a modest year-on-year increase of approximately 2%. Excluding divested businesses, the growth rate appears stronger at around 10% [2]. - Operating income decreased to RMB 35.0 billion, with adjusted EBITA down 14% year-on-year due to heavy investments in Taobao Instant Commerce and technology upgrades [3]. - Net income surged 76% year-on-year to RMB 42.4 billion, bolstered by investment gains and the sale of Trendyol. However, non-GAAP net profit fell 18% to RMB 33.5 billion compared to RMB 40.7 billion in the same quarter of 2024 [3]. Cash Flow Analysis - Operating cash flow declined to RMB 20.7 billion, a decrease of about 39% from the previous year, while free cash flow turned negative at RMB 18 billion, contrasting with a positive figure a year earlier [4]. - Despite cash flow challenges, Alibaba ended the quarter with RMB 585.7 billion (US$81.8 billion) in cash and investments, providing a buffer for continued growth funding [6]. Growth Drivers - The earnings call highlighted a strategic pivot towards cloud computing and AI, with the cloud division experiencing a year-on-year growth of approximately 26%, breaking a trend of disappointing results [9][10]. - Sales from AI products have reportedly increased at triple-digit rates for eight consecutive quarters, indicating that Alibaba is successfully monetizing its AI initiatives [11][12]. - The introduction of Qwen3-Max, a large language model with over a trillion parameters, and a partnership with Nvidia to develop practical AI tools were also announced [14][15]. Market Dynamics - The ongoing price war in food delivery and instant commerce, particularly between Alibaba's Ele.me and Meituan, has led to cash burn from subsidies and free deliveries, impacting margins [19][20]. - Regulatory intervention from the government aims to curb irrational price cuts, which could alleviate margin pressures for Alibaba's core e-commerce business [21][22]. - A more balanced competitive landscape may allow Alibaba to strengthen its Taobao and Tmall platforms, enhancing recovery prospects [23][26]. Conclusion - Alibaba's stock performance is attributed more to its strategic narrative around cloud, AI, and international growth rather than just financial metrics, with ample cash reserves enabling continued investment in new initiatives while stabilizing its core operations [24][27].

Core Viewpoint - Alibaba Group is showing signs of stabilization and potential turnaround after facing significant challenges over the past four years, including regulatory issues, competition, and sluggish consumer demand [2][3][12]. Group 1: Challenges Faced - Alibaba's decline was due to a combination of factors, including regulatory shocks, domestic economic slowdown, competitive encroachment, and geopolitical risks [5][7]. - The company faced a record $2.8 billion antitrust fine and a halted IPO for Ant Group, which fundamentally changed its operational landscape [7]. - Weak consumer confidence and high youth unemployment in China negatively impacted retail spending, crucial for Alibaba's e-commerce business [7]. - Competitors like Pinduoduo and Douyin have eroded Alibaba's market share through aggressive pricing and innovative formats [7]. - U.S.-China tensions have raised concerns about potential delisting and export restrictions affecting Alibaba's AI and cloud ambitions [7]. Group 2: Signs of Recovery - Alibaba's Q1 2026 results indicate a stabilization in revenue, with a 2% year-over-year increase, and actual growth closer to 10% after adjusting for business disposals [8]. - The e-commerce segment saw a 10% revenue increase, driven by customer management revenue and initiatives like Taobao Instant Delivery [9]. - The cloud computing segment experienced a significant 26% year-over-year revenue surge, fueled by demand for AI infrastructure and services [10]. - AI product revenue has shown triple-digit growth for eight consecutive quarters, marking the cloud as a legitimate growth engine [10]. - The company is restructuring its operations to improve focus and efficiency, consolidating various divisions and reducing reporting segments [11]. Group 3: Future Considerations - Despite signs of progress, challenges remain, including profitability issues in quick commerce and ongoing price wars in food and grocery delivery [13]. - Domestic consumption is still soft, which may limit the recovery speed of the retail business [13]. - Geopolitical risks, particularly U.S. chip restrictions, could hinder Alibaba's AI development [13]. - Competition from Pinduoduo and Douyin continues to pose a threat, necessitating ongoing innovation from Alibaba [14]. - Long-term investors should monitor Alibaba's performance in e-commerce and cloud growth sustainability to gauge future investment potential [16].

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Food Delivery Platforms in China - **Key Players**: Alibaba (BABA), Meituan, JD.com (JD) Core Insights - **Curbing Competition**: The three major food delivery platforms have committed to reducing "disorderly competition" and will stop price-based rivalries, including 'zero-cost purchases' and allowing merchants to independently engage in promotional activities [1][2][3] - **Regulatory Influence**: This decision follows meetings with the State Administration for Market Regulation (SAMR) and Shanghai market regulators, indicating a peak in competitive intensity expected in Q3 2025, with caution advised for the competitive landscape thereafter [2][3] Financial Performance and Stock Recommendations - **Stock Preferences**: Analysts prefer Alibaba (BABA) over Meituan and JD.com. They believe that near-term earnings pressure for Alibaba is already reflected in its stock price, while the market undervalues its potential as a leading AI enabler in China [3] - **Valuation Metrics**: - Alibaba is trading at 12x F27e - Meituan is trading at 19x F26e - JD.com is expected to face higher revenue comparisons starting September 2025 and is projected to remain a minor player in food delivery and quick commerce long-term [3] Competitive Landscape - **Subsidy Programs**: - JD announced a RMB10 billion subsidy program for its food delivery business [4] - Meituan pledged a RMB100 billion investment in demand delivery over three years [4] - Alibaba initiated a RMB50 billion subsidy program [4] - **Order Growth**: - JD's daily food delivery orders grew rapidly, reaching 25 million by June 2025 and 150 million by July 2025 [4] - Ele.me (Alibaba's service) also saw significant growth, surpassing 60 million daily orders by June 2025 [4] Market Dynamics - **Expected Subsidies**: Total subsidies are projected to be RMB30 billion and RMB50 billion in Q2 and Q3 2025, respectively, marking a peak in investment [5][8] - **Profitability Outlook**: Long-term profitability for Meituan has been revised downwards, with food delivery gross transaction value (GTV) margins expected to be below 3% and Instashopping below 2% [8] Risks and Considerations - **Market Risks**: - Potential for irrational competition to return in e-commerce - Weaker-than-expected macroeconomic conditions and antitrust regulations could impact profitability [13][15] - **Growth Opportunities**: - Faster-than-expected margin expansion and successful penetration in lower-tier cities could drive user growth [14] Conclusion - The food delivery industry in China is undergoing significant changes due to regulatory pressures and competitive dynamics. Analysts remain cautious but see potential in leading players like Alibaba, while also highlighting the risks associated with ongoing competition and market conditions.

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **China Internet** sector, focusing on **e-commerce** and **food delivery** competition among major players like **Alibaba**, **JD**, and **Meituan** [1][12][8]. Core Insights and Arguments - **Competitive Landscape**: The ongoing competition among Meituan, JD, and Alibaba is intense, with significant financial implications. Alibaba has announced **RMB50 billion** in food delivery incentives, while JD has indicated **RMB30 billion** in investments for the same purpose [12][13]. This competition is expected to last into **2026**, potentially exceeding **RMB100 billion** in total costs [13]. - **Profitability Concerns**: The companies are struggling to grow profitably due to overlapping target markets, with **600-800 million MAUs** and **200-250 million core DAUs** competing for the same consumer base [9][55]. The expectation is that the transactional platforms will find it increasingly difficult to achieve sustainable profitable growth without engaging in destructive competition [9][68]. - **Market Sentiment**: There is a prevailing negative sentiment among investors regarding the sector, but recent tactical positioning suggests that stocks may have room for a rebound [8][18]. The normalization of competition, aided by government regulation, could lead to improved conditions for Alibaba and JD [8][17]. - **Earnings Estimates**: The estimates for JD and Alibaba have been reduced due to higher-than-expected food delivery losses and spending plans. The companies are expected to experience material earnings damage through the September quarter [12][95]. Additional Important Insights - **User Subsidy Limits**: The companies are reaching the limits of their user subsidy budgets, with JD managing a quarterly spend of **RMB10 billion** [3]. The expectation is that the competitive intensity will moderate, allowing for a focus on service quality and unit economics rather than just order volume growth [17]. - **Market Dynamics**: The competition is leading to increased multi-homing among users, with Meituan retaining a larger share of unique merchants compared to JD and Ele.me [15][16]. This indicates a potential long-term advantage for Meituan in the food delivery market, despite the overall profit pool shrinking [16]. - **Valuation Metrics**: The valuation metrics for the companies indicate that JD and Alibaba's shares appear cheap in a context where food delivery losses are expected to moderate [4][20]. The adjusted P/E ratios for JD and Alibaba are **7.8x** and **12.9x** respectively for 2026 [11]. Conclusion - The China Internet sector, particularly in e-commerce and food delivery, is facing significant challenges due to intense competition and profitability concerns. While there are signs of potential normalization and recovery, the long-term outlook remains cautious as companies navigate overlapping markets and regulatory pressures.