Alibaba signals faster AI payoff, margin gains halfway through US$56 billion capex plan

Aggressive spending strains cash, but Alibaba’s AI cloud growth points to strong long-term returns, analysts say

“The most important incremental message, in our view, is that cloud growth has not yet peaked,” Nomura analysts said in a research note on Friday.

“This accelerating growth is occurring alongside meaningful margin expansion rather than at the expense of profitability,” Nomura analysts wrote, highlighting that the AI cloud unit’s adjusted Ebita margin reached 11.6 per cent, up from about 7 per cent a year ago.

Jefferies expected revenue growth for Alibaba’s Cloud and Compute Services, the company’s new reporting segment covering its cloud business and T-Head chip arm, to accelerate beyond 50 per cent year on year in the September quarter, with momentum building further into the next two quarters through March 2027.