As a giant, Alibaba needs new momentum

On November 15, Alibaba Group released its Q2 fiscal year 2025 financial report. The report showed that Alibaba's revenue was 236.5 billion yuan, a year-on-year increase of 5%, but lower than market expectations of 239.43 billion yuan; non-GAAP net profit was 36.518 billion yuan, a decrease of 9% compared to 40.188 billion yuan in the same period in 2023.

Overall, Alibaba is still in an earnings adjustment period, and the effect of the monetization rate of Taobao and Tmall will take some time to materialize. During this period, Alibaba mainly relies on Taobao and Tmall, overseas operations, and cloud business for support.

Among them, for the six months ended September 30, 2024, the group's revenue from China's retail business was 200.429 billion yuan ($28.561 billion), a decrease of 1% compared to 202.388 billion yuan in the same period in 2023, due to an 8% decrease in direct sales and other revenue.

Among them, Taobao and Tmall's business fundamentals mainly rely on loyal middle-class users of 88VIP.

According to the financial report and previously disclosed information from Taobao and Tmall, the number of 88VIP members reached 46 million during the quarter. These 46 million 88VIP users are not only the most frequent consumers on the Taobao ecosystem but also contribute nearly half of the GMV. These users ensure Alibaba's basic order volume, and their scale is growing significantly. Taking the Singles' Day data as an example, the per capita purchase amount of 88VIP members during the promotional period increased by over 30% year-on-year.

Wu Yongming, CEO of Alibaba Group, said, "This quarter, the Taobao and Tmall business continued to invest in user experience and enriched product offerings to better serve consumers. We have established long-term cooperation with technology peers to expand payment and logistics services on the Taobao and Tmall platforms, which is expected to bring significant incremental effects to the platform as a whole."

In the cloud service group, Alibaba Cloud, which focuses on the integrated development of 'cloud + AI', is mainly driven by double-digit growth in public cloud, with quarterly revenue increasing by 7% year-on-year.

In terms of AI, in addition to Tongyi Qianwen continuing to use Alibaba Cloud's price reduction strategy, multiple Alibaba businesses have also integrated AI. For example, Taobao launched the AI product 'Business Manager' for all merchants. During this year's Singles' Day, it served a cumulative 4 million merchants, helping small and medium-sized merchants generate over 100 million products and marketing materials. AI-related product revenue also achieved three-digit year-on-year growth for five consecutive quarters.

However, although some businesses have entered a harvest period, inevitably, during the transformation of e-commerce, Alibaba will experience performance pressure and still needs to wait for a rebound in consumption and monetization rates to usher in growth.

Regarding the continued downturn in share prices, in September this year, Alibaba repurchased $4 billion worth of shares. In the first half of the fiscal year, it invested $10 billion in share repurchases, and there are still $22 billion available for further share repurchases in the future.