Goldman Sachs: Alibaba (09988) Cloud Business/Capital Expenditure Better Than Expected Strengthening AI-Driven Investment Theme Maintains "Buy" Rating.

On November 26, considering Alibaba Cloud as China's largest hyperscale cloud service provider with strong business visibility, Goldman Sachs slightly adjusted the valuation of Alibaba (09988) ADR to $54 (basically unchanged) and maintained a "buy" rating. Alibaba stated that its goal is to significantly improve the unit economics of food delivery/instant retail (quarterly losses peaked in September, with unit losses halved in October compared to July-August), but the expectations for customer management revenue growth (compared to the previous quarter's comments) have been lowered. Therefore, Goldman Sachs revised the growth forecast of core EBITA for Chinese e-commerce (excluding instant retail) for the fiscal years 2026/27/28 from 2%/11%/9% to 1%/5%/5%. In addition, Goldman Sachs adjusted the revised net profit forecast for fiscal years 2026-28 by -12% to +4% to reflect the downward revision of customer management revenue growth forecast in the second half of fiscal year 2026 and reinvestment in e-commerce. They also lowered the 12-month target price based on a partial sum valuation method from $205/199 Hong Kong dollars to $197/192 Hong Kong dollars to reflect the downward adjustment of the valuation of the Chinese e-commerce business, while keeping the valuation of Alibaba Cloud unchanged. This is because Alibaba's AI-driven investment theme remains unchanged - to become an AI+ daily consumer application (Taobao + Amap) and AI+ hyperscale cloud service provider.