Alibaba Group Holding Ltd. Q2 FY2025 earnings call

• Core business segments maintained steady growth guided by the user-first AI-driven strategy. Purchase frequency drove GMV growth on Taobao and Tmall, with monthly active consumers on Taobao and Tmall reaching new all-time highs. • Alibaba international digital commerce revenue growth remained strong. Cloud revenue, excluding Alibaba consolidated subsidiaries, grew steadily with the share of AI products increasing. • Taobao and Tmall Group adhered to the user-first strategy. During the quarter, purchase frequency drove GMV growth, loyal customers (represented by 88 VIP members) reached 46 million by quarter end. Implemented a 0.6% software service fee and saw increased merchant adoption of Alimam's Qantian Tui. • Cloud segment optimized revenue mix and advanced the integrated cloud plus AI development strategy. Public cloud revenue grew double digits, and AI-related product revenue achieved triple-digit growth for the fifth consecutive quarter. • AIDC achieved 29% revenue growth, primarily driven by cross-border business. Optimized marketplace and consignment models, launched an AI-powered B2B search engine, and deepened presence in key markets. • Continued to enhance operational efficiency and monetization capabilities, and improved the performance of loss-making businesses, with losses narrowed in local services and digital media entertainment.

Taobao and Tmall Group revenue was RMB 99 billion, an increase of 1%. Revenue from China commerce retail business was RMB 93 billion, customer management revenue increased by 2%, direct sales and other revenue decreased by 5%, China Commerce wholesale business revenue increased 18%. Cloud Intelligence Group revenue was RMB 29.6 billion, an increase of 7%. Overall revenue, excluding Alibaba consolidated subsidiaries, increased by 7%, mainly driven by double-digit public cloud revenue growth, including AI-related products. AIDC revenue grew 29% this quarter, with international commerce retail business revenue increasing by 35% and international commerce wholesale business revenue increasing by 9%. Cainiao revenue grew 8% to RMB 24.6 billion. Local service group revenue grew by 14%. Digital Media Entertainment Group revenue was RMB 5.7 billion, with losses narrowing.

• Will continue to invest in core businesses and improve the quality of operations. • Confident in future growth driven by AI penetration and macro stimulus policies. • Anticipate AI's potential to reshape the digital world and transform industries, and will continue to invest in AI infrastructure. • Expect continued growth in cloud computing and AI-related products as AI penetration increases.

• Intensifying e-commerce competition. • Potential impact of cloud price decreases on profitability. • Uncertainties related to macroeconomic conditions that may affect consumer spending.

Q: Related to this year's Singles' Day promotions and the macro outlook.

A: Eddie Wu stated that the Double Eleven campaign ran over a longer cycle, achieved relatively robust GMV growth, results exceeded merchants' expectations. Platform coupons to 88 VIP members have a long-term positive impact on brands. Macro stimulus measures like monetary and fiscal policies are stimulating consumption in relevant categories.

Q: Question on take rate and Chen Chen Tui.

A: Toby Xu mentioned that take rate is stable due to progress in monetization (including the 0.6% software service fee) and deeper penetration of Chen Chen Tui, but offset by new business models in the growth stage.

Q: Question on investment strategies in PTG and synergies with WeChat payments.

A: Eddie Wu said Taobao and Tmall are investing in user experience, merchant supply, and technology, and have high expectations for the synergy with WeChat Pay in user acquisition.

Q: Question on supply chain, live streaming, white label goods.

A: Eddie Wu noted that growth rates across e-commerce platforms are converging, benefiting Taobao and Tmall, and that supply needs to be customized based on users' preferences.

Q: Question on cloud profitability and price decreases.

A: Toby Xu said cloud has technology and scale advantages, and lowering the API token price is an investment in attracting users and driving compute usage.

Q: Question on take rate, merchant rights, and trade-in subsidies.

A: Toby Xu emphasized that Taobao and Tmall value merchant rights, trade-in subsidies have boosted relevant categories, and more subsidies may be rolled out in different regions.

Q: Question on take rate, merchant environment, and CapEx ROI.

A: Toby Xu discussed a balanced approach to take rate, and Eddie Wu talked about CapEx in cloud AI infrastructure to meet short and long-term AI demand.

Q: Question on shareholder return and buyback.

A: Toby Xu said buybacks are mainly on the US line, and exploring financing opportunities.

Q: Question on AI demand, cloud revenue source.

A: Eddie Wu explained that AI demand includes both training and inferencing, with inferencing likely to grow more in the long term.