The biggest highlight of Alibaba's earnings report tonight: The growth rate of Alibaba Cloud will determine the stock price

Alibaba will announce its Q4 fiscal report for FY2025 today, and the performance of its cloud business may become a catalyst for its stock price.

According to news from the Chasing Wind Trading Desk, Morgan Stanley pointed out in its latest report that Alibaba Cloud's revenue growth will be a key catalyst for its stock price, with a baseline forecast of 17-20% revenue growth for Alibaba Cloud, leading to a stock price increase of 1-3% to $133-136.

Morgan Stanley stated in a previous report that with the surge in AI inference demand in China, unlike other major cloud service providers such as Tencent and ByteDance, Alibaba's cloud business strategy is significant due to its focus on external customers, giving it a distinct advantage in the current market environment of exploding AI inference demand.

Additionally, Morgan Stanley maintains an "Overweight" rating on Alibaba, with a target price of $180, indicating a 37% upside potential from the current stock price.

Basic Expectations: Alibaba Cloud Revenue Growth of 17-20%

Morgan Stanley predicts three possible scenarios for Alibaba Cloud's revenue growth in Q4 FY2025:

1. Base Case (50% probability): Alibaba Cloud revenue growth of 17-20%, stock price increases by 1-3% to $133-136
2. Optimistic Case (40% probability): Alibaba Cloud revenue growth of 20-25%, stock price increases by 3-8% to $136-142
3. Conservative Case (10% probability): Alibaba Cloud revenue growth of 13-17%, stock price decreases by 1-5% to $125-130

Morgan Stanley believes that Alibaba Cloud has a clear advantage in the current market environment compared to other hyperscale cloud service providers. As Tencent and ByteDance prioritize meeting internal AI needs, Alibaba Cloud has become an important supplier of large-scale AI computing resources for external customers.

Why is Alibaba Cloud the Focus?

The research report emphasizes that Alibaba is benefiting from the AI wave in China from two dimensions: AI enabler: providing AI infrastructure and services to enterprises through Alibaba Cloud; AI adopter: integrating AI technology into Alibaba's own 2C/2B applications.

Morgan Stanley's analysis indicates that Alibaba has a unique advantage in the AI era, serving both as an infrastructure provider and a technology adopter. Investors should closely monitor the financial report on May 15, especially the performance of the cloud business and management's guidance on future AI-related growth Morgan Stanley previously stated that Alibaba's current 12 times PE valuation for the fiscal year 2026 is highly attractive, with a target price of $180 and a SOTP valuation reaching $200, indicating an upside potential of 36-51%. According to the SOTP model, an 8 times EV/EBITA valuation is applied to the Taobao Tmall Group, and a 5 times EV/sales valuation is applied to the cloud business, resulting in a base case SOTP valuation of $200 per share