JPMorgan has issued a research report lowering its target price for Alibaba-W (09988) Hong Kong shares from HK$205 to HK$195 while maintaining an "Overweight" rating.
Ahead of the company's September-quarter results announcement, the bank cut its non-GAAP earnings per share forecasts for fiscal years 2027 and 2028 by 9% and 10% respectively, while raising its non-GAAP EBITDA forecast for fiscal 2027 by 8% and lowering its non-GAAP EBITDA forecast for fiscal 2028 by 4%. JPMorgan believes that Alibaba's cloud business EBITA will exceed losses from AI models and applications for the first time in the December quarter, allowing cloud growth to begin contributing to group profitability.
The extended infrastructure build-out phase lengthens the growth runway but also leads to depreciation before capacity utilization improves, first-year cloud revenue delayed as capacity awaits commissioning, and lower interest income as cash is redirected toward computing power. The bank notes that depreciation is a real cost, and shareholder returns depend on asset returns, financing costs, and the economic benefits Alibaba retains.
The bank's non-GAAP EBITDA forecasts for Alibaba in fiscal years 2027 and 2028 remain 14% and 30% above market consensus, respectively. It expects AI Labs and applications to post a loss of approximately RMB 10 billion in the September quarter, with cloud revenue rising 53% year-on-year and EBITA margin climbing further to 12.4%. It projects that combined cloud and AI EBITA will turn positive in the December quarter, reflecting cloud revenue growth accelerating to over 55% year-on-year and cloud business margin exceeding 15%.
On the e-commerce side, the bank expects customer management revenue (CMR) to grow about 1% year-on-year, Taobao and Tmall Group EBITA to be flat year-on-year, and instant retail losses of approximately RMB 9.2 billion.
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