On November 16th, Alibaba (NYSE: BABA, HKEX: 9988, hereinafter referred to as "Alibaba") released its financial report for the second quarter of the 2024 fiscal year (as of September 30, 2023). (Note: Alibaba's fiscal year is not synchronized with the natural year, and the period from April 1st to March 31st of the following year is one fiscal year.)
According to the financial report, Alibaba Q2 revenue reached 224.79 billion yuan, a year-on-year increase of 9%. Adjusted EBITA (Earnings before Interest, Tax, Depreciation and Amortization) reached 42.845 billion yuan, a year-on-year increase of 18%. The non GAAP net profit was 40.188 billion yuan, a year-on-year increase of 19%.
Compared to the lukewarm financial report, Alibaba Group CEO Wu Yongming participated in the quarterly financial analyst conference for the first time, which redrawn Alibaba's strategic map, and Jack Ma reduced his holdings in Alibaba stocks the day before the financial report was released, which further attracted attention from the capital market.
No matter how successful the past business model may have been, it is necessary to go back to scratch and awaken the mindset of starting a new business. "Wu Yongming announced a series of latest changes at the financial report meeting: suspending the IPO of Hema Fresh and no longer promoting the complete separation of Cloud Intelligence Group. At the same time, Alibaba's first batch of strategic innovation businesses -1688, Xianyu, DingTalk, and Quark - emerged.
The reporter noticed that behind a series of changes, Alibaba has re examined its various businesses and priorities. Regarding the relevant adjustments, Alibaba Group Chairman Cai Chongxin made two clear points in response to analysts' questions: the core business is indeed undergoing a "restart"; The decision not to completely split the cloud business is no longer focused on the so-called "financial engineering".
Long term observers of Alibaba believe that this round of adjustment demonstrates Alibaba's mentality and determination to return to entrepreneurship. It is the biggest adjustment after the Alibaba 1+6+N architecture change, equivalent to a "reboot". From a strategic perspective, Alibaba has a zero mentality and, in the face of changing environmental conditions, chooses to invest inward rather than quickly amplifying value through "financial engineering". Adapting to change is a good thing, but excessive and frequent change is also a consumption. "Starting a new business" is bound to be difficult, and Alibaba still has a long way to go to regain its upward trajectory.
The first round of "horse racing" has undergone twists and turns
With the release of financial reports, the complete separation of Cloud Intelligence Group and the suspension of its IPO with Hema Fresh have become the focus of attention. From a series of changes, some argue that this move signifies a hindrance to Alibaba's spin off and listing plan. However, in the eyes of the aforementioned observers, the pullback action is more due to the fact that "at this moment" is not the perfect time for a spin off and listing, and calling a halt at a critical moment is more rational than a bloody listing.
Alibaba's first clear signal of a spin off listing was announced in March 2023, announcing the launch of the "1+6+N" organizational structure adjustment. At that time, Zhang Yong, Chairman and CEO of Alibaba Group, called this the largest organizational change since Alibaba's establishment.
At that time, Zhang Yong stated in a letter from all staff, "The market is the best touchstone. In the future, qualified business groups and companies will have the possibility of independent financing and listing." This was the first clear signal that independent businesses may be spun off and listed to the public. At that time, the three businesses with the highest demand for independent listing in the market were Alibaba Cloud, Cainiao, and Hema Fresh.
In the view of the above observers, this is equivalent to fully activating the enthusiasm of each sub business, similar to a race initiated internally. Whoever wins will drive Alibaba's revaluation in the capital market, and the best outcome is multiple wins.
But in the subsequent horse racing, changes and adjustments never stopped. On September 26th, Alibaba announced that Cainiao Intelligent Logistics Network Co., Ltd. (referred to as "Cainiao") will be listed independently on the main board of the Hong Kong Stock Exchange. Industry insiders believe that Cainiao has a significant growth rate and has become the third largest source of revenue for Alibaba, second only to Alibaba Cloud and Taotian Group. It is not surprising to be listed first. Cai Chongxin, the chairman of Alibaba Group's board of directors who also serves as the chairman of Cainiao Group, undoubtedly contributed to the further acceleration of Cainiao's listing.
Subsequently, there were rumors in the market that Hema was temporarily suspended from listing, but Hema did not provide a clear response. The reporter learned from insiders close to Hema that if the market timing is not suitable, it is wiser to postpone. At the same time, Hema did not stop expanding. On the one hand, it adopted an internal transformation discount model and engaged in a "price war" with giant Sam; On the other hand, we will accelerate the expansion of our stores. On the eve of National Day, we will open another "black label store" in the core area of Shanghai's city center and continue to explore retail formats.
However, the path for Cloud Intelligence Group to go public is relatively winding. In September, Zhang Yong stepped down as Chairman and CEO of Alibaba Cloud, sparking speculation that the cloud business would go public. Prior to this, as an important part of the "cloud nail integration" strategy, the separation and independence of nails undoubtedly meant a reconsideration of the cloud business strategy at the group level.
When answering the analyst's question, Cai Chongxin responded by adjusting the logic. When we first announced a complete separation of our business, we hoped to highlight the true value of our business through this so-called 'financial engineering' approach, "Cai Chongxin said." However, as of now, the macro environment has changed. Therefore, we are no longer focused on the so-called 'financial engineering', but rather on how to continue driving Alibaba Cloud's business growth and demonstrate business value through further investment
As of now, the first round of "horse racing" for Alibaba's independent spin off and listing has come to an end.
Reorganize 'Priorities'
In addition, "priority" is considered the keyword for Wu Yongming's restart action in this round.
Wu Yongming provided a complete introduction to the development strategies and priorities of each business group. Specifically for each business, Taobao Tmall adheres to the strategy of "user first" and adheres to consumption grading and pricing power; Alibaba Cloud adheres to the principle of "AI driven, public cloud priority" and develops with a dual wheel drive of AI+cloud computing; The 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.
In addition, Cainiao will increase investment in technology and accelerate the construction of a global intelligent logistics network; Local life is mainly focused on Gaode and Ermei, developing technology services to destinations and homes, seizing opportunities for AI development, and advancing with ecology; Da Wen Yu will continue to adhere to the top content strategy.
How to prioritize business, Wu Yongming gave three directions: technology driven internet platform business, AI driven technology business, and globalized business networks.
Facing the future, we will prioritize existing businesses based on market size, business model, and product competitiveness, and define core and non core businesses. "Wu Yongming further stated that for core businesses, we will maintain long-term focus, maintain high intensity of resources and R&D investment, and continuously improve user experience; For non core businesses, the value of these assets will be realized through quick profitability or various other capitalization methods.
It is worth noting that Wu Yongming also announced Alibaba's first batch of strategic innovation businesses, which are considered as the "Four Little Dragons" with 1688, Xianyu, DingTalk, and Quark "emerging". Wu Yongming stated that the above-mentioned strategic innovation business operates as an independent subsidiary, breaking the previous positioning limitations within the group and adopting a more independent strategy to face the widest market. The group will continue to invest on a 3-5 year cycle.
Despite providing a series of standards, it is foreseeable that Alibaba will continue to adjust and change its priorities in the next step. However, the new round of adjustments and the emergence of the "Four Little Dragons" mean that Alibaba is beginning to face changes with a more pragmatic attitude. There is no universal formula for promoting a massive business structure, and "financial engineering" is not the only solution.
It is inevitable that multiple sub businesses will face a new round of adjustments and refined operations, requiring their own solutions.