Alibaba Group (BABA US) Buy: Inflection point of AI commercialization

Research evidence excerpt

Alibaba Group (BABA US) Buy: Inflection point of AI commercialization

y raise FY27-28e earnings 2%. After reflecting estimate changes and

moving DCF valuation one year forward, we revise up TP to USD180 (from USD172) on 52-WEEK PRICE (USD)

our preferred AI name. We maintain a Buy. 210.00

Cloud growth drivers breakdown: (1) Explosive growth in MaaS revenue: BABA 151.50

expect MaaS annual recurring revenue (ARR) to surge from RMB10bn in June to

RMB30bn by FY27e as customers move beyond chatbots and simple tasks to 05/25 11/25 05/2693.00

comprehensive agentic AI apps such as production-scale deployments and platform- TargetHigh: 189.34price: 180.00Low: 103.83 Current: 134.78

level workloads. The majority of MaaS revenue is from API sales (primarily Qwen) via Source: LSEG IBES, HSBC estimates

Bailian, with the remainder from AI-native software subscriptions. (2) Emerging AI-

related revenue (with contribution from MaaS): AI-related products were 30% of

Charlene Liu*

external cloud revenue in 4QFY26 and grew triple digits y-o-y. BABA expects this to Head of Internet and Gaming Research, Asia Pacific

go over 50% within a year. (3) Cross selling to traditional cloud: AI has increased The Hongkong and Shanghai Banking Corporation

Limited, Singapore Branch

demand for traditional cloud products including CPU, storage, and containers. The charlene.r.liu@hsbc.com.sg

rollout of agentic AI accelerates this trend as it consumes even more traditional cloud +65 6658 0615

products. IDC data shows China’s public IaaS revenue growth strengthened in 2H25 Charlotte Wei*

to 20% y-o-y; BABA grew faster on market share gains (Ex. 3). Analyst, Internet Research The Hongkong and Shanghai Banking Corporation Limited

charlotte.wei@hsbc.com.hk