Shares surged 5.1% as Goldman Sachs analyst Ronald Keung reaffirmed his Buy rating on Alibaba and lifted cloud-growth estimates, betting that the company's AI infrastructure push is translating into real revenue. The question for shareholders: does a faster-growing cloud business justify the cost of getting there?
Goldman Raised Its Cloud Forecasts but Cut Its Price Target — and That Tells the Whole Story. Goldman now expects cloud revenue growth of 53% in the September quarter, 55% in December, and 55% in March 2027 — up from previous forecasts of 50%, 52%, and 52%. Yet Keung lowered his price target to $177 from $186 because the adjustment reflects dilution from Alibaba's recently completed HK$80 billion equity raising.
That placement issued 710 million new shares at HK$112.70 each , and 100% of the proceeds are earmarked for AI infrastructure. In plain terms: the cloud business is getting better, but existing shareholders now own a smaller slice of it.
AI Demand Is Real — Alibaba Can't Deploy Servers Fast Enough. Cloud Intelligence revenue jumped 38% year-over-year last quarter to $6 billion, with AI-related products making up 30% of cloud segment revenue and growing at triple-digit rates for the eleventh straight quarter.
Executives acknowledged they were struggling to deploy servers fast enough to meet AI demand.
Keung cited strong demand for GPU rental and hosted AI models as key growth drivers. That supply crunch signals pricing power — a rare advantage in a market where Alibaba holds 36% of China's cloud market , well ahead of Huawei at 19%.
Earnings Are Taking the Hit So Cloud Can Run. Adjusted operating profit fell 84% last quarter to RMB 5.1 billion, with the consolidated margin shrinking to just 2% , reflecting aggressive investments in quick commerce and AI infrastructure.
Goldman expects earnings per share to rebound 58% in fiscal 2027 , partly because quick-commerce losses are expected to halve and that unit should reach profitability by fiscal 2029. The bet is that today's spending buys tomorrow's dominance — but investors are financing that future twice, through both lower near-term profits and share dilution.
International Expansion Could Decide Whether This Premium Is Deserved. International revenue is expected to grow from mid-single-digit percentages to roughly 25% of cloud revenue by fiscal 2028.
Alibaba Cloud's Asia-Pacific market share already rose to 22.5% in 2025 from 20.8% a year earlier, per Gartner. Capturing foreign enterprise customers at higher prices could widen profit margins in ways the domestic market alone cannot deliver.