Daiwa Capital Markets expects Alibaba's AI cloud business to grow strongly in the next fiscal quarter, raising the target price to 203 yuan

Daiwa Capital Markets published a research report, expecting Alibaba (09988.HK)(BABA.US) to perform steadily in the second quarter of the fiscal year 2026. Although intense competition in instant retail will pressure profit margins, the outlook for core business and cloud services is optimistic. It is currently predicted that Customer Management Revenue (CMR) will grow by 10% year-on-year, a growth rate higher than EBITA. The "Taobao Flash Sale" business is estimated to record a loss between 35 billion to 40 billion yuan.

The firm indicated that Alibaba continues to increase investment to achieve its goal of Artificial Super Intelligence (ASI), predicting that Alibaba Cloud's revenue growth will accelerate to 30% year-on-year in the next fiscal quarter, compared to 26% in the first quarter. The EBITA profit margin is expected to remain at a high single-digit level of around 9%. The adjusted EBITA loss for the international digital commerce business is expected to continue to narrow, with a chance of achieving quarterly profitability within the fiscal year 2026.

Daiwa Capital Markets also raised its capital expenditure forecast for Alibaba for the fiscal years 2026 to 2028 to 410 billion yuan and increased its revenue forecast for Alibaba Cloud for the fiscal years 2026 to 2029, with the three-year compound annual growth rate adjusted from 28% to 32%. The "Buy" rating is maintained, with the target price raised from 200 yuan to 203 yuan