According to the Zhitong Finance APP, Goldman Sachs recently released a research report stating that it has significantly raised its capital expenditure forecast for Alibaba (09988, BABA.US) for the fiscal years 2026-2028 to RMB 460 billion, making it one of the most aggressive forecasts on Wall Street. Analysts indicated that the transformation of AI capital expenditure is reshaping Alibaba's growth expectations. Although the company has recently experienced a pullback due to profit-taking, the breakthrough advancements in its AI cloud computing capabilities and the potential for international expansion provide new upward momentum for its stock price. It is expected that by the fiscal year 2028, international business will contribute one-quarter of Alibaba Cloud's external revenue. The target prices for its U.S. and Hong Kong stocks have also been raised by approximately 14%. Specifically, the 12-month target price for U.S. stocks has been raised from $179 to $205; the target price for Hong Kong stocks has been raised from HKD 174 to HKD 199, maintaining a &#34;Buy&#34; rating.
In detail, the AI capital expenditure transformation framework is reshaping growth expectations. Analysts believe that by comparing historical data from Amazon AWS and Google Cloud, Alibaba's development trajectory is lagging behind that of U.S. cloud service giants by about two years. This time lag coincides with the technological breakthroughs of ChatGPT (end of 2022) and DeepSeek (January 2025).
Goldman Sachs estimates that Alibaba currently has a data center capacity of 3-4 GW and plans to expand it to 20 GW by 2032, which means an annual addition of about 2 GW of capacity. Based on the estimate that each GW of capacity can support 1 million GPUs, this expansion plan will support large-scale capital investment over the next three years.
Regarding capital expenditure, Goldman Sachs has set three scenario assumptions. In the baseline scenario, Alibaba's total capital expenditure for the fiscal years 2026-2028 is RMB 460 billion, with a capital expenditure to revenue conversion ratio of 0.2-0.3; in the optimistic scenario, total expenditure could reach RMB 550 billion, with a conversion ratio exceeding 0.3; in the pessimistic scenario, expenditure could drop to RMB 380 billion, with a conversion ratio below 0.2.
Additionally, the internationalization strategy enhances the valuation ceiling. Analysts stated that Alibaba Cloud has established 91 availability zones in 29 regions, with 900 overseas nodes, and it is expected that the proportion of international business revenue will grow from the current single-digit percentage to about 25% by the fiscal year 2028, with a compound annual growth rate reaching high double digits.
Analysts emphasized that Alibaba Cloud enjoys a premium pricing in overseas markets, with its Qwen model's international pricing significantly higher than domestic levels. Furthermore, Alibaba Cloud is accelerating the construction of its first data centers in Brazil, France, and the Netherlands, and upgrading existing facilities in Mexico, Japan, and five other locations, adding 28 AI-specific suites.
In terms of enterprise customer development, Alibaba Cloud has secured orders from multinational companies such as AstraZeneca. AstraZeneca is using Alibaba Cloud's European nodes to build an AI platform for drug discovery, improving efficiency by about 300%, providing strong evidence of Alibaba Cloud's international capabilities.
It is worth noting that despite raising the target price, Goldman Sachs also warned of the short-term challenges facing Alibaba.
Analysts expect that due to investments in the instant e-commerce business (including food delivery), Alibaba's group EBITA for the September quarter will decline by 80% year-on-year. In the June quarter, the instant e-commerce business incurred a loss of RMB 11 billion, which is expected to expand to RMB 36 billion in the September quarter
Goldman Sachs believes that competition in the instant e-commerce business will be a key variable. In the long term, the market share of the takeaway and instant e-commerce business will form a pattern of 5:4:1 among Meituan, Alibaba, and JD.com. Alibaba needs to prove that its instant e-commerce investments can generate synergies, especially by driving the growth of the Commercial Monetization Rate (CMR) through cross-selling

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Goldman Sachs raised Alibaba's capital expenditure forecast for the fiscal years 2026-28 to 460 billion yuan, expecting international business to contribute a quarter of Alibaba Cloud's external revenue. The target price for U.S. stocks was raised from $179 to $205, and the target price for Hong Kong stocks was raised from HKD 174 to HKD 199, maintaining a "Buy" rating. Analysts believe that the transformation of AI capital expenditure reshapes growth expectations, and Alibaba's cloud service development lags behind U.S. giants by about two years, with large-scale capital investment planned for the next three years

- Goldman Sachs has significantly raised Alibaba's (09988, BABA.US) capital expenditure forecast for fiscal years 2026-2028 to 460 billion yuan, marking one of Wall Street's most aggressive predictions.  
- The report highlights that AI capital expenditure transformation is reshaping Alibaba's growth expectations, with international business projected to contribute 25% of Alibaba Cloud's external revenue by fiscal year 2028.  
- Despite the upward revision, Goldman Sachs warns of short-term challenges, anticipating an 80% year-on-year decline in Alibaba's group EBITA for the September quarter due to investments in instant e-commerce.

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Goldman Sachs: Raises Alibaba's target price to HKD 199, AI capital expenditure transformation reshapes growth expectations