Alibaba and Tencent CY1Q26 Results Review

Alibaba and Tencent's CY1Q26 results show accelerating AI progress, with Alibaba scaling cloud monetization and Tencent aggressively ramping capex for its Hunyuan models. UBS remains 'Most Preferred' on China tech, citing attractive valuations and emerging AI growth pillars.

Key Takeaways

• 1.Alibaba is entering a structural growth phase in AI, with AI workloads already contributing ~30% of external cloud revenue and margins expected to expand to the mid-teens.
• 2.Tencent is shed its 'AI laggard' tag by launching the Hunyuan 3.0 model and aggressively increasing AI capex to CNY 32 billion.
• 3.Both companies trade at undemanding valuations relative to historical averages, providing attractive entry points for long-term AI exposure in China.

Table of Contents

• Alibaba: AI monetization begins
• Tencent: Time to drop the AI laggard tag
• Appendix
• Required Disclosures
• Equity selection system
• Equity selection: An assessment relative to a benchmark
• Global asset class preferences definitions
• Statement of Risk
• Risk Information

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