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2026-09-04 13:25:13 UOB Kay Hian said the highlights of Greater China's internet sector in 2Q26 remained AI/AI cloud. AI cloud revenue of BABA-W (09988.HK) and BIDU-W (09888.HK) grew 45% YoY and 50% YoY respectively, while TENCENT (00700.HK) also saw healthy cloud business growth driven by AI demand. Overall e-commerce remained soft, with only signs of stabilization in certain segments. Gaming remained resilient and was largely unaffected by macroeconomic headwinds. Travel demand weakened, but the outlook for 2H26 has improved compared with earlier concerns. The broker maintained its "Market Weight" rating on the sector, with Buy calls on BABA-W (09988.HK), TRIP.COM-S (09961.HK), NTES (09999.HK) and Z.AI (02513.HK). The broker said e-commerce remained weak and could improve QoQ in 3Q26, though it stayed cautious. In 2Q26, core e-commerce/monetization revenue of BABA-W (09988.HK), JD-SW (09618.HK), PDD Holdings Inc. (PDD.US) and KUAISHOU-W (01024.HK) changed by +1%, -4.7%, +3.5% and +4.4% YoY respectively. Their adjusted net profit under non-GAAP/non-IFRS changed by -38%, +21%, -13% and -30% YoY respectively. In gaming, TENCENT (00700.HK)'s online gaming revenue rose 8% YoY, while NTES (09999.HK)'s online gaming revenue increased 10% YoY, with gross margin expanding to 76.1%. In AI cloud, BABA-W (09988.HK)'s AI cloud and computing power revenue for the first fiscal quarter ended June rose 45% YoY, while BIDU-W (09888.HK)'s AI cloud infrastructure revenue increased 50% YoY to RMB7.3 billion. Management expects growth to accelerate further in 3Q26. In online travel, TONGCHENGTRAVEL (00780.HK)'s 2Q26 revenue/core OTA revenue rose 6.8% and 8.4% YoY respectively, while adjusted net profit increased 9.8% YoY. TRIP.COM-S (09961.HK) has yet to announce its 2Q26 results, but the broker remained positive on its medium-term outbound travel exposure. The broker maintained Buy ratings on BABA-W (09988.HK), TENCENT (00700.HK), TRIP.COM-S (09961.HK), NTES (09999.HK) and Z.AI (02513.HK), with target prices of HKD188, HKD608, HKD508, HKD252 and HKD1,830 respectively. (da/a)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |