BABA · Forward model · Bear case

The Bear case, 20 quarters out

Each segment is projected from its own operating driver, rolled up into consolidated cash flow, and discounted back to a fair value per share. The assumptions below are editable — change them and every number on this page moves with them.

Five decisions decide how this model reads. 1. CURRENCY. Alibaba reports in renminbi and publishes a US dollar convenience translation at the quarter-end rate. Every figure here is converted at a CONSTANT RMB6.7851 = US$1.00, the 30 June 2026 rate the company itself used, so the projection carries no implicit view on the exchange rate. Figures will not tie to dollar amounts Alibaba published in earlier quarters at earlier rates. 2. HISTORY IS ONE QUARTER, AND THAT IS DELIBERATE. The 20 August 2026 release recut the group into Alibaba E-commerce Group, AI Cloud and Compute Services, AI Labs and Applications and All others. It restates only two periods on that basis: the three months ended 30 June 2025 and 30 June 2026. No quarter in between exists on the new basis anywhere - not September 2025, not December 2025, not March 2026 - because the March-quarter exhibit is on the old four-segment cut (Alibaba China E-commerce Group, AIDC, Cloud Intelligence Group, All others) and the two cuts do not map: AI Labs was carved out of All others, and Freshippo plus certain Cainiao commerce businesses moved into E-commerce, with none of those magnitudes disclosed. Filling the three-quarter hole would mean inventing a segment split, so this model does not. The engine requires only that actuals end at the basis quarter, and this repo's contract tests require history to be contiguous, so the spec carries the June 2026 quarter alone. The restated June 2025 comparative is not discarded - it is recorded here and in each vertical's notes, and it is the year-over-year anchor behind every growth rate in the model. Restated June 2025, in RMB millions: E-commerce 198,812; AI Cloud 33,418; AI Labs 2,882; All others 28,629; unallocated and elimination -16,089; total 247,652, which is consolidated revenue for that quarter to the yuan. The consequence to read for: the first four projected quarters carry no year-over-year growth and therefore no Rule of 40 reading, because the model has no year-ago quarter to compare them with. The metric starts at the fifth projected quarter. 3. THE RECONCILING VERTICAL IS NOT A BUSINESS. Alibaba's segments do not sum to consolidated revenue on their own: unallocated revenue of RMB783 million less inter-segment elimination of RMB18,270 million nets to -RMB17,487 million. That line is carried as an explicit fifth vertical with NEGATIVE revenue rather than netted into All others, so the verticals sum exactly to the reported RMB268,953 million and no operating line hides an RMB18 billion reconciling item. Its 4.83% margin is an artefact of dividing a negative EBITA by a negative revenue base; in cash terms it is a drag of about $124 million a quarter, and it already contains the group's unallocated corporate cost of -RMB163 million. That is why corporate overhead is set to zero: charging a further percentage of revenue would count the same cost twice. 4. SEGMENT CAPEX AND SEGMENT D&A ARE BOTH ASSUMED, AND THEY DRIVE THE ANSWER. Alibaba discloses group capital expenditure (RMB67,678 million in the quarter, up 75%, 2.5x group adjusted EBITA) and group depreciation, but nothing by segment. This model apportions capex 80/10/8/2 across cloud, AI Labs, e-commerce and all others, which lands the four vertical intensities at 112%, 203%, 2.6% and 4.7% of their own revenue and reproduces the disclosed group figure to within 0.2%. Depreciation of RMB11,814 million (adjusted EBITDA less adjusted EBITA) is apportioned 70/20/5/5 across cloud, e-commerce, AI Labs and all others, which is what turns each segment's DISCLOSED adjusted-EBITA margin into the EBITDA margin the engine needs. Both splits are judgement. The cloud capex intensity slider is the single most important control on this page: hold it at 112% for twenty quarters and free cash flow never turns. 5. FREE CASH FLOW HERE IS NOT ALIBABA'S FREE CASH FLOW. As on every model on this site, free cash flow is EBITDA less capex less tax, not the operating-cash-flow-less-capex measure Alibaba reports. Alibaba's June-quarter free cash flow was an outflow of RMB44,670 million (US$6,584 million) against operating cash flow of RMB22,945 million; this model's equivalent basis-quarter figure is about -US$4.2 billion, because it excludes working capital, interest and the loan-book movements inside Alibaba's own definition. Do not read this page's Rule of 40 against the stock page's. Tax is set at 25%, not the 57.4% the June quarter printed: that rate is distorted by a non-deductible goodwill impairment of RMB4,458 million, and the March quarter printed 22.9%. Shares are 2,485,623,615 ADS - the 19,884,988,918 ordinary shares in issue after the 26 August HK$80 billion placing, at 8 ordinary shares per ADS - and net cash of US$40.87 billion is management's stated US$30.7 billion at 30 June plus HK$79.7 billion of net placing proceeds. That pairing is deliberate: post-placement shares against post-placement cash. It ignores two months of trading and any repurchases since 30 June.

Where each case comes from

From cash flow to fair value

The projected path

Every row is projected. A year-over-year change is shown only where the quarter it compares against exists — an em dash means there is no comparable quarter, not a flat year.

Model revisions

Assumptions are marked to reality as each quarter prints. Every change is appended here, with the fair value the model produced at the time, so the model's own history stays visible.