Damo expects Alibaba Cloud revenue growth to accelerate again to double digits in the second half of the 2025 fiscal year.
The Zhitong Finance App learned that Morgan Stanley released a research report saying that large-scale language model price reductions in the mainland have increased AI applications and provided more AI use cases. It is expected that Baidu Group-SW (09888), Alibaba-SW (09988) and Tencent Holdings (00700) cloud business revenue will benefit, while smaller startups may be affected.
According to the report, Alibaba Cloud announced a price reduction of 9 commercialized and open source models of its “Tongyi Thousand Questions” on May 21. Among them, the price reduction for the main model based on OpenAI GPT-4 reached 97%. A few hours later, Baidu Smart Cloud, a subsidiary of Baidu, followed and announced that its Wenxin Big Model's two main models, ENIRE Speed and ENIRE Lite, were all free. Meanwhile, the next day, Tencent Cloud also announced an overall price reduction for the big model. The mixed yuan-lite will now be free.
The bank pointed out that the Alibaba management said the price reduction was due to Alibaba Cloud's size and technology advantages. Driven by rapid growth in demand for artificial intelligence, cloud revenue related to artificial intelligence achieved three-digit growth in the recent quarter. The bank currently expects cloud revenue growth to accelerate again to double digits in the second half of fiscal year 2025, driven by the recovery of public clouds and increased contributions from artificial intelligence. In terms of profitability, the bank expects the EBITA margin to remain high in units for FY2025, at 5.6% in the fourth quarter of FY2024.