Tata Group's BigBasket CEOs step back as Tata Digital sharpens positioning

BigBasket founders plan to step back from day-to-day operations and transition into mentoring roles, with CEO Hari Menon's five-year tenure nearing completion. Menon has been shortlisting candidates for a successor as Tata Group looks to sharpen BigBasket's positioning in the quick commerce market. The company's founders will continue to be involved in the business, but in a less hands-on capacity.

Bernstein Research has upgraded Alibaba Group (BABA) to "Outperform" with a new price target of $165, signaling a significant shift in investor sentiment. This upgrade is driven by the firm's conviction in Alibaba's AI and cloud-driven reinvention [1]. The strategic catalysts and long-term growth drivers underpinning this valuation potential are examined below.

Strategic Catalysts: AI and Cloud as Growth Engines

Alibaba's $380 billion (RMB 380 billion) three-year investment in AI and cloud infrastructure represents a transformative pivot from its e-commerce-centric past [4]. This investment has already yielded tangible results: Alibaba Cloud's revenue surged 26% year-over-year in Q1 2025, with AI-related products contributing over 20% of external customer revenue [3]. The integration of advanced AI models like Qwen3, an open-source model with 235 billion parameters, further solidifies Alibaba’s position in the generative AI market [5].

Bernstein's analysis underscores the competitive advantage of Alibaba’s AI infrastructure, which is poised to benefit from China’s AI capital expenditure boom. The firm projects 25-30% revenue growth for Alibaba Cloud in fiscal year 2026, offsetting depreciation costs from aggressive capex and generating a 12% return on equity [1]. This aligns with broader industry trends, as AI adoption in cloud services outpaces legacy infrastructure, creating a favorable margin structure [5].

E-Commerce Stabilization: Balancing Innovation and Profitability

While Alibaba’s domestic e-commerce platforms (Taobao and Tmall) face slower growth, the company is stabilizing its ecosystem through strategic innovations. For instance, the “Taobao Instant Commerce” initiative, though reducing adjusted earnings by 21% in Q2 2025, is capturing the fast-growing quick commerce market, projected to reach $267 billion by 2030 [1]. Meanwhile, international marketplaces like Lazada, Trendyol, and AliExpress contributed a 29% revenue increase in fiscal 2025, diversifying Alibaba’s geographic exposure [4].

AI integration is also enhancing monetization. AI-driven tools such as AI Search and AI Ads on Taobao are improving merchant productivity and consumer engagement, driving a 10% year-on-year growth in customer management revenue for the e-commerce segment [3]. These initiatives demonstrate Alibaba’s ability to balance short-term margin pressures with long-term user retention and platform stickiness.

Long-Term Growth Drivers: Financial Health and Strategic Flexibility

Alibaba’s strong financial metrics—38.8% gross profit margin, 12% ROE, and a 7.66 Altman Z-Score—underscore its resilience and capacity for reinvestment [1]. The company’s capital allocation strategy, prioritizing AI infrastructure over global e-commerce expansion, aligns with Bernstein’s thesis of capitalizing on China’s AI-driven growth [2]. Additionally, Alibaba’s exploration of spin-offs, such as its Banma autonomous driving unit, could unlock further value for shareholders [4].

Risks and Mitigants

Challenges remain, including regulatory scrutiny in the U.S. and EU and margin pressures from e-commerce subsidies. However, Alibaba’s $53 billion cash reserves, post-2024 governance reforms, and institutional buying activity suggest confidence in its long-term trajectory [1]. Analysts project a 7% CAGR in revenue and 11% in adjusted EBITDA from 2025 to 2028, driven by cloud expansion and AI adoption [4].

Conclusion

Bernstein’s upgrade reflects a compelling case for Alibaba’s valuation potential, anchored in its strategic realignment toward AI and cloud computing. As the company stabilizes its e-commerce ecosystem through innovation and international diversification, the long-term growth drivers—robust financials, AI-native infrastructure, and a favorable industry structure—position Alibaba to deliver outsized returns. For investors, the current price target of $165 implies an 18.42% upside, supported by a “Moderate Buy” consensus from 11 out of 13 Wall Street analysts [1].

References:

[1] Alibaba Group Announces June Quarter 2025 Results [https://www.businesswire.com/news/home/20250829875486/en/Alibaba-Group-Announces-June-Quarter-2025-Results]
[2] Bernstein upgrades Alibaba on AI optimism [https://finance.yahoo.com/news/bernstein-upgrades-alibaba-ai-optimism-144229365.html]
[3] Alibaba Reports 78% Jump in Attributable Profit for Q2 [https://www.ainvest.com/news/alibaba-reports-78-jump-attributable-profit-q2-2508/]
[4] Alibaba's June Quarter 2025 Results: A Turning Point for E-Commerce and Cloud Reinvestment [https://www.ainvest.com/news/alibaba-june-quarter-2025-results-turning-point-commerce-cloud-reinvestment-2508/]