Zhongtai Securities has released a research report stating that Alibaba-W (09988) is primarily focused on two key development pillars: "e-commerce" and "AI + Cloud," with the latter combination unlocking new avenues for growth while its e-commerce operations are expected to see improved profitability.

The firm forecasts the company's revenue for fiscal years 2027 to 2029 to reach 1.14 trillion, 1.28 trillion, and 1.42 trillion yuan, respectively, with adjusted net profits projected at 93 billion, 135.7 billion, and 170 billion yuan.

Employing a sum-of-the-parts valuation method, the domestic e-commerce business is valued with reference to leading e-commerce platforms at a 7.0x PE for 2026, while the cloud computing business is valued against top overseas cloud providers at a 5.4x PS for 2026. The combined projected market value for China Core Commerce and Alibaba Cloud is estimated at 2.4 trillion RMB (equivalent to 2.7 trillion HKD).

Initiating coverage, the firm assigns a "Buy" rating. The key points from Zhongtai Securities' analysis are as follows:

E-commerce Business Line

Taotian Group is one of China's largest comprehensive e-commerce platforms by GMV and user base. Years of operation have solidified a strong user mindset, with an accumulated 62 million core 88VIP members, securing a robust market position and contributing stable profits and cash flow. The core e-commerce group's non-instant retail business currently contributes approximately 200 billion yuan in annual adjusted EBITA.

Since 2025, the company has significantly invested in instant retail to expand its user base and business scenarios. This has driven new user growth, increased purchase frequency, and cross-stimulated traditional e-commerce growth. Concurrently, the flash sales business has seen substantial increases in order volume and revenue, with a 47% year-on-year revenue growth in fiscal 2026.

As the business scales and regulatory measures against "internal competition" strengthen, losses from instant retail are expected to further narrow. According to management guidance, the flash sales business is anticipated to achieve positive unit economics by the end of fiscal 2027 and overall profitability by fiscal 2029.

AI Business Line

The company has established a full-stack layout encompassing [computing hardware - cloud services - large language models - AI applications].

With the continuous iteration of large models and the expanding application of AI Agents in areas like programming, office work, and video generation, demand for AI computing power and model services is accelerating. This is reflected in faster growth in token consumption and steeper growth curves for ARR from model and AI application providers.

Alibaba's comparative advantage in AI lies in its full-stack deployment from hardware to applications. ① At the hardware layer, T-Head has self-developed products in GPUs, CPUs, storage, and network interconnect chips. As of May 2026, the Zhenwu series chips have cumulatively shipped 560,000 units, holding a significant market share among domestic chips. ② At the cloud infrastructure layer, Alibaba Cloud holds a high market share in both traditional IaaS and emerging AI IaaS. Furthermore, with its comprehensive layout in self-developed models, Alibaba Cloud's MaaS revenue is growing rapidly. As of March 2026, the ARR for Alibaba Cloud MaaS and AI software subscriptions reached 8 billion yuan, with management guidance suggesting it could reach 30 billion yuan by year-end 2026. ③ At the model layer, recent trends focus on enhancing models' real-world task execution capabilities (suitable for Agent use) and improving cost-effectiveness. Alibaba possesses a rich ecosystem of open-source and proprietary models and can rapidly iterate models based on market demand and cutting-edge trends. Since 2026, it has released dozens of models covering Agent foundation models, full-modality models, and multi-modal models. ④ At the application layer, this year's trends involve expanding partnership ecosystems and focusing on productivity scenarios (e.g., programming, office work). Alibaba's current core consumer application layout centers on the Qianwen App and AI entry points within existing apps (e.g., the AI assistant within the Taotian App). Qianwen is already integrated with various applications within the Alibaba ecosystem, offering diversified service scenarios. For the enterprise side, it offers products tailored to different groups, including the enterprise-level AI work platform Wukong, the office intelligence agent Qoder Work, and the cross-border trade vertical agent Accio Work.

Establishing an AI Organizational Structure Centered on ATH, Covering Multiple Stages from Frontier Exploration to Application

Since 2025, Alibaba has undergone several adjustments to its AI-related organizational structure. It has now established a core organizational framework centered on the Alibaba Token Hub (ATH) business group, led by Group CEO Yongming Wu. The core objective is to "create Tokens, deliver Tokens, and apply Tokens," encompassing frontier exploration (Alibaba AI Future Research Institute), foundational model R&D (Token Foundry Business Unit, formed by merging the Tongyi Large Model Business Unit and the Future Life Lab), model services (the MaaS business line), and AI application implementation (Qianwen Business Unit, Wukong Business Unit).

Key Risk Factors

Potential risks include a weaker-than-expected recovery in macro consumer demand, intensifying industry competition, slower-than-anticipated loss reduction in the instant retail business, slower-than-expected growth in AI application demand, short-term cost and cash flow pressures from increased capital expenditures, and risks associated with data update delays.