Alibaba shifts focus to AI and cloud, with strong revenue growth but near-term cash flow challenges.

Alibaba is moving aggressively from traditional e-commerce to a comprehensive AI and cloud computing strategy, supported by significant insider buying. Its AI Cloud and Compute Services revenue grew 45% year-over-year, with adjusted EBITA soaring 133% to $830 million, showing promising early results from AI investments. Despite a 75% increase in AI capital expenditure causing near-term negative cash flow, management aims to break even within three years and reach RMB 100 billion in external cloud revenue by 2030. While domestic competition is intensifying, analysts maintain a Strong Buy rating with a $188 price target, suggesting patient investors could benefit if Alibaba executes well.