JP Morgan: Alibaba-W (09988) underperformed in the last quarter, expected negative market reaction.

JPMorgan Chase released a research report stating that Alibaba-W (09988) had a 2% year-on-year increase in total revenue to 284.8 billion RMB in the third quarter of the 2025 fiscal year, which was 2% lower than the bank's and market's expectations but generally acceptable. However, adjusted net profit plummeted by 67% year-on-year to 16.7 billion RMB, significantly lower than the bank's and market's expectations by 40% and 44% respectively, which was disappointing. The "overweight" rating for Alibaba was maintained with a target price of 210 Hong Kong dollars. The report pointed out that customer management revenue (CMR) and cloud business, among other major revenue sources, roughly met investors' expectations, reflecting no sign of a slowdown in e-commerce monetization and steady demand for AI cloud services this quarter. This was offset by widespread profit underperformance in various business sectors, indicating higher cost pressures than expected and a weakening of the short-term profit trajectory. Revenue from external clients in Alibaba's cloud business increased from 29% in the previous quarter to 35%, with revenue from AI-related products maintaining triple-digit growth. Capital expenditure remained high, at 29 billion RMB (compared to 31.5 billion RMB in the previous quarter). Revenue from the Chinese e-commerce group increased by 6% year-on-year, which was 2% lower than the bank's expectations, driven mainly by a 56% year-on-year growth in instant commerce revenue; adjusted EBITA fell by 43% year-on-year to 34.6 billion RMB, in line with the bank's expectations. International digital commerce revenue growth further slowed to 4%, which was 3% lower than the bank's expectations, with adjusted EBITA recording a loss of 2 billion RMB. Adjusted EBITA loss in the "all other" business widened to 9.8 billion RMB, compared to the bank's expected loss of 8.5 billion RMB.