Analysts widely believe that Alibaba has entered a period where investment returns are materializing, with expectations for sustained double-digit revenue growth over the next 12-24 months and accelerating profit growth as instant retail losses narrow. Strong AI inference demand and growing demand for vertical industry large model training are bringing new growth momentum to Alibaba Cloud. The instant retail business has reached a scale effect inflection point, with management's target of 1 trillion yuan in flash shopping GMV within three years highlighting significant upside potential.

Following Alibaba's first quarter earnings release, four major investment banks including HSBC, Bank of America Merrill Lynch, JPMorgan Chase, and Citigroup have published research reports expressing optimism about the company's prospects. Institutions generally favor the accelerating growth of cloud business, synergistic effects from flash shopping business, and sustainable growth prospects for Customer Management Revenue (CMR).

First quarter performance data shows cloud computing revenue grew 26% year-over-year, significantly accelerating from the previous quarter's 18% growth rate. AI-related revenue now accounts for over 20% of external cloud revenue, maintaining triple-digit growth for eight consecutive quarters. The instant retail business launched in April has grown rapidly, with daily average orders reaching 80 million in August and monthly active users growing 200% to 300 million since April.

Multiple investment banks have significantly raised Alibaba's target price based on business synergies and long-term growth prospects. HSBC raised its target price from $150 to $160; Citigroup increased it more substantially from $148 to $187, a 26% increase; JPMorgan Chase set a $170 target price, all maintaining buy ratings.

Analysts universally believe Alibaba has entered a period where investment returns are materializing, expecting sustained double-digit revenue growth over the next 12-24 months, with profit growth accelerating as instant retail losses narrow.

**Cloud Computing AI Business: Value Revaluation Engine with Above-Expected Growth**

Alibaba Cloud business demonstrates strong growth acceleration momentum. First quarter cloud computing revenue reached 33.4 billion yuan, growing 26% year-over-year, significantly exceeding market expectations of 20-25%. This marks the eighth consecutive quarter of triple-digit growth in AI-related revenue, which now accounts for over 20% of external cloud business revenue.

This above-expectation performance is driven by three factors. According to HSBC analysis: Strong AI inference demand and growing demand for vertical industry large model training bring new growth momentum to Alibaba Cloud. Customers in education, media, and healthcare industries are establishing proprietary models, creating new demand for post-training and fine-tuning. Second, Agent applications are accelerating B2B commercialization through the AgentBay platform providing one-stop solutions. Third, increasing AI penetration drives demand growth for traditional computing, storage, and big data services.

Notably, Alibaba has significantly increased capital investment. AI and cloud computing capital expenditure increased to 39 billion yuan, up 56% from the previous quarter's 25 billion yuan. Management reaffirmed plans to invest 380 billion yuan in AI and cloud infrastructure over the next three years.

Management is confident about accelerating cloud computing growth. HSBC raised cloud revenue growth expectations by 3% for fiscal years 2027-2028. Citigroup predicts Q3 and Q4 cloud computing revenue will grow 28% and 30% year-over-year respectively. JPMorgan expects 26% cloud business growth in calendar year 2026, with revenue contribution rising from 14% in calendar year 2025 to 16%.

Bank of America Merrill Lynch notes that management's statements about cloud business growth prospects are positive, expecting growth rates to continue accelerating in coming quarters. The company reaffirmed plans to invest 380 billion yuan in AI and cloud infrastructure construction over the next three years to capture more market share.

**Instant Retail Business: Scale Effect Inflection Point Emerging**

Alibaba's Taobao flash shopping business launched in late April has generated substantial synergistic effects, establishing a leading position in fierce market competition.

User growth and market share gains exceeded expectations. Monthly active users grew 200% to 300 million since April, with active delivery riders tripling to 2 million. Alibaba has achieved market-leading position in quick commerce order market share, with daily order peaks reaching 120 million in August and weekly averages stabilizing around 80 million.

Citigroup analysts indicate that flash shopping business has begun generating significant synergistic effects—improved user engagement and supply chain expansion have driven traffic growth across the entire e-commerce ecosystem. Management expects unit economic losses to potentially halve in the short term through improved customer retention, order structure optimization, and fulfillment efficiency improvements.

JPMorgan believes Alibaba's food delivery and flash shopping businesses have reached scales that can improve efficiency, similar to Meituan's early development path, expecting long-term per-order economic benefits to exceed Ele.me's previous break-even ceiling.

Management's target of 1 trillion yuan in flash shopping GMV within three years highlights significant upside potential.

**CMR Growth Resilience Exceeds Expectations, Advertising Demand Remains Strong**

Investors previously worried that Alibaba's core CMR growth might slow after September due to high comparison base from the 0.6% software service fee introduced in the same period last year. However, JPMorgan analysts note that advertising demand has improved driven by continued penetration of site-wide promotion tools and incremental traffic from flash shopping.

Management expects CMR growth to remain resilient despite facing high comparison bases. Bank of America Merrill Lynch predicts CMR will maintain high single-digit growth in coming quarters, benefiting from improved monetization rates. Flash shopping business provides additional momentum for CMR growth by increasing user numbers and purchase frequency, further enhancing monetization rates.

**Profitability Under Pressure but Clear Improvement Path**

While raising target prices, institutions also lowered fiscal 2026 profit expectations, mainly reflecting upfront investment costs for flash shopping business. HSBC lowered fiscal 2026 adjusted earnings per share expectations by 14%, while JPMorgan reduced them by 13%.

However, analysts generally believe this short-term profit pressure is worthwhile. Citigroup points out that Alibaba has sufficient financial resources for these strategic investments, with management balancing short-term and long-term returns while prioritizing more valuable investments.

HSBC maintains a "Buy" rating, believing AI theme's long-term prospects and accelerating e-commerce business growth will drive stock price appreciation. JPMorgan gives a $170 target price based on 12x 2027 expected P/E ratio, believing the company's streamlined operations, strong financial resources, and clear flash shopping and cloud strategies will bring sustainable double-digit profit growth.

Citigroup uses Sum-of-the-Parts (SOTP) valuation, assigning 12x P/E ratio to China e-commerce business (up from previous 10x), 5x price-to-sales ratio to cloud business, and 3x price-to-sales ratio to international digital commerce, arriving at a $187 target price.

Institutions unanimously believe that as flash shopping business losses narrow and cloud business continues growing, Alibaba's valuation repair potential remains substantial. Key indicators investors should monitor include the degree of unit economic improvement in flash shopping business, sustainability of CMR growth, and market share gains in AI and cloud business.

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