Morgan Stanley: Gives BABA-W (09988) an "Overweight" rating, expects Alibaba Cloud business to grow more than 50% in the second quarter of the next fiscal year.

Morgan Stanley released a research report maintaining an "Overweight" rating on Alibaba Group Holding Limited Sponsored ADR (09988, BABA.US), with a US stock target price of $180; the bank is bullish on the acceleration of Alibaba Cloud's external revenue growth and margin expansion potential. The report mentions that Alibaba Cloud's business growth will exceed 50% in the second quarter of fiscal year 2027, with external revenue growing faster than internal business, and is expected to further accelerate over the next 2 to 3 quarters. Currently, approximately 70% of Alibaba Cloud's revenue comes from external customers, of which about 35% comes from AI-related businesses. The report points out that Alibaba Cloud's profit margin is expected to expand in the coming quarters, and may even break through the 20% level earlier than the original 5-year target, though profit margin is not currently the primary development focus. Although the MAAS business currently accounts for a small proportion, with the main revenue still coming from Infrastructure as a Service (IAAS), as application scenarios such as AI-generated content and Siasun Robot&Automation expand, MAAS revenue is growing strongly, and its proportion will gradually increase in the future. In terms of technology investment, the report analysis indicates that as the commercialization models of third-party open-source models mature, for example through revenue-sharing mechanisms, Alibaba Cloud's monetization capabilities are gradually strengthening.