Alibaba, the Internet giant, has not finished its adjustment for nearly a year.
On the evening of February 7th, Alibaba released its financial report for the third quarter of the 2024 fiscal year as of the end of 2023, showing a revenue of 260.348 billion yuan, a year-on-year increase of 5%. However, the operating profit of 22.511 billion yuan decreased by 36% year-on-year, and the adjusted EBITA was 52.843 billion yuan, a year-on-year increase of 2%.
On the same day, Alibaba also announced an additional $25 billion new share repurchase plan, with a total repurchase scale of $65 billion. Previously, Alibaba founder Jack Ma had become the largest single shareholder of Alibaba by increasing his holdings.
While attempting to boost stock prices through repurchases, Alibaba Group CEO Wu Yongming also stated on the same day that the highest priority for the group is to reignite growth momentum in its two core businesses, e-commerce and cloud computing. While striving to drive core business growth, who does Alibaba plan to let go of?
Who will be put down
With the new management taking office in September last year, Alibaba is accelerating its exit from non core businesses.
At an investor meeting on the evening of February 7th, Alibaba Group Chairman Cai Chongxin answered questions related to the sale of non core assets, stating that in the nine months since the 2024 fiscal year, Alibaba has completed the exit of $1.7 billion in non core assets and is actively observing how listed stocks can exit, and has established a dedicated team, "At present, there are still some traditional physical retail businesses on Alibaba's balance sheet, which are not core focused businesses. Alibaba's exit is also reasonable, but considering the current market situation, the exit may take time to achieve."
Compared to withdrawing from external companies such as Meinian Health, Focus Media, and Xiaopeng Motors, how Alibaba treats its internal "non core" business has attracted more attention from the outside world. Previously, businesses such as Ele.me, Intime, and RT Mart have all appeared on the rumored exit list.
Alibaba firmly denies rumors of the sale of Ele.me. Alibaba CFO Xu Hong stated in a financial report conference call on February 7th that Ele.me is still an important asset for Alibaba's near-field operations. According to the Q3 financial report, the local lifestyle group where Ele.me is located had a revenue of 15.16 billion yuan, a year-on-year increase of 13%, mainly due to the growth of Gaode's business and Ele.me's orders. The adjusted EBITA for the current period was a loss of 2.068 billion yuan, a decrease of nearly 30% year-on-year. This is due to the continuous narrowing of the "home" business losses caused by the improvement of the unit's economic benefits and expansion of the scale of Ele.me.
Ding Daoshi, an Internet analyst, told the reporter of the Huaxia Times that as an important part of Ali's local life services, Elema is closely linked with Alipay, Taobao and other core businesses. In addition, in the local life services market, Elema is increasingly competitive with Meituan, and selling it at this time will undoubtedly weaken Ali's competitiveness in this field.
Alibaba has not yet confirmed the journalist's inquiry regarding its intention to sell businesses such as Intime and Gaoxin Retail. However, the new financial report shows that all other businesses, including Gaoxin Retail, Hema, Intime, DingTalk, etc., achieved a revenue of 47.023 billion yuan, a year-on-year decrease of 7%. Alibaba explained in the financial report that this is mainly due to the reduction in the scale of its supply chain business and the decrease in unit price, which led to the decline in Gaoxin Retail's revenue. This business's adjusted EBITA for the current period was a loss of 3.172 billion yuan, an increase of 87% year-on-year. Alibaba stated that this was mainly due to the increase in year-on-year losses caused by the reduction in the scale of several businesses of Gaoxin Retail.
E-commerce and cloud top priority
Compared to who is still unclear who will be left behind, it is already clear that domestic and international e-commerce and cloud computing are currently Alibaba's two core businesses and its investment priorities. Previously, Wu Yongming had already concurrently served as the CEO of Alibaba Cloud Intelligent Group and Taotian Group. How to bring e-commerce and cloud computing back to high-speed growth in the fierce market competition is also the responsibility of the new management of Alibaba.
From the just released Q3 financial report, it can be seen that these businesses are facing their own challenges within Alibaba.
During the current period, Jiang Fan led an international commercial revenue of 28.516 billion yuan, with a year-on-year growth rate of 44%, ranking first within the group. However, after adjusting for EBITA, the expansion of losses also ranked first within the group. Alibaba Cloud's adjusted EBITA for the current period was 2.364 billion yuan, ranking first with a year-on-year growth rate of 86%. However, its revenue of 28.066 billion yuan only increased by 3% year-on-year, ranking second to last within the group.
In the Q3 fiscal quarter, Taotian Group, Alibaba's ballast stone business, had the lowest year-on-year growth rate in revenue, with a revenue of 129.07 billion yuan, accounting for about half of Alibaba's current revenue and 4.5 times the second largest international commercial revenue scale. However, its 2% year-on-year growth rate ranked last in the group. However, Taotian Group remains Alibaba's largest source of profit, with an adjusted EBITA of 59.93 billion yuan, which is 1.3 times that of the group as a whole, but with a year-on-year growth of only 1%.
Behind these figures, under the impact of many strong competitors such as JD, Pinduoduo, Tiktok, Kwai, etc., Taotian is facing the most fierce market competition.
Low price has been a strategy it has been implementing in recent years. According to Alibaba's financial report, after the Double 11 event, the order volume of Taobao and Tmall in the second half of the Q3 fiscal quarter increased in double digits year-on-year, reflecting the effective promotion of pricing strategy. Industry insiders also believe that Taotian's current focus is on benchmarking against Pinduoduo's low-priced model. In addition to launching a "refund only" function, its emphasis on Taobao factories has also increased to a certain level. In addition, C-end users can consume on the 1688 platform, which has previously been mainly wholesale, "which may also be one of its changes."
In a financial report conference call on February 7th, Wu Yongming also stated that "our focus on price power is on good prices based on good goods, which is the demand of consumers to cross cycles and the responsibility of doing business." In addition, he also stated that Alibaba will increase investment in improving user core experience in the next year. "Through comprehensive capacity building in 2024, we are very confident in Taotian's return to growth.". As for how to retain users or increase their shopping frequency in fierce competition, he said the most important thing is to accurately identify the layered consumption needs of many users on the Taotian platform, and provide them with better products, prices, and services.
On February 7th, Alibaba closed at $73.64 in the US stock market, a decrease of 5.87%, with a total market value of $187.545 billion.