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Investing.com -- Mizuho warned that growing competition in food delivery is putting pressure on margins at both Alibaba (NYSE:BABA) and JD.com, expecting the trend to continue into 2026 unless regulatory intervention curbs the current subsidy race.
The bank estimates both firms spent more than 10 billion yuan in the second quarter to defend market share, with JD’s investment cutting its estimated Q2 EBITDA to 4 billion yuan from a previous forecast of 15 billion.
For Alibaba, Q2 EBITDA is now projected at 45 billion yuan, down from 55 billion.
Mizuho (NYSE:MFG) said these large investments, while boosting order volumes, do not yet translate to revenue as variable costs remain high until scale reaches breakeven.
Competitive discounting, especially in Alibaba’s Ele.me unit and JD’s local delivery business, is expected to extend into the third quarter, a seasonal high for on-demand services.
The brokerage cut its price targets for both stocks, lowering JD’s to $42 from $48 and Alibaba’s to $149 from $160.
It cited reduced EBITDA estimates and the longer path to profitability for food delivery. Mizuho now values JD on 6x 2027 EBITDA, down from 7x on 2026) and Alibaba on 9.5x 2028 EBITDA vs 10.5x on 2027.
Despite near-term margin headwinds, Mizuho maintained Outperform ratings on both companies, calling them relatively defensive amid macro uncertainty in China.
For Alibaba, it said only core commerce and cloud are reflected in the share price, while businesses like food delivery and video remain optional upside. JD, it added, retains strength in higher-priced categories like electronics and appliances.
Risks flagged include potential regulatory changes, economic weakness, and the impact of subsidies on consumer pricing expectations.