On the evening of February 7th, Alibaba Group announced its performance for the third quarter of the 2024 fiscal year as of December 31, 2023. The actual revenue was RMB 260.35 billion, a year-on-year increase of 5%, and the net profit attributable to common shareholders was RMB 14.433 billion.
This is the first complete quarterly performance delivered by Cai Chongxin after taking over the position of Chairman of the Group's Board of Directors, Wu Yongming as CEO of the Group, and taking over Alibaba Cloud.
The company also announced an increase of $25 billion in its share repurchase plan, bringing the total size of share repurchases to $65 billion. In the next three years, repurchase will be carried out at a pace of reducing circulating shares by 3% annually.
But this news did not increase confidence in the capital market. After the financial report was released, Alibaba's US stock market rose before the market and then turned down, ultimately closing down 5.87%. The market value is $184.1 billion, higher than the competitor Pinduoduo's $171.095 billion. Last year, the latter surpassed Alibaba in market value and also caught the attention of the company's founder Jack Ma.
Despite revenue growth, Alibaba's net profit has significantly decreased by nearly 80% compared to the previous year, reaching 10.717 billion yuan. The company stated that it was mainly affected by the impairment of intangible assets of Gaoxin Retail and the impairment of goodwill of Youku. If the above impact is not taken into account, the net profit under non GAAP accounting standards for the quarter was 47.951 billion yuan, a decrease of 4%.
In the past quarter, news of Alibaba selling its business has been exposed one after another, including the repeatedly debunked Ele.me, as well as traditional retail companies such as Intime Commercial and Gaoxin Retail.
Cai Chongxin stated that there are still some traditional physical retail businesses on Alibaba's balance sheet, which are not the core focus of business. It is reasonable to exit, but considering the current market situation, it will take time to achieve.
He also pointed out that in the nine months from fiscal year 2024 to present, Alibaba has completed the exit of $1.7 billion in non core assets and is actively watching how listed stocks can exit.
In its financial report, Alibaba reiterated its focus on its core business. Wu Yongming said that the group first needs to reignite the growth momentum of its two core businesses, e-commerce and cloud computing, and will continue to increase investment in the next year. E-commerce and cloud computing are also the two businesses with relatively small year-on-year growth in this quarter.
Taobao and Tmall Group's revenue for this quarter was 129.07 billion yuan, with a year-on-year growth rate of only 2%. The growth was mainly driven by wholesale commerce (1688 business), which included the core e-commerce revenue of the Double 11 promotion season with almost no growth.
The "cash flow" customer management revenue (CMR) that contributed profits to the business group was 92.113 billion yuan, an increase of only 419 million yuan from the previous year, indicating a mediocre performance. The direct sales and other business revenue of Chinese retail business increased by 2%, reaching 31.649 billion yuan. The growth rate of 1688 is relatively high, reaching 23%, mainly due to the increase in value-added services for paid members.
Alibaba CFO Xu Hong stated in the financial report conference call that the overall realization rate of Taotian has slightly decreased, which is due to changes in the GMV structure. Currently, consumers have a stronger preference for products with price power, and the average order amount has decreased.
He also emphasized that in this quarter, while the monetization rate of Tmall merchants remained unchanged, the monetization rate of Taobao merchants was increasing. Therefore, although there was an increase in the number of transaction buyers and order volume, some of it was offset by the decrease in conversion rate and average order amount.
Towards the end of the quarter (December 20, 2023), Alibaba announced that Wu Yongming would once again serve as the CEO of Taotian Group, with a fully youthful management team taking over. He, who holds three positions, stated that Taotian's current business strategy is to increase user consumption frequency, thereby enhancing GMV. Afterwards, by optimizing advertising products, he will help small and medium-sized businesses improve their monetization efficiency.
Wu Yongming specifically mentioned the collaboration between AI and cloud, stating that the new product is still in the early stages of research and testing, but Alibaba has seen the impact of AI on improving search conversion rates, as well as advertising matching and monetization efficiency.
This also means that Taotian Group, which is in the process of revitalization, will face some pressure on its revenue and profits in the short term.
Unlike the low growth of e-commerce business, Alibaba International Digital Business Group has seen a significant increase of 44% compared to the previous year, with overall orders increasing by 24% year-on-year. Overseas retail platforms have all achieved growth, making it the business with the highest revenue growth rate at Alibaba.
The main contributor to growth is AliExpress. AliExpress is a cross-border e-commerce platform under Alibaba aimed at global markets. This quarter, the platform achieved a quarterly order growth of over 60%, mainly driven by Choice's fully hosted and semi hosted models. In January of this year alone, Choice orders accounted for about half of the total order volume on AliExpress.
Due to increased investment, Alibaba International Business's losses continued to expand this quarter, with an adjusted EBITA (pre tax profit) loss of 3.146 billion yuan, compared to a loss of 645 million yuan in 2022.
Jiang Fan, CEO of the International Digital Business Group, said that the expansion of losses is due to investment in the new model Choice, increased spending on marketing during the big promotion season, and early expansion of key markets. He said that the current local international business is rapidly narrowing losses.
Alibaba's management also mentioned that Alibaba International E-commerce Group will definitely find the right time to seek external financing, but Alibaba is not in a hurry. Prior to this, there is sufficient overseas cash to invest in the group.
In addition to international e-commerce business, local lifestyle business also achieved growth this quarter, with a growth rate of 13%, reaching 15.16 billion yuan, mainly driven by Ele.me and Gaode. The local lifestyle group's orders increased by more than 20% year-on-year, with an annual active consumer of over 390 million. After adjustment, the EBITA was a loss of 2.068 billion yuan, which continued to narrow by 30% compared to the same period in 2022.
The management emphasizes that Ele.me is a very important asset of Alibaba.
Since the largest organizational change in 24 years since its establishment in March last year, the effectiveness of Alibaba's adjustment has always been a concern for the outside world. This company hopes to transform from a super large business operation group to an investment holding group.
For the IPO progress of Hema and Cainiao, Alibaba's management believes that the current market conditions cannot reflect the true intrinsic value of the business. They will consider separate financing for different businesses, but will not act too hastily.
Last quarter, Alibaba stated that it would gradually increase its return on capital from single digits to double digits, but currently, investments are still needed in both e-commerce and cloud computing, making it difficult to see significant returns in the short term.
Various data indicate that this company is still under the influence of adjustments and changes, and the strategic focus effect after power returns to the hands of the elders has not yet been demonstrated.
Due to adjustments and other factors, the total number of employees at Alibaba is currently 219260, a decrease of 5695 in a single quarter.