BABA Cloud: External Customer Momentum and Internal AI Investments Drive Cloud Upside

In our previous Alibaba preview, we mentioned that Alibaba Cloud would accelerate in FY26Q1 compared to FY25Q4. After the earnings call, the company also indicated confidence in sustaining this growth momentum, although they did not commit to achieving 30% growth in the next quarter.

Recent research confirms that Alibaba Cloud indeed has an opportunity to maintain its acceleration.

From the perspective of the AI cloud landscape in China, Alibaba Cloud now possesses competitive advantages distinct from those in the previous era. The competition among Chinese cloud providers, driven by CPUs, has entered an intense phase. Two to three years ago, Alibaba Cloud faced competition from operators, Microsoft, Amazon's China branches, and other internet companies, such as Tencent Cloud and Baidu Cloud. However, today, Alibaba Cloud leads in the number of NV GPUs it has procured, coupled with aggressive efforts in AI cloud services (another fast-growing cloud company, ByteDance, also owes its YoY growth of 50-100% to its significant advantage in NV GPU procurement, while Tencent has not been heavily invested in AI cloud). By leveraging NV GPU performance, Alibaba Cloud has been able to rapidly attract customers, outpacing operator clouds and the China branches of Microsoft and Amazon. This has fueled further expansion. Considering future demand for inference scenarios, it is clear that beyond GPUs, other products will be needed for application development. In this area, Alibaba Cloud remains ahead of ByteDance’s Volcano Engine. Overall, Alibaba Cloud stands to be the biggest beneficiary of China's rising AI demand.

Research Details