ZHONGTAI SECURITIES: Initiates "Buy" rating on Alibaba-W, Cloud + AI opens new growth space

According to the Zhitong Finance APP, ZHONGTAI SECURITIES has released a research report stating that Alibaba-W (09988) is core-focused on two major development lines: "e-commerce" and "AI + Cloud." The combination of cloud and AI opens up new growth opportunities, and the e-commerce business line is expected to see profitability improvements. The firm forecasts that the company will achieve revenues of 11.4 trillion / 12.8 trillion / 14.2 trillion yuan in the fiscal years 2027-2029, with adjusted net profits of 93 billion / 135.7 billion / 170 billion yuan. Using a segmented valuation method, the domestic e-commerce business refers to the leading e-commerce platform's 2026 7.0x PE valuation, while the cloud computing business refers to the overseas leading cloud providers' 2026 5.4x PS valuation. The combined projected market value of China's core business and Alibaba Cloud is 2.4 trillion yuan (equivalent to 2.7 trillion HKD). This is the first coverage, giving a "buy" rating.

The main points from ZHONGTAI SECURITIES are as follows:

E-commerce Business Line: Traditional e-commerce operates steadily, while instant retail expands new scenarios and new users

Taotian is one of the largest comprehensive e-commerce platforms in terms of GMV and user scale in China. After years of operation, it has established a strong brand presence on the user side (having accumulated 62 million core 88VIP users), maintaining a relatively solid market position, contributing stable profits and cash flow to the company (the non-instant retail business of the core e-commerce group currently contributes about 200 billion yuan/year in adjusted EBITA); since 2025, the company has been investing heavily in instant retail to expand users and business scenarios, resulting in new user growth, increased user frequency, and cross-pulling growth in traditional e-commerce. At the same time, the order volume and revenue of the flash purchase business have also seen significant growth (with a 47% year-on-year revenue increase in the 2026 fiscal year). As the business scale increases and "anti-involution" regulations strengthen, it is expected that the losses in instant retail will further narrow. According to management guidance, the flash purchase business is expected to achieve positive UE before the end of the 2027 fiscal year and overall profitability in the 2029 fiscal year.

AI Business Line: Achieving a full-stack layout of [computing power hardware - cloud services - large models - AI applications]

With the continuous iteration of large models and the expansion of AI Agent applications in programming, office work, and video generation, the demand for AI computing power and model services is accelerating (reflected in the accelerated growth of token consumption and the steepening slope of ARR growth for model and AI application vendors). Alibaba's relative advantage in the AI field lies in its full-stack layout from hardware to application.

① At the hardware level, PingTouGe has self-developed products in GPU, CPU, storage, and network interconnection chips. As of May 2026, the Zhenwu series chips have shipped a total of 560,000 units, holding a high market share among domestic chips;

② At the cloud infrastructure level, Alibaba Cloud has a high market share in both traditional IaaS and emerging AI IaaS fields. Additionally, with a comprehensive layout in self-developed models, Alibaba Cloud's MaaS revenue is rapidly growing. As of March 2026, Alibaba Cloud's MaaS and AI software subscription ARR reached 8 billion yuan, with management guidance indicating it is expected to reach 30 billion yuan by the end of 2026 ③ Model layer, enhancing the model's ability to execute real tasks (suitable for Agent models) and improving economic practicality has become a recent trend. Alibaba has a rich ecosystem of open-source and closed-source models and can rapidly iterate models based on market demand and cutting-edge trends. Since 2026, it has released dozens of models, covering foundational Agent models, full-modal models, multi-modal models, etc.;

④ Application layer, this year the trend in AI applications is to expand the cooperative ecosystem and focus on productivity scenarios (programming, office work, etc.). Alibaba's core layout for consumer applications is the Qianwen App and the AI entry points within existing apps (such as the AI assistant in the Taotian App). Currently, Qianwen has integrated with various applications within the Alibaba ecosystem, diversifying service scenarios. In the B-end, there are products targeting different groups, including the enterprise-level AI work platform Wukong, the office intelligent agent Qoder Work, and the cross-border trade-focused Agent Accio Work.

Forming an AI organizational structure centered around ATH, covering multiple stages from cutting-edge exploration to practical application

Since 2025, Alibaba has made multiple adjustments to its AI-related structure. It has now formed an organizational structure centered around the Alibaba Token Hub business group, led by Group CEO Eric Wu. The core goal is "create Token, deliver Token, apply Token," covering cutting-edge exploration (Alibaba AI Future Research Institute), foundational model research and development (Token Foundry business unit, formed by merging the Tongyi Large Model business unit and the Future Life Laboratory), model services (MaaS business line), and AI application implementation (Qianwen business unit, Wukong business unit).

Risk Warning

Macroeconomic consumer demand recovery is weaker than expected, industry competition is intensifying, the reduction in losses for instant retail business is not meeting expectations, the growth rate of AI application demand is below expectations, increased capital expenditure brings short-term cost and cash flow pressure, and risks of untimely data updates