I would watch margins next qua-To The Moon - Tiger Brokers Online Investing Community - To The Moon

I would watch margins next quarter, while giving Alibaba a modest cloud re-rating.

The bullish case is real: Cloud and Compute grew 45%, its strongest growth in 22 quarters, while cloud adjusted EBITA jumped 133% and margin expanded to about 12%. AI product revenue has also delivered triple-digit growth for 12 consecutive quarters.

But I would not fully re-rate BABA on cloud growth yet. The problem is capital intensity. Capex rose 75% to RMB67.7bn, while GAAP net profit fell roughly 75%. Management is effectively exchanging near-term earnings and free cash flow for future AI capacity.

The crucial question is therefore not whether AI demand exists. It clearly does. It is whether cloud revenue and margins can grow faster than AI infrastructure spending.

My hierarchy:

1. Cloud growth: bullish.

2. Cloud margin expansion: very bullish.

3. Capex trajectory: biggest risk.

4. Group margins/free cash flow: confirmation needed.

If next quarter shows 45%+ cloud growth + further cloud margin expansion + capex growth moderating, I would become much more aggressive on BABA. If cloud remains strong but capex keeps accelerating and group profitability deteriorates, the market may continue treating Alibaba as an expensive AI investment project rather than a cash-generating AI platform.

**Verdict: re-rate the cloud business gradually, but wait for margin and capex confirmation before giving Alibaba a full AI multiple.**

Alibaba Cloud External Revenue Hits 22-Quarter High, But GAAP Profit Drops ~75%?

Alibaba's FY27 Q1: revenue of 268.95bn yuan, +9% and a hair above the 268.52bn consensus. Profit needs two lenses — adjusted net profit −38% to 20.72bn, GAAP net profit −75%; quoting only the adjusted figure understates the erosion. Capex +75% to 67.68bn, nearly all AI infrastructure, and the return is visible: cloud external revenue +45%, a 22-quarter high, AI product revenue in triple digits for 12 straight quarters, AI cloud annualizing near 49.5bn. The U.S. listing rose 1.26% on the print. Re-rate on cloud, wait for capex to peak, or watch margins next quarter?

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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AI product revenue has also delivered triple-digit growth for 12 consecutive quarters.&nbsp;</p>\n<p><br></p>\n<p>But I would not fully re-rate BABA on cloud growth yet. The problem is capital intensity. Capex rose 75% to RMB67.7bn, while GAAP net profit fell roughly 75%. Management is effectively exchanging near-term earnings and free cash flow for future AI capacity.&nbsp;</p>\n<p><br></p>\n<p>The crucial question is therefore not whether AI demand exists. It clearly does. It is whether cloud revenue and margins can grow faster than AI infrastructure spending.</p>\n<p><br></p>\n<p>My hierarchy:</p>\n<p><br></p>\n<p>1. Cloud growth: bullish.</p>\n<p><br></p>\n<p><br></p>\n<p>2. Cloud margin expansion: very bullish.</p>\n<p><br></p>\n<p><br></p>\n<p>3. Capex trajectory: biggest risk.</p>\n<p><br></p>\n<p><br></p>\n<p>4. 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