Alibaba Group BABA rolled out its next-generation AI video model, Wan3.0, a day after closing an HK$80 billion (roughly $10.2 billion) share placement in Hong Kong, the largest primary follow-on offering by a Hong Kong-listed company.
Wan3.0, developed by Alibaba’s Tongyi Lab, generates videos up to 30 seconds long, twice the length of its predecessor, from a wide range of inputs including text, images, audio, spreadsheets, slides, PDFs and web pages. The model had already been in public beta since Aug. 6, supporting short-film production, advertising, tourism marketing and music-video creation before its full release. API pricing on Alibaba Cloud Model Studio starts at $0.05 per second for 480p output, rising to 10 cents for 720p and 20 cents for 1080p. All net proceeds from the share sale, which priced 710 million new shares at an 8.4% discount, are earmarked for Alibaba’s full-stack AI capabilities, spanning chips, infrastructure and model development.
Alibaba shares lost 8.1% to HK$113 in Hong Kong trading following the placement announcement, reflecting investor concern over the dilutive impact of the new share issuance even as the company framed the raise as essential to funding its AI ambitions. The stock move underscored the tension between near-term shareholder dilution and the longer-term infrastructure buildout that the proceeds are meant to support.
The launch follows Alibaba’s first-quarter fiscal 2027 results, disclosed on Aug. 20, which showed revenues of RMB268.95 billion ($39.64 billion), up 9% year over year. Alibaba Cloud’s external commercialization revenues grew 45%, its fastest pace in 22 quarters, while the AI Cloud and Computing Services segment posted revenues of RMB48.44 billion. AI-related product revenues reached RMB12.4 billion, marking 12 consecutive quarters of triple-digit growth and lifting the annualized run rate above RMB49.5 billion. Segment adjusted EBITA rose 133% to RMB5.63 billion, with margin expanding to 12%. Capital expenditure for the quarter reached RMB67.7 billion, contributing to a free cash outflow of RMB44.7 billion and a 75% year-over-year decline in net income.
Alibaba has reiterated its commitment, first outlined in February 2025, to invest more than RMB380 billion in AI and cloud infrastructure over three years. Management has pointed to accelerating cloud growth and margin expansion as evidence that the spending is translating into commercial traction, positioning Wan3.0 as an early monetizable output of that broader AI buildout.
How US Rivals Compare on AI Video & Infrastructure Spending
Alibaba’s Wan3.0 enters a field where Alphabet GOOGL and Microsoft MSFT have also tied heavy AI infrastructure spending to generative video and cloud products. Alphabet’s Google has positioned its Veo video-generation model as a direct competitor to Wan3.0, backing it with sustained capital expenditure across its cloud and AI units. Microsoft, meanwhile, continues to channel large sums into AI infrastructure through its Azure cloud platform and OpenAI partnership. Both Alphabet and Microsoft, like Alibaba, are betting that near-term spending pressure will convert into longer-term AI-driven revenue growth across their respective cloud businesses.
BABA’s Share Price Performance, Valuation & Estimates
BABA shares have plunged 19.2% in the year-to-date period, underperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s appreciation of 6.6% and 3.6%, respectively.
BABA’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, BABA is currently trading at a trailing 12-month price-to-earnings ratio of 51.96X, above the sector’s average of 29.01X. The company carries a Value Score of C.
BABA’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2027 earnings is pegged at $6.87 per share, implying 76.61% year-over-year growth.
Alibaba Group Holding Limited Price and Consensus
Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote
Alibaba currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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