Jefferies Lowers Zhizhu's Target Price to HKD 1,183.79, ARR Guidance Exceeds Expectations but Sustainability in Doubt

On September 7, Jefferies released a report stating that Zhizhu's guidance for annual recurring revenue of USD 2.4 billion by the end of 2026 exceeds expectations, but its sustainability is in doubt due to factors such as a high base in August, uneven growth in computing power supply, high customer concentration, and low switching costs. The report noted that Zhizhu's cloud business gross margin improved in the first half of 2026, but may decline in the second half due to the launch of new domestic GPU clusters and the recovery of the Coding Plan. Jefferies lowered Zhizhu's target price from HKD 1,299.8 to HKD 1,183.79, maintaining a hold rating. The firm raised its revenue forecast for Zhizhu from 2026 to 2029 by 37% to 119%, reflecting accelerated growth in the cloud segment, and reduced its net loss forecast by 14% to 21%. In the total valuation of segments, the multiple for the cloud segment was reduced from 50 times the projected annual recurring revenue for 2026 to 30 times, to better align with overseas peers. Jefferies believes that the Chinese large language model industry is overly crowded and, compared to independent AI laboratories, is more optimistic about full-stack cloud service platforms with advantages in computing power, data, and monetization, such as Alibaba and ByteDance.

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