Alibaba Group Holding Ltd (NYSE: BABA) Stock Analysis & Research Report (BABA) | Research Report

📊 Executive Summary

Alibaba (NYSE: BABA), the Chinese e-commerce and cloud leader, has seen a 39% YTD stock rally in 2025—driven by AI-fueled cloud momentum, international expansion, and growing instant delivery adoption. Investors are now eyeing the upcoming Q1 FY26 earnings set for July 29, which will provide fresh insight into profitability trends amid heavy capital spending.

In FY2025, Alibaba posted:

Revenue: CNY 996.3B (~$137B), up 6% YoY
Net Income: $17.9B
EPS: $7.45 (FY26 guidance: ~$9.29)

Nvidia’s recent confirmation of H20 AI chip sales resuming in China strengthens Alibaba’s tech supply chain, boosting expectations for its AI infrastructure and cloud acceleration. While analysts remain bullish long term, they also flag near-term margin pressures as logistics and delivery investments weigh on EBITA.

📌 Short-Term Verdict: Hold 📌 Long-Term Outlook: Strong Buy

🚀 Investor Snapshot Infographic

📈 Metric	💡 Value
Current Price	$120.23
FY2025 EPS	$7.45
FY2026 EPS Est.	$9.29
FY2026 Q1 EPS Est.	$2.22 (–3% YoY)
FY2026 Q1 Revenue Est.	$35.46B (+6% YoY)
AI Cloud Growth (Est.)	+23% YoY
Daily Orders (Instant)	80M+ across platforms
Analyst Consensus	14 Buy / 1 Hold (Strong Buy)
Avg. Price Target	$153.15 (~32% Upside)

🧠 Investment Thesis

✅ Reason	📌 Description
💻 Cloud & AI Leadership	AI cloud EBITA +69% YoY; June quarter growth forecast now 23%, up from 20%
🛒 Core E-Commerce Scale	Steady domestic sales; 80M+ daily instant orders via Taobao & Eleme
🌍 Global Expansion	24% YoY growth in international commerce; strong B2B inquiry growth
🧩 Operational Restructuring	“1+6+N” structure fosters independence and better capital allocation
🔋 AI Chip Supply Normalizing	Nvidia’s H20 chips resuming in China, easing hardware constraints
🤝 Strategic Infrastructure	$50B+ AI cloud investment driving long-term moat
📊 Analyst Optimism	Strong Buy consensus with $153 avg PT, 32% upside

🌐 Macro Trends

🌟 The Good

China Q2 GDP: +5.2%
Cloud investment tailwinds: Enhanced AI demand and fiscal support
Chip supply recovery: Nvidia back in play for Chinese firms

💩 The Bad

Sluggish retail sales (+4.8%) and property malaise
Rising operating costs in logistics/delivery pressuring EBITA

🤯 The Ugly

U.S.–China tariff war escalation post-April 2025 “Liberation Day”
New Trump tariffs push duties up to ~145%
Legal uncertainty on IEEPA-driven tariffs still unresolved

🔍 Short-Term Outlook (1–2 Years)

📈 Growth Catalysts

Q1 Cloud revenue likely +23% YoY
Instant delivery hits record 80M daily orders
H20 chip availability boosts AI training/deployment

⚠️ Risks to Watch

EBITA pressure: Estimated –15% (Jefferies), –16% (Morgan Stanley)
Core e-commerce & local services EBITA: –20% forecasted decline
EPS guidance lowered slightly to $2.22 (–3% YoY)

Analyst Commentary:

Thomas Chong (Jefferies): PT lowered to $150 citing margin compression
Gary Yu (Morgan Stanley): PT cut from $180 to $150; cautious on delivery capex

🧩 Verdict: Hold

Strong AI/cloud trends offset by logistics cost pressure and policy overhang.

🔭 Long-Term Outlook (3+ Years)

🌱 Structural Growth Drivers

AI Cloud Leadership: 7 consecutive quarters of triple-digit product growth
B2B + Global Expansion: Southeast Asia, Middle East, and EU gains
Diversified Segments: Cloud, logistics, entertainment, retail—across borders

⚠️ Long-Term Hurdles

U.S.–China tech/trade friction could cap upside
Regulatory scrutiny still a tail risk
Intensifying competition in e-commerce and cloud

✔️ Verdict: Strong Buy

Strategic moat in AI + cloud; 32% upside vs avg PT; ideal for patient capital.

📉 Key Financials

Metric	Q4 FY2025	FY2025	FY2026 Q1 Est.
Revenue	CNY 236.5B	CNY 996.3B	$35.46B
Net Income	CNY 12.56B	$17.9B	—
EPS	$1.74	$7.45	$2.22
Cloud Revenue	RMB 30.13B	—	+23% YoY
Daily Orders (Instant)	—	—	80M+
EBITA Change	—	+36% YoY	–15 to –16%

📊 Forward Financial Estimates

Fiscal Year	Revenue Growth	EBITDA Margin	EPS Estimate	Forward P/E
FY2026	+10%	~30%	~$9.29	~13x
FY2027–29	8–12% CAGR	32–35%	$11–$15	12–15x

🏭 Peer Valuation Comparison

Company	P/E	EV/EBITDA	Debt/Equity	Revenue CAGR
Alibaba	16x	~12x	Moderate	8–10%
Tencent	18x	14x	Low	12%
Amazon	20x	16x	Moderate	15%
Microsoft	25x	18x	Low	10%

Alibaba trades at a ~25% discount to peers due to macro and regulatory concerns, yet has superior growth in cloud and AI.

🧾 Insider & Institutional Sentiment

Insider Activity: No major selling YTD
Institutional Inflows: Increasing—especially from AI-focused and China-recovery funds

💰 Valuation & Intrinsic Value

DCF Assumptions:

Revenue Growth: 8–10%
Discount Rate: 12%
Terminal Growth: 3%
DCF Value Range: $150–160

Multiples-Based:

15–18x forward P/E = $140–165 fair value

Valuation Method	Implied Value	Margin of Safety
DCF	$150–160	20–25%
Market Multiples	$140–165	15–30%

💸 Dividend & ESG Snapshot

Dividend: ~$4.6B in FY25 (annual + special); buybacks prioritized
ESG Highlights:
- ✅ Board independence, enhanced audit reporting
- 🌱 Carbon-neutral logistics fleet scaling up
- ⚠️ Past surveillance controversies under remediation

📌 Final Investment Summary

Time Horizon	Recommendation	Rationale
Short-Term (1–2y)	⚖️ Hold	Margin compression + cost investment ahead of Q1 print
Long-Term (3+y)	✅ Strong Buy	Cloud, AI, delivery scale, and undervaluation offer upside

🔔 Next Steps & Catalysts to Watch

Q1 FY26 Earnings: July 29 – focus on margin trends, cloud EBITA, and logistics ROI
U.S.–China Trade Policy: Any reversal or litigation success = valuation catalyst
AI Sector Tailwinds: Chip supply normalization + record order volumes = strategic upside

Alibaba Group Holding Ltd (NYSE: BABA) Stock Analysis & Research Report