Alibaba (BABA, Financial) is set to release its fiscal third-quarter 2025 earnings on February 20. Morgan Stanley reports that this financial release will be a crucial indicator for evaluating domestic AI investment trends. As Alibaba is a major customer of GDS Holdings (GDS), the report could significantly influence the data center sector.
Morgan Stanley predicts that Alibaba's management will discuss its future capital expenditure and public cloud revenue outlook during the earnings call. If Alibaba decides to increase its AI-related investments, it may enhance growth expectations for the entire data center industry. The firm estimates that if Alibaba maintains its capital expenditure at around 70 billion RMB for fiscal 2026, or refrains from commenting on it, and cloud revenue growth remains in low double digits (around 10% to 13%), it would have no substantial effect on the sector.
However, Morgan Stanley suggests that if Alibaba significantly raises its capital expenditure due to AI investments and improves its public cloud revenue projections, GDS Holdings could see more new orders and clients entering its data centers. Conversely, if Alibaba reduces its capital expenditure, GDS Holdings' stock could potentially fall by 10%. Morgan Stanley has given GDS an "overweight" rating with a target price of $39.
