Changjiang: Alibaba Cloud's turning point has arrived, Alibaba (09988) is expected to soar again in the AI era.

Changjiang released a research report stating that Alibaba (09988) achieved cloud revenue of 33.398 billion yuan in the first quarter of fiscal year 26, a year-on-year increase of 26%, reaching the highest growth rate in three years; the adjusted profit margin of cloud business was 8.8%, basically flat year-on-year; capital expenditure for this quarter was 38.7 billion yuan, a year-on-year increase of 220%. Starting in 2024, as domestic AI accelerates comprehensively, the demand for basic resources is growing rapidly, and cloud basic resources are returning to a growth upward channel, ushering in the first value reassessment. In the latest quarterly financial report, Alibaba's cloud revenue growth rate has increased to 26%, reaching the highest level in three years, which may indicate that Alibaba Cloud's new growth cycle has begun again. In addition, the report continued to point out that on August 29, 2025, according to the Wall Street Journal, Alibaba is developing a new artificial intelligence chip, aiming to fill the gap in the Chinese market left by NVIDIA. Currently, this chip has entered the testing phase, mainly targeting a wider range of AI inference tasks, and is compatible with NVIDIA's architecture. With the gradual deepening and improvement of the industrial chain layout, Alibaba is expected to soar in the AI era once again. Event Description: Alibaba released its financial report for the first quarter of fiscal year 26: the company achieved cloud revenue of 33.398 billion yuan in the first quarter of fiscal year 26, a year-on-year increase of 26%, reaching the highest growth rate in three years; the adjusted profit margin for cloud business was 8.8%, basically flat year-on-year; capital expenditure for this quarter was 38.7 billion yuan, a year-on-year increase of 220%. Changjiang's main points are as follows: A new cycle driven by AI is coming, and with Alibaba's increasing Capex investment pace, the turning point of the Alibaba Cloud cycle has arrived. Since the release of DeepSeek, the market has gradually realized that cloud resources are the foundation of all AI applications, and Alibaba Cloud, as the leading domestic public cloud provider, has undergone a value reassessment. Historically, applications initiate cloud resource first, and starting in 2024, with the comprehensive acceleration of domestic AI, the demand for basic resources is growing rapidly, and in the fourth quarter of 2024, Alibaba Cloud's year-on-year growth rate of 13% has returned to double-digit growth. In February 2025, Alibaba proposed to invest 380 billion yuan over three years to build cloud + AI hardware infrastructure, exceeding the sum of the past ten years. Capex is a forward-looking indicator of the explosive growth of cloud basic resources. With the continuous acceleration of Alibaba Cloud's Capex investment pace, the future growth rate of Alibaba Cloud is expected to further increase. With a solid foundation, the accelerated cloud revenue is expected to drive Alibaba Cloud to undergo a comprehensive reassessment. Alibaba Cloud's growth has experienced a process of rapid growth growth stagnation return to growth in the AI era. After 2018, as the innovation cycle of mobile internet ended and the competition intensified due to the efforts of operators and Volcano Engine in the public cloud, Alibaba Cloud's revenue slowed to single digits. Due to the fact that the cloud itself is not profitable and growth has entered a bottleneck, Alibaba Cloud has contributed little to market value despite its revenue scale. Starting in 2024, with the comprehensive acceleration of domestic AI, the demand for basic resources is growing rapidly, and cloud basic resources are returning to a growth upward channel, ushering in the first value reassessment. In the latest quarterly financial report, Alibaba Cloud's revenue growth rate has increased to 26%, reaching the highest level in three years, which may indicate that Alibaba Cloud's new growth cycle has begun again. In the AI era, Alibaba Cloud's moat and competitive advantage are stronger than in the internet era, and it is the most core asset in the AI era. Through introspection, it is found that Alibaba Cloud won in the internet era mainly relying on advantages in being the first to market, scale, and technology on three levels, thus becoming the leading enterprise in the domestic public cloud industry. Returning to essence, the core of cloud is cost competition and value-added services. In the AI era, Alibaba has leading models such as Generic AI model and Pingtou Ge, as well as top-tier models and chip teams, significantly enhancing its competitiveness. In the AI era, Alibaba Cloud's profitability may undergo systematic improvement, driving a second value reassessment. In terms of models, the Generic AI large model recently achieved "N consecutive releases", successively open-sourcing new versions such as Basic Model 3, Thought Model, and AI Programming Model, winning global open-source championships in mainstream areas such as basic models, programming models, and inference models. On the chip side, on August 29, 2025, according to the Wall Street Journal, Alibaba is developing a new artificial intelligence chip to fill the gap left by NVIDIA in the Chinese market. Currently, this chip has entered the testing phase, mainly targeting a wider range of AI inference tasks, and is compatible with NVIDIA's architecture. With the gradual deepening and improvement of the industrial chain layout, Alibaba is expected to soar in the AI era once again. Risk Warning: 1. Risks related to AI technology development falling short of expectations; 2. Risks of intensified industry competition; 3. Risks of downstream application development falling short of expectations.