Yamato: Alibaba's (09988) cloud revenue is expected to increase by more than 50% year-on-year in the second fiscal quarter, reaffirming the “buy” rating

The Zhitong Finance App learned that Yamato released a research report saying that confidence in the profit prospects of the Alibaba-W (09988) cloud business has increased, and currently predicts that cloud revenue for the next fiscal quarter ending in September this year will increase by more than 50% year on year; the bank raised Ali's earnings forecast per share for the 2027-2029 fiscal year by 2% to 3% to reflect the improved profit prospects of the cloud business, reaffirm the “buy” rating, and maintain the target price of HK$180.

The bank expects that at the EBITA level, cloud business profits can basically offset AI Labs' losses as soon as the third fiscal quarter, becoming an important milestone in the Group's AI investment, faster than previously anticipated. The bank maintained the second-fiscal quarter cloud EBITA profit margin forecast of 12%, but raised the third-quarter forecast from 12.4% to about 15%. It believes that AI accounts for a relatively high share of revenue, especially MaaS and IaaS. Coupled with strong pricing capabilities and economies of scale, it should drive profit margins to expand faster. Recently, management expects capital expenditure of about 200 billion to 300 billion yuan per year, adding about 2 to 3 gigawatts of production capacity each year, half self-built and half through leasing and partner operating facilities, which is expected to help reduce balance sheet pressure.

Yamato expects that Alibaba's e-commerce business profits are resilient, and immediate retail losses are narrowing. Although the domestic consumer market is still weak, it believes that stable platform profits, combined with higher customer unit prices and increased penetration of non-food products, can drive improvements in the unit economy and support the further narrowing of instant retail losses.