Oriental Securities has released a research report maintaining a "Buy" rating on Alibaba-W (09988). The firm forecasts the company's FY2026-FY2028 revenue to be RMB 10,307 / 11,432 / 12,518 billion, with adjusted net profits of RMB 916 / 1,358 / 1,761 billion. Using a sum-of-the-parts valuation method and referencing comparable company valuation multiples, the calculated total market capitalization is RMB 3,565.6 billion, corresponding to a per-share value of HKD 207.7 (using a RMB/HKD exchange rate of 1.113). The report highlights that AI-driven Alibaba Cloud is expected to continue accelerating, while the e-commerce segment faces pressure, though flash sales remain stable and are narrowing losses, with the broader consumption strategy advancing synergistically. The main viewpoints of Oriental Securities are as follows:

China E-commerce: The industry faces a slowdown in a challenging environment, yet the commitment to flash sales remains firm despite increased losses. 1) E-commerce: The firm anticipates FY26Q3 Customer Management Revenue (CMR) to reach RMB 105.48 billion (year-on-year increase of 3.4%). Since Q4, as national subsidies entered a period of high comparables, coupled with the impact of new streaming tax policies, overall industry growth has decelerated. According to National Bureau of Statistics data, the growth rates for online retail sales of physical goods in October and November 2025 were 4.9% and 1.5% respectively, showing a significant slowdown with sequential declines of 2.4 and 3.4 percentage points. At the company level, the positive effect on CMR from a 0.6% commission rate hike this quarter was entirely offset by the high base, and pressure is expected to persist in the first half of 2026 due to the high base period. 2) Instant Retail: The firm estimates losses for Alibaba's instant retail business in FY26Q3 to be around RMB 21.5 billion, with a loss per order of RMB 3.7 (revised up from an expected RMB 4.0). Unit economics improved significantly quarter-over-quarter this quarter, with the trend of narrowing losses meeting expectations, while market share and order mix remained healthy. As a crucial high-frequency consumption scenario, Taobao Flash Sales are significant for driving traffic and enhancing user retention and activity within the Taotian ecosystem. On the fulfillment side, it can also synergize with mid-to-long-distance e-commerce to improve fulfillment efficiency. The firm views progress in the flash sales business as smooth, with the company demonstrating a firm commitment to investment and unlikely to easily reduce efforts to maintain market share. It is optimistic about the medium-to-long-term potential for flash sales to narrow losses and the synergistic benefits of order volume and user growth for the core e-commerce business.

Cloud Intelligence Group: Sequential Re-acceleration & Acceleration in External Revenue; AI-Driven Cloud Poised to Unlock Valuation Upside for Alibaba. The firm expects the Cloud Intelligence Group to achieve revenue of RMB 43.49 billion in FY26Q3 (year-on-year increase of 37.0%), representing a continued sequential acceleration, with external revenue also showing a clear acceleration compared to Q2. Demand growth from AI cloud services continued to be released at a high rate this quarter. Furthermore, the company has consistently increased investment in AI applications since 25Q3. Ecosystem applications like Tongyi Qianwen, Quark APP, and Taotian's AI Universal Search are expected to further broaden the company's AI application scenarios, driving further growth in demand for Alibaba Cloud. As the only cloud computing company in China with a full-stack AI layout, Alibaba Cloud has the potential to create a flywheel effect: reducing computing costs - boosting cloud demand through models & expanding application scenarios - applications driving further cloud growth. This could lead to high growth in both revenue and profit. The firm anticipates further potential for revenue acceleration at Alibaba Cloud, with profit margins maintaining a stable, slightly increasing trend. It is optimistic about the potential for a Davis Double (simultaneous increase in earnings and valuation multiples) for Alibaba Cloud amid this re-acceleration, which could unlock significant upside for the company.

Other Segments: AIDC Continues to Narrow Losses, Increased Investment in New Businesses. The firm expects the AIDC segment to report a loss of RMB 1.89 billion in FY26Q3, primarily attributed to seasonal losses from increased promotional spending during events like Black Friday, while the profit-oriented strategy remains unchanged, and AIDC is expected to continue its trend of narrowing losses. The firm forecasts a loss of RMB 7.12 billion for "All Other" segments in FY26Q3, mainly due to increased AI model training expenses and heightened investment in AI ToC and edge-side applications such as the Tongyi Qianwen app and Quark AI glasses. The company is continuously refining its AI product portfolio and increasing investment in consumer-facing AI services, strategically positioning itself for user access points in the AI era. The Tongyi Qianwen app surpassed 100 million Monthly Active Users within two months of launch. The firm is optimistic about the potential of Alibaba's consumer AI applications as key entry points, which could lay a solid foundation for future user growth within the Alibaba AI ecosystem.

Leading Models and Expanding AI Application Scenarios; Bullish on Alibaba's Potential for AI Application Breakthroughs. Alibaba possesses strong model R&D capabilities and is accelerating enhancements in model multimodality and agent abilities. The release of the Qwen3-VL Embedding and Reranker models on January 8 further strengthened multimodal understanding and retrieval capabilities. An upcoming launch event on January 15 will further upgrade the task execution and agent capabilities of the Tongyi Qianwen app. Major version updates for models like Qwen3.5 and Qwen4 are expected to be rolled out successively during 2026. As model capabilities strengthen, combined with increased investment in AI applications, the company can further expand its AI application scenarios. The firm is optimistic about the company's potential for breakthroughs in native AI applications and the enabling potential of AI for other businesses within its ecosystem.

Risk warnings include flash sales business progress falling short of expectations, intensifying industry competition, capital investment returns below expectations, and an unfavorable macroeconomic climate.