Daiwa issued a research report saying that it has become more confident in the earnings outlook of BABA-W (09988.HK) +1.600 (+1.495%) Short selling $465.56M; Ratio 15.646% 's cloud business. It currently forecasts cloud revenue for the second fiscal quarter ending September this year to increase by more than 50% YoY. At the EBITA level, the broker expects cloud business profit to largely offset losses from the AI laboratory as early as the third fiscal quarter, marking an important milestone in the group's AI investments and earlier than previously expected.

The broker maintained its forecast for second fiscal quarter cloud EBITA margin at 12%, but raised its third fiscal quarter forecast from 12.4% to around 15%. It believes the higher contribution from AI revenue, particularly MaaS and IaaS, together with stronger pricing power and economies of scale, should drive faster margin expansion. Management recently guided annual capital expenditure at around RMB200 billion to RMB300 billion, with annual additional capacity of about 2 to 3 gigawatts, half self-built and half through leased and partner-operated facilities, which is expected to help reduce balance sheet pressure.

Daiwa expects BABA-W's e-commerce business earnings to remain resilient, while Quick Commerce losses are narrowing. Although domestic consumer sentiment remains weak, the broker believes platform earnings are stable. Higher average order value and stronger non-food penetration are expected to improve unit economics and support further narrowing of Quick Commerce losses. The broker raised its EPS forecasts for fiscal years 2027 to 2029 by 2% to 3% to reflect improved earnings prospects for the cloud business. It reiterated a Buy rating and maintained the TP at HKD180. (gc/da)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-10-12 12:25.)