Alibaba analysts raise target price, sees AI cloud demand boosting revenue growth

Citi analysts have raised Alibaba's price target to US$217 from US$187, reiterating a 'Buy' rating, driven by expectations of accelerating AI cloud demand boosting revenue growth and efficiency. They now project a 29% cloud revenue compound annual growth rate for fiscal years 2026-2028, up from 26%, and anticipate the Rmb 380 billion capex budget to be deployed sooner. This positions Alibaba as a robust AI-play, leveraging its full-stack AI services to capture the Artificial Superintelligence evolution.

Analysis

Citi analysts have raised their price target on Alibaba Group (BABA) to US$217 from US$187, reiterating a 'Buy' rating based on an accelerating outlook for its cloud division. The core of this thesis is the increasing demand for Artificial Intelligence (AI) services, leading Citi to label Alibaba a "solid AI-play". The bank has revised its forecast for Alibaba's cloud revenue Compound Annual Growth Rate (CAGR) upwards to 29% from 26% for the fiscal years 2026-2028. This optimism is further supported by the expectation that Alibaba will deploy its existing 380 billion renminbi capex budget by the second quarter of fiscal 2028, sooner than previously anticipated. The analysis positions Alibaba as one of only a few global "super cloud platforms" with full-stack AI capabilities, poised to capture long-term growth from the "Artificial Superintelligence (ASI) evolution" while also delivering upside to efficiency margins.

Key Decisions for Investors

• Investors should evaluate Alibaba's potential as a primary beneficiary of AI infrastructure growth, in line with Citi's thesis, rather than solely as an e-commerce entity.
• Monitor Alibaba's quarterly cloud revenue figures closely to track performance against the newly projected 29% CAGR, as this is the key metric underpinning the revised valuation.
• Consider the implications of the accelerated Rmb 380 billion capex deployment, which signals confidence in near-term demand but could pressure short-term margins and free cash flow before delivering long-term growth.