JPMorgan: Alibaba Cloud AI could hit a profitability inflection in Q4
10/12/2026 — 10/12, 11:19·1 sources (all)·1 reports (all)
Key takeaways
- Analysts led by Yao Cheng at J.P. Morgan expect Alibaba's cloud business EBITA to exceed operating losses from AI models and applications fo…
Background & analysis
On October 11, analysts led by Yao Cheng at J.P. Morgan Securities (China) published a report arguing that Alibaba's cloud business is improving its profitability faster than the market expected, and that the company's AI spending may become self-funding sooner than anticipated. According to the report, Alibaba Cloud's EBITA is expected to exceed the operating losses of its AI models and applications for the first time in the quarter ending December 2026, at which point cloud growth would begin contributing positively to the group's overall profitability. J.P. Morgan described this turning point as the first key data point for the return on capital invested in AI, and as the core focus for the stock over the coming one to two quarters.
The report estimates that in the quarter ending September 2026, EBITA losses from Alibaba's AI lab and applications will be about RMB 10.6 billion, while the cloud business's EBITA margin will rise to 12.4% from 11.6% in the previous quarter.
On ratings and price targets, J.P. Morgan kept its overweight rating on Alibaba but cut its US price target to $200 from $210, and its Hong Kong target to HK$195 from HK$205. At the same time, it raised its valuation multiple to 17x from 16x, citing the approaching combined cloud and AI EBITA turning point, which it said reduces uncertainty around the company's earnings path. The report did not disclose specific expectations beyond that quarter.
AI-generated from 1 reports · updated 2 hours ago
Latest turnA JPMorgan team led by analyst Yao Cheng expects Alibaba's cloud EBITA to exceed the operating losses of its AI models and applications for the first time in the quarter ending in December, calling it the first key data point for return on AI investment. The bank cut its Alibaba US target price from $210 to $200 while raising its valuation multiple from 16x to 17x, keeping an Overweight rating.
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A JPMorgan team led by analyst Yao Cheng expects Alibaba's cloud EBITA to exceed the operating losses of its AI models and applications for the first time in the quarter ending in December, calling it the first key data point for return on AI investment. The bank cut its Alibaba US target price from $210 to $200 while raising its valuation multiple from 16x to 17x, keeping an Overweight rating.
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