Periodic/Sector reports
Internet - 2Q26 Results Recap: AI Cloud Accelerates; E-Commerce Still Soft; Gaming Resilient
MARKET WEIGHT (Maintained)
Analyst
Highlights
- AI/AI cloud remained the bright spot in 2Q26, with Alibaba and Baidu delivering 45%/50% respective yoy growths in AI cloud, while Tencent reported healthy cloud growth on AI demand. E-commerce remained soft, with only selective signs of stabilisation. Gaming was resilient and largely macro-insensitive. Meanwhile, travel demand softened but the 2H outlook has improved from earlier fears.
- Maintain MARKET WEIGHT. Top BUYs: Alibaba, TCOM, NetEase and Z.ai.
Analysis
- E-commerce remains subdued; 3Q26 may improve sequentially, but we stay cautious. Alibaba/JD/PDD/Kuaishou reported respective core commerce/monetisation growths of +1.0%/-4.7%/+3.5%/+4.4% yoy in 2Q26. Profit trends were mixed: non-GAAP/non-IFRS net profit changed -38%/+21%/-13%/-30% yoy, respectively. Alibaba's like-for-like customer management revenue (CMR) returned to slight growth and management expects to see a recovery in e-commerce EBITA and narrower quick-commerce losses. JD expects retail revenue to return to growth at 3-3.3% yoy in 3Q26 as the electronics subsidy base normalises. PDD's domestic monetisation improved but overseas regulations remain a drag. Kuaishou guided for 3Q26 group revenue to decline 7.5% yoy. We therefore expect a modest sequential improvement in 3Q26, but remain cautious given weak discretionary demand and uneven merchant economics.
- Overall, we expect CMR and broader e-commerce monetisation to remain subdued, with persistent macro headwinds and weak discretionary demand limiting the pace of recovery despite some sequential improvement in 3Q26.
Highlights
- AI/AI cloud remained the bright spot in 2Q26, with Alibaba and Baidu delivering 45%/50% respective yoy growths in AI cloud, while Tencent reported healthy cloud growth on AI demand. E-commerce remained soft, with only selective signs of stabilisation. Gaming was resilient and largely macro-insensitive. Meanwhile, travel demand softened but the 2H outlook has improved from earlier fears.
- Maintain MARKET WEIGHT. Top BUYs: Alibaba, TCOM, NetEase and Z.ai.
Analysis
- E-commerce remains subdued; 3Q26 may improve sequentially, but we stay cautious. Alibaba/JD/PDD/Kuaishou reported respective core commerce/monetisation growths of +1.0%/-4.7%/+3.5%/+4.4% yoy in 2Q26. Profit trends were mixed: non-GAAP/non-IFRS net profit changed -38%/+21%/-13%/-30% yoy, respectively. Alibaba's like-for-like customer management revenue (CMR) returned to slight growth and management expects to see a recovery in e-commerce EBITA and narrower quick-commerce losses. JD expects retail revenue to return to growth at 3-3.3% yoy in 3Q26 as the electronics subsidy base normalises. PDD's domestic monetisation improved but overseas regulations remain a drag. Kuaishou guided for 3Q26 group revenue to decline 7.5% yoy. We therefore expect a modest sequential improvement in 3Q26, but remain cautious given weak discretionary demand and uneven merchant economics.
- Overall, we expect CMR and broader e-commerce monetisation to remain subdued, with persistent macro headwinds and weak discretionary demand limiting the pace of recovery despite some sequential improvement in 3Q26.
MARKET WEIGHT (Maintained)
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
