Navigating China Internet: 1Q Mega-Cap Earnings Outlook

Goldman Sachs previews mixed 1Q26 earnings for China internet mega-caps, forecasting a -28% yoy aggregate profit decline as companies aggressively invest in AI infrastructure and applications. Cloud growth, particularly for Alibaba (+40% GSe), is highlighted as a primary tailwind amid surging token demand.

Key Takeaways

• 1.Aggregate China internet profits are forecasted to decline -28% yoy for the March quarter due to margin pressures from AI pivots and app subsidies.
• 2.Cloud revenue acceleration is a key bright spot, with Alibaba Cloud sales expected to grow +40% yoy driven by surging demand for AI tokens.
• 3.A central focus is the contrast in AI strategies: Tencent's balanced approach versus Alibaba's 'all-in' capex strategy where capex now exceeds annual group EBITA.

Table of Contents

• NAVIGATING CHINA INTERNET
• Tencent
• Alibaba
• PDD
• Meituan
• JD
• Price Target, Risks and Methodology
• Disclosure Appendix

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