Daiwa: Expects Alibaba Cloud business to maintain strong growth momentum in the next few quarters, maintaining a "buy" rating.

Morgan Stanley released a research report stating that Alibaba's cloud business revenue in the third quarter increased by 36%, meeting the bank's expectations. Benefiting from a six-fold increase in token volume in March compared to December last year, a price increase by Alibaba Cloud, and the increasing adoption of agent-type artificial intelligence, the bank expects strong growth momentum in the coming quarters, with cloud business growth accelerating to 40% in the fourth quarter and further increasing to 45% in the fiscal year 2027. Management expects cloud business revenue from external customers to reach $100 billion in the next five years, equivalent to a compound annual growth rate of over 40%. Management mentioned for the first time in the performance the chip business "Ping Tou Ge", revealing that over 60% of the revenue comes from external cloud customers and has delivered over 470,000 units. Management does not rule out the possibility of future spin-offs, which is expected to further unlock the SOTP valuation value, but no timetable was mentioned. Daiwa Securities expects that as signs of consumer recovery emerge, client management income will improve, and growth in the fourth quarter is expected to rebound to 6%. The increase in cloud business profit margin and narrowing losses in the timely retail sector will drive improvement in profitability for the fiscal year 2027. The bank maintains a "buy" rating on Alibaba's U.S. stock and considers it the industry's top choice, with a target price of $180.