Key Takeaways:
- Barclays and Mizuho raise Alibaba price targets to $195.
- Cloud Intelligence Group revenue grew 38% year-over-year in Q4.
- Executive forecasts higher cloud gross profit margins in 1-2 quarters.
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Alibaba Gains as Analysts Hike Price Targets to $195 on Cloud Outlook
(P1) Alibaba Group Holding Ltd. (NYSE: BABA) received dual price target hikes to $195 from Barclays and Mizuho following positive executive commentary on the company's cloud division and strong Q4 revenue growth.
(P2) "Alibaba’s full-stack AI investments have progressed from incubation to commercialization at scale," CEO Eddie Wu said on the company's May 13 earnings call, framing the firm's strategy.
(P3) The analyst upgrades came after Alibaba’s Cloud Intelligence Group reported a 38% year-over-year revenue increase in the fourth quarter of fiscal 2026. Here are the details of the analyst actions:
(P4) The bullish analyst sentiment, driven by accelerating cloud growth and a new focus on AI commercialization, clashes with a steep 84% drop in the company's adjusted EBITA for the quarter. For investors, the key question is whether the high-growth cloud and AI segments can offset margin pressure and justify a higher valuation.
An Alibaba executive stated on May 13 that the company's cloud business is expected to achieve "significantly higher gross profit margins" within the next one to two quarters, reinforcing the company's optimistic outlook. This guidance directly addresses investor concerns about profitability after a period of heavy investment.
Cloud Growth vs. Margin Pressure
The bull case for Alibaba centers on its rapidly scaling cloud and AI businesses. The company's proprietary Qwen large language model is gaining enterprise traction, and AI-related products now constitute 30% of external cloud revenue, marking the eleventh straight quarter of triple-digit growth in that sub-segment. Barclays' price target increase was anchored on this accelerating cloud momentum.
However, the bear case is equally compelling. The aggressive investment in AI has led to a significant drop in profitability, with adjusted EBITA falling 84% year-over-year. Mizuho analyst Wei Fang noted that while the quarter missed on EBITA due to increased token demand and higher costs, this same demand is a clear positive signal for future growth.
The guidance for improved cloud profitability in the near term is a critical development. It suggests that Alibaba's heavy investments are beginning to mature, potentially leading to a re-rating of the stock as the market balances near-term margin compression with long-term growth prospects.
The upgrades from Barclays and Mizuho push their price targets modestly above the consensus analyst target of $189.73. Alibaba shares closed at $145.81 on May 13.
This article is for informational purposes only and does not constitute investment advice.
[1] Alibaba shares surge nearly 8% as firm expects to exceed $55.96 billion AI spending target[2] Alibaba’s core profit plunges 84% as its CEO doubles down on AI investments that haven’t paid off[3] Wall Street Splits on Alibaba: Two Firms Hike Price Targets to $195 as Cloud Growth Hits 38%[4] Alibaba Q4 Earnings Review: AI Inflection Point Is Here
