Changjiang Securities Company Limited released a research report stating that BABA-W (09988) achieved cloud revenue of RMB 33.398 billion in the first quarter of fiscal year 2026, representing a 26% year-on-year growth and marking the highest growth rate in three years. The company recorded an adjusted profit margin of 8.8% for its cloud business, remaining essentially flat year-on-year. Capital expenditure for the quarter reached RMB 38.7 billion, surging 220% compared to the previous year.
Starting in 2024, with the comprehensive acceleration of domestic AI development, demand for basic resources has grown rapidly. Cloud infrastructure resources have returned to an upward growth trajectory, ushering in their first value revaluation. The latest quarterly results show Alibaba's cloud revenue growth accelerating to 26%, reaching its highest level in three years, potentially signaling the reopening of a new growth cycle for Alibaba Cloud.
Regarding chip development, on August 29, 2025, according to reports, BABA-W is developing a new artificial intelligence chip aimed at filling NVIDIA's gap in the Chinese market. The chip has entered the testing phase and is primarily designed for broader AI inference tasks while maintaining compatibility with NVIDIA's architecture. With the gradual deepening and improvement of its industrial chain layout, BABA-W is positioned to soar again in the AI era.
**Event Description:** BABA-W disclosed its first quarter fiscal year 2026 financial results, achieving cloud revenue of RMB 33.398 billion, a 26% year-on-year increase representing the highest growth rate in three years. The cloud business achieved an adjusted profit margin of 8.8%, remaining essentially flat year-on-year, with quarterly capital expenditure reaching RMB 38.7 billion, up 220% year-on-year.
**Key Investment Points from Changjiang Securities Company Limited:**
**AI-Driven New Cycle Emerging, Alibaba Cloud Turning Point Reached as Capex Investment Pace Accelerates**
Since DeepSeek's launch, the market has gradually recognized that cloud resources form the foundation of all AI applications. Alibaba Cloud, as the leading domestic public cloud provider, is experiencing a value revaluation. Historically, applications drive cloud infrastructure demand, and starting in 2024, with the comprehensive acceleration of domestic AI advancement, basic resource demand has grown rapidly. In Q4 2024, Alibaba Cloud returned to double-digit growth with 13% year-on-year increase.
In February 2025, Alibaba announced a three-year investment of RMB 380 billion to build cloud and AI hardware infrastructure, exceeding the total investment of the past decade. Capital expenditure serves as a leading indicator of cloud infrastructure resource expansion. As Alibaba Cloud's Capex investment pace continues to accelerate, future growth rates are expected to rise further.
**Accumulated Strength Unleashed, Cloud Revenue Acceleration Expected to Drive Comprehensive Revaluation**
Alibaba Cloud's growth has experienced phases of rapid expansion, growth stagnation, and renewed growth in the AI era. After 2018, as the mobile internet innovation cycle ended and competition intensified with telecom operators and ByteDance's cloud services entering the public cloud space, Alibaba Cloud's revenue growth slowed to single digits. Due to the cloud business's lack of profitability and growth bottlenecks, despite substantial revenue scale, its contribution to market value remained minimal.
Starting in 2024, with comprehensive domestic AI acceleration, basic resource demand has grown rapidly, returning cloud infrastructure resources to an upward growth trajectory and triggering the first value revaluation. The latest quarterly results show cloud revenue growth accelerating to 26%, reaching the highest level in three years, potentially marking the reopening of Alibaba Cloud's new growth cycle.
In the AI era, Alibaba Cloud's competitive moat and advantages are stronger than in the internet cycle, positioning it as the most core asset of the AI era. Historical analysis reveals that Alibaba Cloud achieved leadership in China's public cloud industry through first-mover advantage, scale, and technological superiority during the internet cycle.
Fundamentally, cloud competition centers on cost and added value. In the AI era, Alibaba possesses top-tier model and chip teams including Tongyi models and Pingtouge, with comprehensively enhanced competitiveness compared to the past. Alibaba Cloud's profitability in the AI era may experience systematic improvement, driving a second value revaluation.
**Model Development:** Recently, Tongyi AI large models achieved multiple consecutive releases, successively open-sourcing new versions including Qwen 3 non-reasoning foundation models, inference models, and AI programming models, capturing global open-source championships in mainstream areas including foundation models, programming models, and inference models.
**Chip Development:** On August 29, 2025, reports indicated that BABA-W is developing a new artificial intelligence chip aimed at filling NVIDIA's gap in the Chinese market. The chip has entered testing phases, primarily targeting broader AI inference tasks while maintaining compatibility with NVIDIA's architecture. With gradual deepening and improvement of industrial chain layouts, BABA-W is positioned to soar again in the AI era.
**Risk Factors:** 1. AI technology development falling short of expectations 2. Intensified industry competition risks 3. Downstream application development falling short of expectations