We maintain our Outperform recommendation on Alibaba post its decent F3Q25 results; topline growth were ahead of expectations thanks to improving monetization of domestic eCommerce and cloud demand accelerated; though, wider losses for international eCommerce weighed on EBITDA margin, and higher capex for cloud/AI led to a fall in FOCF; debt metrics remained modest and net cash expanded. We expect Alibaba’s topline growth (excl. Sun Art and Intime) to accelerate over F4Q25 and FY26; we expect EBITDA margin to stay flat, but FOCF to trend lower on a material increase in capex for cloud; we expect Total debt/EBITDA to remain stable, and Alibaba to maintain its healthy net cash position. We view the credit as a core holding in China and Asia IG; we like its 2030/2031/2035/2041 in particular.

While Chinese policymakers have adopted an increasingly friendly stance towards tech platforms, regulatory clampdown (e.g. anti-monopoly guidelines, data security laws, personal information protection laws) may still affect Alibaba as it increases compliance cost. There are regulatory risks given the corporate structure which uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs).

Intensifying competition amongst eCommerce platforms may result in slower topline growth and weaker EBITDA margins.

Alibaba does not control Alipay but relies on Alipay to conduct substantially all the payment processing and escrow services on its marketplaces.

US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Tencent against international peers.