CITIC Securities released a research report noting that on the evening of November 25, 2025, Alibaba (09988) announced its fiscal 2026 Q2 earnings, with cloud revenue rising 34% YoY. AI-related product revenue has achieved triple-digit YoY growth for nine consecutive quarters. The company’s capital expenditure (Capex) for the quarter reached RMB 31.5 billion, with approximately RMB 120 billion invested in AI and cloud infrastructure over the past four quarters.

Alibaba’s sustained commitment to AI infrastructure, marked by rising Capex, is expected to prompt other cloud providers to follow suit. CITIC Securities believes this signals steady progress in domestic computing power self-sufficiency, potentially heralding an industry inflection point. Investors are advised to focus on leading players with strategic positioning and long-term competitiveness.

**Key Highlights:** - **Alibaba Cloud’s Growth Surpasses Expectations:** Fiscal 2026 Q2 cloud revenue hit RMB 39.8 billion, up 34% YoY (vs. consensus estimates of 30%). AI-related revenue maintained triple-digit growth for nine straight quarters. Quarterly Capex surged 85% YoY to RMB 31.5 billion. - **Global AI Expansion:** Singapore’s National AI Initiative (AISG) selected Alibaba’s open-source Qwen architecture for its Southeast Asian language model project. The newly launched "Qwen-SEA-LION-v4" model quickly topped an open-source benchmark for regional language capabilities, underscoring China’s growing influence in global AI. - **Sustained AI Investment:** On September 11, 2025, Alibaba announced plans to issue $3.2 billion in zero-coupon convertible bonds due 2032, with 80% ($2.56 billion) allocated to cloud infrastructure expansion, including data centers and tech upgrades. Fiscal 2025 Q2 Capex hit a record RMB 38.68 billion (+220% YoY, +57% QoQ), while AI-related revenue grew triple-digits for the eighth consecutive quarter. The company has pledged RMB 380 billion over three years for cloud and AI infrastructure.

**Industry Outlook:** - **Self-Sufficiency Gains Traction:** Despite geopolitical constraints on foreign AI chips, Alibaba’s Capex growth reflects progress in domestic alternatives, such as its self-developed Hanguang AI inference chips and Yitian CPUs, alongside advancements by Huawei, Cambricon, SMIC, and others. - **Accelerated Domestic AI Development:** With North American cloud providers reporting surging computing demand, Chinese firms are ramping up investments to close the gap, potentially reigniting high growth in domestic computing power.

**Risks:** Slower-than-expected AI adoption, infrastructure delays, policy uncertainties, subdued Capex from cloud/telecom players, and geopolitical tensions.