Just after Double 11, Alibaba's latest financial report has caused another wave of turmoil in the capital market.
The financial report on the evening of November 16th showed that Alibaba Group's strategic adjustments are still in the process of change, including no longer promoting the complete separation of Cloud Intelligence Group (Alibaba Cloud) and suspending the Hema IPO plan.
Meanwhile, according to 144 documents disclosed on the official website of the Securities and Exchange Commission (SEC), Jack Ma's family trust JC Properties Limited and JSP Investment Limited plan to sell the founder's shares of Alibaba on November 21, reducing their holdings of 5 million American Depositary Shares (ADSs) respectively. Based on Alibaba's $87.070 per share on November 15, the reduction in holdings involves a total stock market value of $870.7 million.
According to Alibaba Group's financial report, in the third quarter of 2023, Alibaba achieved revenue of 224.79 billion yuan, a year-on-year increase of 9%; The net profit attributable to ordinary shareholders was 27.706 billion yuan, with a net profit of 26.696 billion yuan and a non GAAP net profit of 40.188 billion yuan, a year-on-year increase of 19%. From a business perspective:
The core performance indicators of Taotian Group continue to grow, with an adjusted operating profit of 47.077 billion yuan. The number of Taobao app users, transaction buyers, and order volume continue to grow, and 88VIP members have a double-digit year-on-year growth, with a scale of over 30 million yuan.
Alibaba International Digital Business Group (AIDC)'s overall retail business orders increased by about 28% year-on-year, and quarterly revenue increased by 53% year-on-year. After adjustment, the operating profit was a loss of 384 million yuan. Meanwhile, the business is preparing for external financing.
Alibaba Cloud's revenue increased by 2% year-on-year to 27.648 billion yuan, and its adjusted EBITA profit increased significantly from 387 million yuan in the previous quarter to 1.409 billion yuan, a month on month increase of 264%.
The revenue of the local living group increased by 16% year-on-year to 15.564 billion yuan, driven by the strong growth of the business of Hungry and High Tech. The adjusted operating profit of the local living group resulted in a loss of RMB 2.564 billion, compared to a loss of RMB 3.328 billion in the same period of 2022. The reduction in the scale of the loss was mainly due to the improvement in the unit economic benefits of each order and the expansion of the scale, which led to the continuous narrowing of the losses in the "home" business.
Cainiao's revenue increased by 25% year-on-year to RMB 22.823 billion, mainly driven by revenue from cross-border logistics fulfillment solutions, with an adjusted operating profit of RMB 906 million. Cainiao has applied for an initial public offering in Hong Kong and has submitted A1 documents to the Hong Kong Stock Exchange.
The revenue of Da Wen Yu Group was 5.779 billion yuan, a year-on-year increase of 11%. It was mainly driven by the strong revenue growth of offline entertainment businesses of Da Mai Network and Alibaba Pictures and the growth of Youku subscription revenue, partially offset by the decline in Youku advertising revenue. After adjustment, the operating profit was a loss of 201 million yuan.
CEO's First Explanation of Alibaba's Development Strategy Map
At the analyst conference, Alibaba Group CEO Wu Yongming comprehensively explained Alibaba's strategic plan for the new stage of development for the first time. Wu Yongming stated that the driving force for industry development in the future will be the technology driven force represented by AI. Alibaba will have three important priority directions for the future: technology driven internet platform business, AI driven technology business, and global business network.
Wu Yongming gave a complete introduction to the development strategies and priorities of each business group:
Taotian Group adheres to the business development strategy of "user first, ecological prosperity, and technology driven", and clarifies the strategic priority of "user first" in the next three years, focusing on universal Taobao, consumption grading and pricing power, and user value selection. Taobao will adhere to its positioning as an internet consumer platform, and Taotian Group does not position itself as a retail company. It will prioritize user purchase frequency over GMV as the most critical goal of platform operation.
Alibaba Cloud insists on& Quot; AI driven, public cloud priority; Quot;, Developing with dual wheel drive of AI+cloud computing. In the future, we will persist in doing two things well: one is to create a flower; Quot; The most open cloud in the AI era; Quot;, Provide stable and efficient AI infrastructure for the entire industry, and support intelligent transformation in various industries. The second is to create an open and prosperous AI ecosystem.
International Digital Business Group is committed to building a globally leading digital supply chain network and AI+digital retail core technology capabilities, hoping to achieve breakthroughs in key emerging regional markets in the coming years.
Cainiao will increase investment in technology, accelerate the construction of a global intelligent logistics network, and export technological capabilities domestically.
Local life mainly focuses on the development of high-tech services from Gaode and Ermei to destinations and homes, seizing opportunities for AI development, and working together with ecology.
Da Wen Yu will leverage technological innovations such as AI to achieve standardization, workflow, and digital intelligence in film and television production within three years. Adhering to the top content strategy, Da Wen Yu will achieve stable profitability as soon as possible.
Wu Yongming also announced Alibaba's first batch of strategic innovation businesses -1688, Xianyu, DingTalk, and Quak. These strategic level innovative businesses operate as independent subsidiaries, breaking past positioning limitations within the group and adopting more independent strategies to face the widest market. The group will continue to invest in them over a period of 3-5 years.
Not splitting cloud intelligence, but still increasing investment
According to the financial report, Alibaba Cloud's revenue in the new quarter increased by 2% year-on-year to 27.648 billion yuan. Adjusted EBITA profit increased significantly from 387 million yuan in the previous quarter to 1.409 billion yuan, with a month on month increase of 264%. By proactively reducing project based orders, Alibaba Cloud is improving revenue quality and driving profitability optimization.
Alibaba stated in its financial report that the recent expansion of restrictions on the export of advanced computing chips in the United States has brought uncertainty to the prospects of Cloud Intelligence Group. We believe that a complete split of the Cloud Intelligence Group may not enhance shareholder value as originally envisioned. Therefore, we have decided not to promote a complete split of the Cloud Intelligence Group, but instead to face an uncertain environment and focus on establishing a sustainable growth model for the Cloud Intelligence Group.
At the financial report conference call, Alibaba Group Chairman Cai Chongxin stated that the main idea when announcing a complete split of the cloud business was to highlight the true value of the business through this so-called "financial engineering" approach. At that time, the overall environment in which the business was operating could be said to be predictable, but so far, the macro environment has changed.
We are no longer focused on so-called 'financial engineering', but on how to continue driving Alibaba Cloud business growth and demonstrate business value through further investment. Because in the highly networked and large-scale world driven by AI, the value of cloud business cannot be achieved without investment. Therefore, we choose not to display cloud business value to investors through 'splitting', but rather by enhancing investment Enhance value. In the future, we hope to prove the true value of Alibaba Cloud's business to investors by improving business growth, optimizing revenue, and profits Cai Chongxin said.
Alibaba Group CEO Wu Yongming stated that he will make trade-offs between all Alibaba Cloud products and business models, reduce project based sales orders, and increase investment in public cloud core products. Adhering to prioritizing public clouds can enable us to reap economies of scale and technological dividends in the future
In Wu Yongming's view, the business model of the group's cloud computing can be divided into two stages:
The first stage is traditional cloud computing with CPU as the core. After 14 years of accumulation, Alibaba has a very strong product portfolio in this market. In this product portfolio, we will place more emphasis on the "public cloud" product portfolio, as the cloud computing model of public cloud has stronger network and scale effects, which can help customers provide better and more cost-effective services. This is our growth strategy in the so-called traditional cloud computing market.
The second stage is towards the future. In the Chinese market, AI computing with GPU as the core is undergoing some significant changes. We are also aware of the overall international chip policies and strategies recently, which have brought significant changes to China's AI computing market. According to our judgment, in the foreseeable future, the AI computing chip market in China will be highly fragmented, with multiple suppliers providing services to the entire AI computing market based on user choices and the entire supply chain.
In this situation, in the long run, we believe that the importance of cloud computing will increase for the domestic cloud computing AI market. Because in this situation, our customers actually need cloud computing platforms to provide more efficient and one-time solutions to simplify their development and applications, in order to shield more complex AI computing chips from the underlying layer. In the long run, Alibaba Cloud's AI solutions can provide more value for customers' future.