Shares of Alibaba surged 3.5% to $112.36 on September 18 after Goldman Sachs reiterated its Buy rating, pointing to accelerating cloud revenue and clearer paths to profitability — a vote of confidence that landed amid a broader tech rally fueled by renewed optimism around AI chips. Goldman Backs Alibaba's Cloud Surge With a 53% Growth Call — but Can Massive AI Spending Deliver Returns Before Patience Runs Out?
Shares of Alibaba jumped 3.5% to $112.36 after Goldman Sachs analyst Ronald Keung reiterated a Buy rating and raised his September-quarter cloud revenue-growth estimate to 53%, a dramatic acceleration from an already steep trajectory. The call lands at a pivotal moment: Alibaba is halfway through a colossal spending spree, and investors need to decide whether the cloud boom justifies the cash burn.
Cloud Growth Is Real and Accelerating — Fast
Alibaba's cloud and AI revenue rose 45% in the June quarter, marking the fastest growth in 22 quarters.
AI-related products now account for roughly 30% of all cloud revenue, having achieved triple-digit growth for eleven straight quarters. Goldman's 53% estimate for the September quarter implies the ramp is still steepening, driven by enterprise demand for computing power to run AI applications. For shareholders, this is the clearest signal that Alibaba is pulling away from Chinese rivals: Huawei's cloud revenue actually declined 3.5% in 2025, meaning Alibaba is capturing share in a market where the No. 2 player is shrinking.
The Bill Is Enormous — and Getting Bigger
Alibaba has committed at least RMB 380 billion (~$53 billion) over three years to AI and cloud infrastructure — more than its total cloud spending over the prior decade.
Last quarter alone, capital expenditures hit RMB 67.7 billion (~$10 billion), up 75% year-over-year.
The result: adjusted earnings collapsed 84% and free cash flow swung to negative RMB 17.3 billion. Management says the investment can break even in roughly three years, but until then, investors are bankrolling a bet, not a proven return.
Goldman's Optimism Comes With a Caveat
Goldman maintains a $186 price target, implying roughly 66% upside from today's price.
Nomura notes the AI cloud unit's profit margin has expanded to 11.6%, up from about 7% a year ago — evidence that scale is starting to absorb fixed costs. Yet the risk is that Alibaba, Tencent, Baidu, and other Chinese tech giants all build aggressively at the same time, creating ample AI capacity but weaker pricing power.
Sector Winds Help, but This Is an Alibaba Story The tech sector climbed 1.56% on AI-chip optimism, providing a tailwind. But the stock's move is roughly double the sector's gain, confirming this is driven by the Goldman call and Alibaba's own cloud momentum. The consensus analyst target sits at $187.45 , suggesting the Street broadly agrees with Goldman — the debate now is whether $53 billion in spending will produce profits before investors lose patience.