On the evening of November 16th, Alibaba Group released its second quarter financial report for the 2024 fiscal year (unaudited performance announcement for the three months ended September 30, 2023). The financial report showed that Alibaba Group's revenue for the quarter was 224.79 billion yuan, a year-on-year increase of 9%, and operating profit was 33.584 billion yuan, a year-on-year increase of 34%.
The financial report also disclosed the progress of the spin off and financing listing of some business groups of Alibaba. Hema's initial public offering plan was temporarily postponed, and Alibaba stated that it is evaluating the market necessary to ensure successful project implementation and enhance shareholder value. Given various uncertain factors, Alibaba is no longer pushing for a complete split of the Cloud Intelligence Group.
At the same time, Cainiao Group has applied for an initial public offering in Hong Kong and has submitted A1 documents to the Hong Kong Stock Exchange. Alibaba International Digital Business Group is preparing for external financing, with 1688, Xianyu, DingTalk, and Quake becoming Alibaba's first batch of strategic innovation business "Four Dragons".
Alibaba Cloud: After not splitting
Regarding the impact factors of no longer promoting the complete separation of Cloud Intelligence Group, Alibaba mainly mentioned in its financial report the uncertainty brought by the recent expansion of restrictions on the export of advanced computing chips in the United States. Alibaba stated that due to chip export restrictions, the group believes that a complete spin off of Cloud Intelligence Group may not enhance shareholder value as originally envisioned. Therefore, it has decided not to promote a complete spin off of Cloud Intelligence Group, but will instead face an uncertain environment and focus on establishing a model for sustainable growth of Cloud Intelligence Group.
At the same time, Alibaba stated that it will resolutely increase its investment in Alibaba Cloud, allowing Alibaba Cloud to focus on the "AI+cloud computing" development strategy without any distractions, and minimizing the adverse impact of uncertain factors on future development.
Specifically, Alibaba believes that further restrictions on the export of advanced computing chips and semiconductor manufacturing equipment to China by the United States may have a significant adverse impact on the ability of Cloud Intelligence Group to provide products and services and fulfill existing contracts, thereby negatively affecting Alibaba Cloud's business performance and financial condition. These new restrictions may also have a broader impact on multiple related businesses of Alibaba, limiting Alibaba's ability to upgrade technology.
According to the financial report, Cloud Intelligence Group's revenue during the reporting period was 27.648 billion yuan, an increase of 2% compared to the same period in 2022. Adjusted EBITA profit increased from 387 million yuan in the previous quarter to 1.409 billion yuan, a year-on-year increase of 44%. The financial report shows that this is mainly due to improvements in product structure and operational efficiency. Meanwhile, by reducing project based contract revenue with lower profit margins, Alibaba Cloud is improving revenue quality and driving profitability optimization. The growth in revenue from Alibaba Cloud public cloud products and services this quarter has also driven the optimization of revenue structure.
Wu Yongming, who attended the financial report conference as the CEO of Alibaba Group for the first time, stated that in the future, Cloud Intelligence Group will continue to operate as an independent company and adopt a CEO responsibility system authorized by the board of directors. Currently, Wu Yongming is also the CEO of Alibaba Cloud.
Wu Yongming also stated that after no longer reflecting the value of cloud business through financial means such as splitting, Alibaba Cloud will seek to increase the growth of cloud business, including revenue and profits, to realize its value. He mentioned that from the perspective of the business model of cloud computing, it can be divided into two stages. The first is traditional computing with CPU as the core. In this field, Alibaba Cloud will emphasize the focus on public cloud product portfolio to drive growth. The second is future oriented AI computing with GPU as the core. Alibaba Cloud believes that in the foreseeable future, the chip market for AI computing power in China will be very fragmented, with multiple suppliers providing the entire AI computing market. Alibaba Cloud needs to provide more efficient and one-time solutions to simplify customer development and applications.
For Hema, which announced a suspension of its initial public offering plan, no further explanation was provided in this financial report or conference call. In May of this year, the board of directors of Alibaba Group approved the launch of the listing process for Hema, which is expected to be completed within the next 6 to 12 months.
At present, Hema's revenue is still consolidated in all other branches of Alibaba. This financial report shows that during the reporting period, the revenue of all other divisions of Alibaba was 48.052 billion yuan, which remained stable compared to the same period in 2022. This was mainly contributed by the revenue growth of Hema, Feizhu, Alibaba Health, and Intelligent Information, partially offset by the decline in retail revenue of Gaoxin. The adjusted EBITA for all other segment income was a loss of 1.437 billion yuan, compared to a loss of 2.884 billion yuan in the same period of 2022, mainly due to the improvement in operating performance of Hema, DingTalk, and Feizhu.
The specific plan for Hema to restart its public offering was not mentioned in this Alibaba financial report or conference call.
First announcement of the "Four Little Dragons"
Alibaba has also made a series of adjustments to other businesses.
At the financial report conference call, Wu Yongming announced the first batch of strategic innovation businesses -1688, Xianyu, DingTalk, and Quark. During the conference call, it was mentioned that in September 2023, quark DAU increased by over 35% year-on-year, while idle fish DAU increased by over 20% year-on-year.
Wu Yongming has for the first time clarified the selection criteria for strategic innovation businesses to the public: having sufficient market space; Having a unique market positioning; In line with user demand trends and the group's "AI driven" strategy. He stated that in the future, these strategic innovation businesses will operate as independent subsidiaries in the organization, breaking the previous positioning restrictions within the group, and Alibaba will continue to invest in them on a 3-5 year cycle.
Alibaba International Digital Business Group CEO Jiang Fan and Taotian Group CEO Dai Shan also attended the financial report conference call.
During the reporting period, the revenue of Alibaba International Digital Business Group led by Jiang Fan was 18.978 billion yuan, a year-on-year increase of 73%. After adjustment, the EBITA was a loss of 384 million yuan, compared to a loss of 748 million yuan in the same period of 2022. The financial report mentioned that the overall order growth of international digital commerce retail business in this quarter was about 28% year-on-year, although it has not yet turned a loss into a profit. International digital commerce group has shown a sustained high-speed growth trend in the past quarter.
Jiang Fan revealed during the financial report conference call that in the next few quarters, Alibaba International Digital Business Group's business focus will be on rapidly expanding its business scale and market. He mentioned that Alibaba International Digital Commerce recently acquired a leading local BtoB platform in Germany, and through the acquisition of Alibaba International Station, it will achieve dual brand operation in Europe.
During the reporting period, the revenue of Chinese retail commerce was 92.56 billion yuan, a year-on-year increase of 3%, and customer management revenue increased by 3%. Dai Shan mentioned in the financial report call that the increase in customer management revenue was mainly due to the increased willingness of merchants to invest in advertising, partially offset by a slight decrease in online GMV (excluding unpaid orders) on Taobao and Tmall.
Dai Shan stated that during the reporting period, the number of active and purchasing users on Taobao has increased, and the user duration has also increased. Taotian Group has seen the benefits of content investment and will continue to increase investment on the content side. At the same time, she also responded to the cooperation between Taotian Group and WeChat, stating that the cooperation is currently in a very early stage and the impact is still limited. This cooperation mainly focuses on traffic expansion, system co construction, and bilateral policy support.
Alibaba Group Chief Financial Officer Xu Hong stated that according to Alibaba's capital management plan, Alibaba is prioritizing investment in technology and innovation. He announced that Alibaba will issue its first annual dividend for the 2023 fiscal year, with a total dividend payout of approximately $2.5 billion. In addition to its existing share buyback plan, Alibaba will continue to strive to improve shareholder returns.
Alibaba Group Chairman Cai Chongxin emphasized that in the future, measures will be taken to enhance shareholder returns by improving the investment return rate of the business, utilizing cash flow to invest in future growth, realizing the value of non core assets, distributing dividends, and promoting stock repurchases.
It is worth mentioning that the financial report shows that as of September 30, 2023, the total number of employees on Alibaba was 224955, and as of June 30, 2023, it was 228675. Alibaba's employees decreased by 3720 this quarter.
After the financial report was released, Alibaba's stock price continued to decline, with the US stock market falling by over 9% at one point.