Goldman Sachs released a research report stating that BABA-W (09988, BABA.US) delivered better-than-expected performance in both cloud business and capital expenditure for the first fiscal quarter ending June this year. The firm reiterated its bullish outlook on AI-driven growth and maintained a "Buy" rating.

Goldman Sachs lowered its adjusted net profit attributable to ordinary shareholders forecasts for Alibaba's fiscal years 2026 and 2027 by 9% and 4% respectively, while reducing EBITA forecasts by 11% and 1%. However, the firm raised its earnings and EBITA forecasts for fiscal year 2028 by 2%, expressing confidence that continued investment in e-commerce and cloud businesses will drive growth. The target prices were raised to HK$158 for Hong Kong shares and US$163 for US shares.

The firm noted that Alibaba's operational visibility has improved, with management indicating that the unit economics of food delivery and instant retail are expected to improve significantly in the coming months. This suggests that the second fiscal quarter ending September will likely represent the peak of losses for these businesses. The group also expressed confidence in maintaining customer management revenue growth for the remaining quarters of fiscal year 2026, which should alleviate market concerns about significant investments in instant retail business.

Goldman Sachs revised its forecast for Alibaba's instant retail losses in the second fiscal quarter upward from the original RMB 20 billion to RMB 31 billion, compared to RMB 11 billion in losses during the first fiscal quarter. The firm expects per-order losses to halve in the third fiscal quarter as the group normalizes subsidies and improves rider efficiency.

The firm anticipates that Alibaba's market share in food delivery and instant retail will eventually stabilize at 40%, while competitors Meituan-W (03690) and JD.com Group-SW (09618, JD.US) will capture the remaining 50% and 10% market shares respectively.