TLDR
- Alibaba (BABA) stock jumped 12.9% after strong Q1 FY26 results with cloud revenue climbing 26% year-over-year to 33.4 billion yuan
- Multiple analysts raised price targets, with JPMorgan setting the highest at $170 from $140 following the earnings beat
- AI revenue more than doubled from previous year, marking the eighth consecutive quarter of triple-digit AI growth
- Company reportedly developed new AI chip to handle broader range of tasks than previous processors
- Stock closed up 19% in Hong Kong trading as investors focus on Alibaba’s AI potential and cloud growth
Alibaba Group Holding Limited saw its stock price surge 12.9% following the release of strong first-quarter fiscal 2026 results on August 29. The Chinese e-commerce giant delivered adjusted earnings per ADS of $2.06, beating the consensus estimate of $1.98.
Revenue came in at 247.7 billion yuan ($34.6 billion), slightly below the expected 252.9 billion yuan. However, investors focused on the positive aspects of the report, particularly the company’s cloud and AI performance.
Cloud revenue stood out as a major growth driver, climbing 26% year-over-year to 33.4 billion yuan. This performance helped offset concerns about the overall revenue miss.
The AI segment delivered even more impressive results. AI revenue more than doubled from the previous year, marking the eighth consecutive quarter of triple-digit percentage increases in AI-related product revenue.
Analyst Upgrades Flow In
Goldman Sachs analyst Ronald Keung raised his price target to $163 from $147 while maintaining a Buy rating. Keung expects Alibaba’s quick commerce unit to post larger losses in the September quarter but anticipates improvement by December.
The analyst highlighted Alibaba’s strategic shift toward becoming an “AI + everyday consumption app” and an “AI + Cloud hyperscaler.” This positioning could drive future growth as the company leverages its technology investments.
JPMorgan analyst Alex Yao increased his price target to $170 from $140, keeping an Overweight rating. Yao compared Alibaba’s food delivery and quick commerce operations to Meituan, suggesting they have reached sufficient scale for efficient operations.
Bernstein analyst Robin Zhu raised his target to $160 from $145 with an Outperform rating. Zhu noted that Alibaba now serves 300 million monthly quick commerce customers with more than 2 million daily riders processing 80 million daily orders.
The analyst expects losses in the food delivery unit could be cut in half by October. Taobao’s daily users grew 20%, showing continued strength in the core e-commerce platform.
AI Chip Development Adds to Momentum
Reports suggest Alibaba has developed a new artificial intelligence chip capable of handling a broader range of tasks than its previous processors. This development could help the company reduce its dependence on Nvidia chips, which have been restricted due to trade limitations.
The timing of this AI focus comes as Chinese technology companies engage in fierce competition to develop more powerful AI models. Alibaba competes directly with DeepSeek, Baidu, and Tencent in this space.
Richard Windsor, an independent analyst, noted that while the market recognition timing remains unclear, Alibaba has been investing in AI development for an extended period. The company’s AI model ranks among the best available in China and remains globally competitive.
The stock’s reaction in Hong Kong trading was particularly strong, closing up 19% on Monday. This gain helped the Hong Kong-listed shares catch up with the American depositary receipts’ Friday performance.
Alibaba’s ADRs have increased 36% since being featured as a Barron’s stock pick in October last year. The recommendation was based partly on the company’s cheap valuation and AI potential.
Wall Street maintains a positive outlook on the stock. With 12 Buy ratings and one Hold rating, BABA commands a Strong Buy consensus rating. The average price target of $152.63 implies approximately 13% upside potential from current levels.
The company’s strategic focus on AI integration across its platforms appears to be gaining traction with investors and analysts alike. Cloud revenue growth of 26% demonstrates the success of this technology-focused approach.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
