What are the expectations for Alibaba's Q1 report? Instant retail losses may be halved, and cloud business growth could surpass 40%.

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Alibaba will announce its fiscal year 2026 Q4 (i.e. 2026 Q1) results in May. Morgan Stanley, HSBC, and Nomura—the three major investment banks—have intensively released preview reports before the earnings release. Their core views are highly consistent: cloud business growth is expected to accelerate further to over 40%; instant retail (QC) losses are at a clear turning point; and continued investment in the Qwen large model constitutes the main performance pressure for this quarter.

All three institutions maintain a Buy rating, with target price ranges between $172 and $200. Compared to the current share price of about $120, the potential upside exceeds 40%. For investors, the core issue this season is not whether short-term earnings look good, but whether Alibaba can deliver on its dual promises of "narrowing losses + accelerated cloud growth".

Cloud business accelerates to 40%, MaaS monetization is the biggest mid-term increment

Morgan Stanley expects Alibaba Cloud's 4Q revenue growth to accelerate further from last quarter’s 36% to over 40%, with EBITA margin stable at 9%.

The drivers show a dual-wheel pattern: the recent cloud service price hikes support short-term growth, while MaaS (Model-as-a-Service) builds the mid-term path—institutions expect MaaS revenue share to rise from less than 10% now to over 50% within five years, and management has set a long-term cloud business EBITA margin target of 20%, significantly higher than the current high single digit level.

Qwen’s token usage share in China’s enterprise market has soared from 18% in the first half of 2025 to 32% in the second half, topping all models.

According to HSBC, Qwen App reached 223 million monthly active users in February 2026, with a 30-day user retention rate of 39%, deepening its enterprise moat.

Clear roadmap for instant retail loss reduction, "war peak" has passed

Morgan Stanley estimates 4Q instant retail loss at about 18 billion yuan, narrowed from 22 billion yuan last quarter.

Management’s clear target is to halve FY27 annual losses compared to FY26 (Morgan Stanley forecasts FY26 QC loss at about 86 billion yuan, and FY27 target is about 43 billion yuan), halve again in FY28, and achieve break-even in FY29.

Nomura also predicts FY27 QC loss will narrow to around 43 billion yuan. The three institutions agree that the most intense stage of the instant retail "war" is over—after consolidating market share, Alibaba is shifting its strategy focus from "grabbing share" to "improving efficiency", a change expected to also give Meituan’s food delivery business some marginal breathing room.

CMR growth re-accelerates, accounting adjustment causes optical disruption

Investment banks expect customer management revenue (CMR) for Alibaba’s China e-commerce segment to grow 7% year-on-year in Q4 under a comparable basis, rebounding significantly from 1% last quarter and confirming the positive pass-through of improved consumption data in January and February.

However, starting this quarter, Alibaba will reclassify platform incentives for top merchants from marketing expenses to "deduction items" under CMR, so the reported CMR growth is only about 1%. HSBC estimates this adjustment caused about a 6-percentage-point difference in growth rate.

Excluding instant retail, EBITA for the e-commerce segment is expected to be roughly flat year-on-year, a significant improvement from a roughly -7% decline last quarter.

Target price range of $172–$200 from the three banks, AI monetization still underpriced

There are differences in target price among the three institutions, but their Buy logic is similar.

Morgan Stanley maintains an Overweight rating and a target price of $180, based on a DCF model (WACC 10%, perpetual growth rate 3%), corresponding to FY28 non-GAAP P/E of 23x, which is a significant premium to the current 16x valuation. They also lower FY26 and FY27 adjusted EBITA forecasts by 7% and 12%, mainly reflecting higher-than-expected Qwen investments.

HSBC has slightly lowered its target price from $180 to $172, also due to increased assumed losses from "other businesses". Nomura maintains a $200 target price, corresponding to about 20x P/E for FY28.

The consensus among the three institutions: The AI monetization path is becoming clearer, the instant retail loss reduction timeline is set, and current valuation still insufficiently prices these two core logics.

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