JPMorgan Chase Alibaba Investor Conference: The company's long-term value narrative remains intact, with significant underestimation of optionality value in the valuation.

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（Source: NetEase Technology）

Although the investor meeting held after Alibaba’s earnings release strengthened its long-term investment narrative, JPMorgan believes the company’s share price in the short term will still be constrained by the pace of earnings realization. The firm maintains an “Overweight” rating for Alibaba’s U.S. shares and Hong Kong shares, with a target price of $205 for the U.S. and HK$200 for Hong Kong.

In a research report released on March 24, JPMorgan said the meeting helps clarify why management is willing to absorb short-term profit pressure and why it believes current investments can generate clear value over the medium term. However, JPMorgan is not more confident that valuation can be raised meaningfully in the near term. The firm believes that over the next three months, Alibaba’s share price will still be dominated by consolidation, unless subsequent data more clearly indicates that business momentum is improving and that the intensity of investment is becoming more manageable.

The current market environment is more inclined to reward earnings realization than long-term strategic choices. JPMorgan said the meeting itself is not enough to drive a sharp valuation increase, but the company’s long-term value narrative remains intact, and the option value implied in its valuation appears to be undervalued by the market.

AI and Cloud business: Clear strategic focus, monetization visibility still needs improvement

At the meeting, management made it clear that AI and cloud business are at the core of Alibaba’s strategic agenda and are the company’s most important long-term investment areas. This statement is intended to dispel market concerns about whether spending on local services or flash sale is consuming resources and strategic attention that should be devoted to AI and cloud business.

On the monetization front, management said Alibaba has realized monetization of AI demand, but at present most monetization is included within broader cloud business revenue and has not yet been disclosed separately as independent AI revenue. Enterprise customers using AI workloads typically use infrastructure, compute power, and related services through standard cloud frameworks. Management expects that as customer usage increases and pricing models evolve, AI monetization will gradually become more visible.

JPMorgan believes this is the most important takeaway from the meeting. Alibaba’s management hopes investors will view cloud business as a broader AI stack—expanding monetization potential through model services, token consumption, and usage at the application layer, rather than simply positioning it as traditional infrastructure business. Over the medium term, this framework is constructive, but the market needs clearer evidence, including continued acceleration in cloud business, improved AI monetization visibility, and confirmation that increased investment will not structurally pressure profit margins beyond expectations—only then will it grant a clearly higher valuation multiple.

AI full-value-chain layout: Open source to attract users, ecosystem collaboration to monetize

Management’s view of Alibaba’s AI role goes far beyond the foundation model layer. Alibaba believes it is broadly involved across multiple areas, including infrastructure, cloud hosting, model platforms, enterprise deployment tools, and commercialization. Platform tools such as Bailian are an important bridge connecting model capabilities with real enterprise application needs.

On the open-source strategy, management is pragmatic: the core value of open-source models lies in increasing influence, attracting developers, and expanding the scope of use. Its commercial logic is to funnel users into Alibaba’s full-stack ecosystem, and then achieve monetization through hosted services, enterprise-level tools, and cloud services—not as a direct source of profit.

What is worth noting is that management emphasized that third-party AI model companies should not be viewed solely as a competitive threat. Among these participants, many still need cloud infrastructure, training and inference capabilities, and enterprise-customer reach channels—Alibaba can cooperate with them as a cloud service provider, a platform enabler, or a distribution partner. Management also said AI-related demand is expanding from a small number of large internet companies to a wider range of industry and enterprise customers. Customers are moving from the trial stage to more routine, more deeply embedded ways of using AI in their businesses, which is crucial for forming sustained cloud and AI revenue.

In addition, management said Alibaba Cloud’s operating environment is no longer driven purely by scale. Pricing discipline is gradually taking shape; price adjustments will be carried out in an orderly manner through renewals and new contracts, rather than suddenly or across-the-board increases.

Flash sale business: Ecosystem value is underestimated, but the timeline for reducing losses remains unclear

At the meeting, management spent a great deal of time explaining that the immediate retail business should not be assessed solely from a short-term loss perspective. The business is positioned as a strategic tool to increase user visit frequency, strengthen engagement, expand category coverage, and consolidate the user ecosystem. Part of its investment rationale comes from ecosystem collaboration effects, rather than pursuing independent business profitability performance.

JPMorgan believes this strategic positioning is logically sound and may have been underestimated by the market. If management’s assessment is correct, the current flash-sale losses are actually helping Alibaba consolidate its moat in the commercial business, rather than simply expanding low-quality GMV.

However, the challenge is that this is still a medium-term stock view, while the stock is currently trading amid short-term earnings adjustments. Management is more confident about the operating logic for eventually delivering improvement than about providing specific short-term timing points. Its focus is on building scale, increasing order density, and optimizing the category mix—not cutting investment to force short-term margin improvement. JPMorgan noted that investors will continue to watch three questions: the pace of improvement in unit economics, the continuity of user growth, and when ecosystem value will become clearer in the disclosed financial data.

Market pricing ignores cloud business and flash-sale option value

JPMorgan said the current market pricing for Alibaba is as if the company’s valuation is based only on domestic e-commerce business earnings. The firm estimates that Alibaba’s current valuation is about 10x JPMorgan’s forecast for FY2027 domestic e-commerce business profits of RMB196 billion, while for cloud intelligent group revenue growth of 36% year over year, AI product revenue maintaining triple-digit growth for ten consecutive quarters, and the on-demand retail platform advancing management-set plans to reach RMB1 trillion GMV in FY2028, the remaining valuation the market assigns is zero.

JPMorgan does not agree with this. The firm believes that if the $100 billion cloud revenue target is achieved and receives a reasonable valuation, then the market capitalization of the cloud business alone could reach $400 billion, but the current share price does not yet reflect this potential.

The firm maintains its $205 target price for Alibaba’s U.S. shares, based on a 16x forward P/E for FY2028. It also uses a sum-of-the-parts method as a second valuation approach: assign 14x forward P/E for calendar year 2026 expectations to core e-commerce profits, and assign 6x forward price-to-sales for calendar year 2026 expectations to the cloud business. Key downside risks include: competitive threats to the local life services business from large internet companies such as Tencent and Baidu; sustained margin pressure from a longer digital content investment cycle; and slower-than-expected progress in monetization improvements in the mobile business.

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