Analysts Compare Alibaba and Microsoft for Cloud Growth Potential

NEW YORK, N.Y. — Analysts are closely examining the stock performance of Alibaba and Microsoft as both companies push to enhance their positions in the cloud computing sector. Both stocks are earning ‘Strong Buy’ ratings from Wall Street amid significant investments in artificial intelligence.

This year, Alibaba, China’s largest e-commerce and cloud-services provider, has seen its stock surge over 94%. The company’s growth is largely attributed to a rising demand for AI-driven cloud services and robust performance in its cloud sector. Alibaba has committed 380 billion yuan ($53 billion) over three years to improve its chip and cloud initiatives.

Recently, Alibaba reported revenue of 247.7 billion yuan ($34.6 billion), a growth of 2% year-over-year. However, this fell short of analysts’ expectations of 252.9 billion yuan. The company’s adjusted earnings were $2.06 per American Depositary Share, surpassing predictions of $1.98 due to effective cost management.

The Cloud Intelligence Group emerged as a key area of growth, with revenue increasing 26% to 33.4 billion yuan, fueled by enterprise demand for AI services. Following these results, several analysts raised their price targets, with one notable update from a prominent analyst who adjusted the target for Alibaba from $147 to $163, emphasizing the company’s strategy as an ‘AI + everyday consumption app’ and an ‘AI + Cloud hyperscaler.’

On the other hand, Microsoft, the world’s largest software firm, has seen a 22% increase in its stock value this year, bolstered by the swift adoption of generative AI tools and robust demand for its Azure cloud platform. The company reported revenue of $76.4 billion, exceeding forecasts of $73.8 billion, driven by a 26% sales increase in its Intelligent Cloud unit.

Analysts have maintained strong confidence in Microsoft, with one raising his price target to $582 per share, supported by a solid buyback plan of $55 billion. Analysts expect steady revenue growth and disciplined spending practices to lead to approximately 16% annual growth in earnings per share through Fiscal Year 2028.

Both Alibaba and Microsoft maintain strong positions in the market, yet Alibaba’s stock price approaches its target, potentially limiting further upside. Conversely, Microsoft’s stock displays nearly 23% potential growth from current levels, positioning it as the more favorable investment among analysts.