HSBC: Alibaba will continue to burn money for the "takeout war," but the stock price adjustment is already in place
HSBC expects Alibaba to continue increasing investments in food delivery and instant retail in the coming months, forecasting a loss of 2.7 yuan per order for food delivery and a loss of 3.7 yuan per order for instant retail in FY26, with investment peaking in the September quarter before gradually normalizing. Although short-term profitability is under pressure, HSBC believes that the stock price has fully reflected this adjusted expectation. Based on a growth rate of over 20% in cloud computing and a leading advantage in AI, HSBC maintains a "Buy" rating with a target price of $150
The "takeout war" is becoming increasingly intense, and Alibaba continues its "burning money" model.
According to news from the Chase Wind Trading Platform, HSBC's latest research report shows that Alibaba will continue to increase its investment in instant retail (Insta) and takeout business (FD) in the coming quarters. Although Alibaba's significant investment in takeout and instant retail will weigh on short-term profits, these factors have largely been reflected in the stock price. The cloud computing business maintains strong growth momentum, and its leading position in the AI field supports long-term value. The bank still maintains a buy rating for Alibaba but has lowered the target price from $176 to $150, which still has a 38.9% upside potential compared to the current stock price of $107.99.
Since April 2024, competition in takeout delivery and instant retail has become increasingly fierce. Meituan launched a three-year takeout support plan totaling 100 billion yuan on April 14 and announced on May 26 that it would "spare no effort to win the competition." JD.com launched a one-year takeout subsidy project totaling 10 billion yuan on April 11.
In contrast, Alibaba's "takeout war" started relatively late, launching a one-year takeout subsidy plan totaling 50 billion yuan on July 2.
However, Alibaba's growth momentum is rapid. According to third-party data, Alibaba's market share in the takeout and instant retail market has quickly increased from over 20% in 2024 to 36% as of July 5, 2025, while Meituan holds 55% and JD.com holds 9%. This significant growth is attributed to the integration of Ele.me and Fliggy into Taobao and Tmall, leadership consolidation, aggressive subsidy strategies, and traffic support.
HSBC expects Alibaba to continue increasing its investment in instant retail and takeout business in the coming quarters. Although this will have a significant impact on recent profit prospects, the decline in stock price has largely reflected the expectations of profit adjustments. Over the past month, Alibaba's stock price has fallen more than 14%.
HSBC has raised its revenue expectations for Alibaba for FY26-28 by 3-8%, reflecting accelerated growth in instant retail and takeout order volumes, but has simultaneously lowered its profit expectations by 7-22%. HSBC expects that Alibaba will incur a loss of 2.7 yuan per order in the takeout business and a loss of 3.7 yuan per order in instant shopping for FY26, with an overall loss of 55 billion yuan in local life services. The peak of investment is expected in the September quarter, after which it will gradually normalize in the second half of FY26
Accelerating Growth Momentum in Cloud Computing Business
HSBC remains optimistic about Alibaba's cloud computing business prospects, expecting cloud revenue to achieve over 20% year-on-year growth in FY26, primarily driven by strong AI demand. Although the gross margin of the cloud business may experience quarterly fluctuations, it is expected to maintain a high single-digit level.
In the AI sector, Alibaba ranks first in the Generative AI Infrastructure as a Service (GenAI IaaS) market, with a market share of 23.5% in the second half of 2024. IDC predicts that the compound annual growth rate of the GenAI IaaS market will exceed 60% from 2024 to 2027. With its leading scale in AI infrastructure, strong product capabilities of PAI-Lingjun, and a large enterprise customer base, Alibaba is expected to reap the maximum benefits.
HSBC expects Alibaba to announce its 1QFY26 results in August. Sales revenue is expected to grow by 4% year-on-year, with customer management revenue (CMR) increasing by 11% and cloud computing revenue growing by 23%. Due to investments in food delivery and instant retail, adjusted EBITA is expected to decline by 15% year-on-year to RMB 38.3 billion, with a profit margin of 15% (a decrease of 3.4 percentage points year-on-year).
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