Alibaba Q4 Earnings Preview: AI Cloud Maintains Strong Growth, Taobao Flash Significantly Reduces Losses

Wallstreetcn
2026.01.09 12:00
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Morgan Stanley and Barclays both pointed out that although Alibaba's core e-commerce growth is under short-term pressure, its strategic focus has clearly shifted to a new growth model driven by cloud and AI. The market has underestimated its long-term value as "China's best AI enabler"—cloud business is accelerating growth, AI investments are continuously transforming into engines, while loss-making businesses are significantly narrowing, indicating that the company is exchanging short-term profit investments for solid long-term technological barriers

The current consensus on Wall Street is very clear: Despite facing macro headwinds in its core e-commerce business, Alibaba is undergoing a profound transformation driven by accelerated cloud business and AI capital expenditures.

According to the Chasing Wind Trading Desk, on January 8th, based on the latest research reports from Morgan Stanley and Barclays, analysts generally expect Alibaba Cloud to achieve further explosive revenue growth driven by AI demand, solidifying its position as China's best AI enabler. Meanwhile, although the overall consumer environment is softening, investors will see significant progress in loss control for the Quick Commerce (instant retail/Tao Flash) business under the "Tao Tian" group, marking a significant achievement in balancing market share and profitability.

For investors, the most critical signal lies in the word "accelerate"—the revenue growth rate of the cloud business is expected to exceed 35%, and this momentum will remain strong in the coming quarters.

Cloud Intelligence and AI Business: Growth Engines Fully Ignited

In the upcoming financial report, Alibaba Cloud's performance is undoubtedly the biggest highlight. It is no longer just a stable source of income but has become the engine for Alibaba's return to the growth fast lane. Morgan Stanley analyst Gary Yu pointed out in the report that Alibaba Cloud's revenue growth is expected to maintain strong momentum, with year-on-year growth likely accelerating to over 35%, not only higher than the previous quarter's 34%, but also having the potential to further accelerate to 40% in the fiscal year 2027. The firm believes this growth trend reinforces Alibaba's investment logic as "China's best AI enabler."

This growth is not a flash in the pan but is attributed to Alibaba's continuous investment in AI and the implementation of C-end applications. Morgan Stanley specifically mentioned the upgrades of Tongyi Qianwen (Qwen APP), the revision of Quark, and the launch of Quark glasses, which significantly enhanced the internal adoption rate of AI and external customer demand. Barclays analyst Jiong Shao is also optimistic about this trend, noting that this is expected to be Alibaba Cloud's ninth consecutive quarter of accelerating revenue growth, and the current forecasts may still be conservative. Barclays emphasized that Alibaba is the only full-stack AI leader among Chinese cloud vendors, possessing highly competitive LLM (large language model) and AI infrastructure.

In terms of profitability, Morgan Stanley expects Alibaba Cloud to maintain a stable EBITA margin of about 9%. This indicates that while revenue is expanding rapidly, the company still maintains good cost control capabilities, successfully converting technological advantages into tangible financial returns.

Core E-commerce Business: Resilience and Adjustment Amid Macro Headwinds

Although the market is concerned about the slowdown in the core e-commerce business (CMR), two brokerages conducted in-depth data analysis and pointed out that this is more due to short-term fluctuations in the macro environment rather than a loss of competitiveness.

Affected by the slowdown in overall online retail sales growth in October and November (which decelerated to 3% according to National Bureau of Statistics data) and the high base effect brought about by the software service fee imposed since September last year, CMR growth is expected to slow to 3% this quarter However, Barclays' analysis points out that Alibaba's market share in the core e-commerce sector remains relatively stable. This indicates that despite weak consumer demand and intensified industry competition, Alibaba has still maintained its fundamental base. Morgan Stanley expects China's e-commerce EBITA to decline by 3%, which is already a significant achievement in the current macro environment. Investors should recognize that the current slowdown is largely cyclical rather than a structural collapse. With the gradual implementation of macro policies, this core cash cow business is expected to stabilize in the future.

Profitability Analysis: Narrowing Losses and Strategic Investments Coexist

The most easily misinterpreted part of the financial report data may be the overall adjusted EBITA, which is expected to decline by 45% year-on-year to 30 billion RMB. On the surface, this figure appears under pressure, but a breakdown reveals the underlying logic of "exchanging short-term profits for long-term barriers" and "stopping the bleeding and healing wounds."

First, significant progress has been made in managing losses in the instant retail business. Morgan Stanley expects losses in this segment to narrow sharply from 35 billion RMB in the previous quarter to 23 billion RMB; Barclays also believes that losses in this segment peaked in the September quarter and expects at least a 10 billion RMB quarter-on-quarter reduction in losses this quarter. This means that while pursuing market share, management has begun to take efficiency issues extremely seriously.

Second, the EBITA loss in the "all other" segment expanded to 7 billion RMB (up from 3.3 billion RMB in the previous quarter), but this is entirely driven by increased internal AI adoption rates and rising model training costs. The Tongyi Qianwen APP surpassed 10 million downloads in its first week, and such explosive growth must be accompanied by high-intensity computing power investments. For forward-looking investors, these losses incurred from betting on the future of AI are, in fact, high-quality capital allocation.

Valuation and Outlook: Long-term Logic Remains Unchanged

Despite considering the short-term weakness in the core e-commerce business and ongoing strategic investments, Morgan Stanley has lowered its adjusted EBITA expectations for fiscal years 2026 and 2027 by 7% and 15%, respectively, and reduced its target price from $200 to $180. However, this has not changed its core view of "overweight." Barclays is even more resolute, maintaining a target price of $195.

The consensus among the two top institutions is that Alibaba remains the most attractive AI story in China. The current stock price has fully accounted for expectations of weak consumer demand but has not fully reflected the valuation recovery potential brought about by the acceleration of cloud business and improvements in loss-making businesses (such as Taocai Cai and other instant retail).

As AI-related revenues continue to grow and losses in non-core businesses further narrow, Alibaba is building a new, more technology-driven growth model. For patient capital, the current pullback may be a good opportunity to position for the next AI-driven cycle

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