Guotai Junan Securities: Maintains Alibaba-W "Outperform" Rating, Focuses on Consumption and Cloud + AI Strategy

According to the Zhitong Finance APP, Guosen Securities has released a research report maintaining Alibaba-W (09988) with an "Outperform" rating. The company insists on investing in two historic strategic opportunities: a technology platform centered on AI + cloud and a large consumer platform that integrates shopping and lifestyle services. The firm expects the company's revenue for the fiscal years 2026-2028 to be CNY 1,064.3 billion / 1,181.7 billion / 1,286.6 billion, with previous estimates of CNY 1,063.9 billion / 1,184.4 billion / 1,297.2 billion, essentially unchanged. The adjusted net profit is expected to be CNY 126.6 billion / 167.0 billion / 193.8 billion, with adjustments of -6% / 0% / 0%, mainly considering the high level of investment in the fiscal year 2026.

The report states that after multiple rounds of adjustments to the organizational structure and management team, Alibaba's management team has gradually stabilized and clarified its strategic goals in consumption and AI + cloud. Since 2021, Alibaba has continuously adjusted its organizational structure and executives, and it has now gradually stabilized, with Joseph Tsai, Eddie Wu, and Jiang Fan at the core. The business strategy is clear, and starting from the fiscal year 2026, the group's business will be re-divided into four major segments, focusing on the technology platform centered on "AI + cloud" and the large consumer platform that integrates "shopping and lifestyle services," with a saturated investment approach and a youthful mindset to start "re-entrepreneurship."

E-commerce Business: GMV growth is the core, pursuing stable market share, and continuing to improve monetization in the short term. 1) GMV: The current e-commerce competitive environment remains fierce. Since Eddie Wu took over as CEO of Alibaba in 2023, the core e-commerce business (Taotian) has begun to prioritize GMV growth, gradually abandoning the low-price strategy. After Jiang Fan's return, further measures have been proposed to support quality brands and continue to expand external traffic. The firm believes the company can maintain a growth level close to the market. 2) Take rate: The firm believes that under the promotion of products and technology service fees across the site and the synergy effects of instant retail, the company can still maintain a year-on-year increase in monetization in the short term, driving CMR to achieve about 10% growth. 3) Profitability: Due to the fierce competitive environment in e-commerce, the company has seen a decline in profit margins for several consecutive quarters. The firm believes the company still needs to subsidize merchants and users in the e-commerce business to achieve its top priority goal—GMV growth; therefore, profit margins may continue to decline.

Instant Retail: Short-term investments bring pressure on profits, and more attention needs to be paid to the synergy effects of e-commerce and the pace of UE optimization, with long-term potential to contribute over CNY 1 trillion in GMV. According to the firm's estimates, the instant retail market is expected to exceed CNY 3 trillion by 2030, accounting for more than 16% of the overall e-commerce market. Therefore, Alibaba needs to actively layout to ultimately achieve its goal of covering consumers' full-scene shopping needs. Although in the short term, the firm estimates that instant retail may bring Alibaba over CNY 70 billion in losses in the fiscal year 2026, in the medium to long term, it can enhance the company's market share and competitiveness in the retail market, with the potential to contribute over CNY 1 trillion in GMV. It is worth paying attention to how the company will enhance the synergy between instant retail and e-commerce, as well as how it will optimize UE in terms of user structure, order structure, and fulfillment efficiency Cloud Business: The global cloud market is expected to reach approximately $820 billion in 2024, with China's public cloud accounting for about 5.6%. Driven by the rapid development of AI and large models, overseas cloud demand remains strong and persistent, with computing power in short supply. Giants like Amazon, Microsoft, and Google continue to revise their capital expenditures upward to compete for cloud computing market share, and revenue growth is accelerating. This is because cloud business has an excellent business model characterized by economies of scale and stable cash flow. AI will further promote cloudification and dataization, stimulate demand for traditional modules, and enhance profit margins. Domestically, since the emergence of Deepseek this year, cloud demand has also triggered sustained growth. Alibaba Cloud, as the pioneer and leader in domestic cloud services, occupies about one-third of the domestic market share, with revenue accelerating quarter by quarter. Unlike traditional clouds, the AI era demands a higher richness of products than ever before, thus the market concentration of cloud computing will continue to rise, and leading companies are expected to benefit significantly. In addition, the company currently has a wide layout of AI models and applications, with the Qwen series models leading domestic models. On the application side, it is actively promoting AI integration in core products such as Taobao, Quark, DingTalk, and Amap, achieving a comprehensive layout for 2B2C scenarios