Jefferies Raises Alibaba Price Target: Cloud Acceleration Continues, T-Head Chip Covers 650 Clients
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Jefferies raised Alibaba's HK target to HK$184 and US target to US$190, maintaining Buy — the core thesis is that cloud revenue acceleration will persist, shifting the valuation anchor from e-commerce to AI cloud.
Why did Jefferies raise the target?
Jefferies lifted Alibaba's HK target from HK$179 to HK$184 and the US target from US$185 to US$190, keeping a Buy rating.
The thesis boils down to one line: cloud revenue growth is accelerating and will continue to do so.
This means → Jefferies now sees AI cloud — not an e-commerce recovery — as the primary driver of Alibaba's valuation trajectory.
How did the latest quarter look?
Revenue for the June quarter rose 9% year-on-year, in line with both market and Jefferies estimates.
Adjusted EBITA — the core operating profit after adjustments — fell 30% YoY to RMB 27.3 billion, but beat the Street's RMB 25.6 billion and Jefferies' own RMB 26.2 billion forecast.
In plain terms = the top line held steady and the bottom line, while down year-on-year, came in better than feared — and "not as bad as expected" is itself a positive signal.
What underpins the cloud acceleration story?
Management guided that cloud revenue will keep accelerating over the coming quarters; AI-related ARR (annualised recurring revenue — the run-rate derived from current contracts) should approach US$10 billion next quarter.
Jefferies estimates the payback period on AI compute investment at roughly three years, but says product-mix improvement, in-house T-Head chip deployment, and diversified monetisation could shorten it to two and a half years.
This means → the story is not just "cloud revenue is growing" — Jefferies believes return on invested capital is improving too. A six-month shorter payback justifies a higher valuation multiple.
How far has T-Head's chip business come?
Management disclosed that T-Head's in-house chips have reached broad commercialisation; the latest generation, Zhenwu M890, is now offered to external clients through Alibaba Cloud.
It has attracted over 650 external customers across more than 20 industries, including internet, autonomous driving, and financial services.
This reflects a shift from "buying others' chips" to "serving customers on our own silicon" — 650 external clients is concrete evidence of that transition.
What should investors watch next?
Whether AI-related ARR actually approaches US$10 billion next quarter is the key checkpoint for the acceleration thesis.
If it delivers, Alibaba Cloud's AI revenue has entered a scaled ramp-up phase; if it misses, the market will reassess whether the acceleration is sustainable.
In plain terms = Jefferies has laid out an optimistic case, but the next earnings report is the open-book exam — the numbers will speak for themselves.
Content is for reference only, not financial advice.