JPMorgan Alibaba (BABA.US): December Quarter Crosses the Inflection Point as AI Self-Funding Arrives Sooner Than the Market Expects
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JPMorgan maintains Alibaba at Overweight and adjusts its target prices to $200 for the U.S. listing (BABA US) and HK$195 for the Hong Kong line (9988 HK). The central call: cloud-segment EBITA should exceed the losses from AI models and applications for the first time in the December quarter, the point at which the cloud business starts funding itself and contributing to group earnings.
Infrastructure spending has lengthened the growth cycle and added depreciation pressure, yet the analysts expect cloud revenue growth above 50% with steadily improving margins that can trend toward 20% over the long term. Estimate changes run in both directions: FY27/28E non-GAAP EPS is cut 9%/10%, FY27E non-GAAP EBITDA is raised 8% and FY28E is trimmed 4%.
Commerce EBITA stabilised in the September quarter, with CMR growth of roughly 1% year-on-year and flat Taobao-Tmall Group EBITA signalling marginally easing competitive intensity. Quick-commerce losses should narrow sharply to around RMB 9.2 billion from RMB 35 billion a year earlier. No further equity financing is expected this fiscal year, and the September quarter should mark the second quarter in which investors can observe the cloud profitability inflection.
Key exhibits
Exhibit 1
