Alibaba (BABA) Stock: AI Strategy Wins Wall Street Support as Cloud Revenue Surges

TLDR

Table of Contents

Alibaba’s Qwen AI app reaches 100 million monthly users in two months, handling 400+ daily tasks across shopping, payments, and travel
Jefferies maintains Buy rating with $225 target as Qwen integrates with Taobao, Alipay, Fliggy, and Amap for complete task execution
Alibaba Cloud controls 35.8% AI market share, targets 80% of 2026 industry revenue growth with triple-digit expansion expected
Morgan Stanley keeps Overweight rating at $180 despite user acquisition costs pressuring near-term margins
Analysts issue Strong Buy consensus with $203.66 average target, representing 19% upside from current $167.79 price

Alibaba is earning stronger backing from Wall Street as its AI investments shift from experimental to revenue-generating. Analysts now view the company’s Qwen app and cloud services as legitimate growth catalysts rather than speculative bets.

Alibaba Group Holding Limited, BABA

The stock trades at $167.79 with analysts setting price targets between $180 and $225. Jefferies analyst Thomas Chong keeps his Buy rating, highlighting Qwen’s integration with core Alibaba platforms. Users can now shop on Taobao, pay through Alipay, book trips on Fliggy, and navigate with Amap without switching apps.

This represents a fundamental change in how AI works for consumers. Instead of just answering questions, Qwen completes actual transactions and tasks. The app crossed 100 million monthly active users within two months of launch. It currently processes over 400 different daily tasks including food delivery, travel planning, and access to 50+ public services.

Cloud Division Dominates Market Share

Alibaba Cloud holds the leading position in AI cloud revenue with 35.8% market share in early 2025. That exceeds the combined share of competitors ranked second through fourth. The division serves customers who use both API services and GPU computing power for model training and fine-tuning.

Roughly 70% of Alibaba Cloud clients deploy both service types. Over 90% of enterprises still haven’t adopted AI tools, leaving substantial room for expansion. Industry data from Omdia forecasts AI revenue jumping 149% year-over-year from 20.83 billion yuan in 2024 to 51.8 billion yuan in 2025.

Alibaba Cloud aims to capture 80% of incremental industry revenue in 2026. Jefferies projects the unit will maintain triple-digit growth rates and potentially reach 60% market share this year. The cloud business benefits from customers who start with AI models then expand into computing infrastructure.

Morgan Stanley analyst Gary Yu maintains an Overweight rating with a $180 price target. He identifies consumer AI and task automation as major investment themes for 2026. Yu believes Alibaba’s ecosystem of services positions Qwen to become a dominant all-in-one AI application.

User Growth Comes With Short-Term Costs

The rapid user acquisition requires heavy spending on marketing and incentives. Morgan Stanley acknowledges this will pressure profit margins in coming quarters. However, Yu expects the long-term benefits from increased user engagement and cloud adoption to outweigh near-term costs.

Wall Street shows broad confidence with 13 Buy ratings and one Hold issued over the past three months. The Strong Buy consensus reflects analyst optimism about AI monetization potential. The average price target of $203.66 implies 19% upside from current levels.

The company’s next earnings report arrives February 19. Investors will focus on Qwen adoption metrics, cloud revenue acceleration, and management commentary on AI investment returns. With a PEG ratio of 0.42, the stock appears undervalued relative to projected growth rates.

Alibaba delivered 109.54% returns over the past year with a market cap of $379.84 billion. InvestingPro assigns a financial health score of 2.59, rated as good.

✨ Limited Time Offer