Ali trade-offs: cloud and e-commerce are listed as the highest priority, and who is the first to sell "non-core business".

Internet giant Alibaba's nearly year-long adjustment has not yet ended.

On the evening of February 7, Alibaba released its financial report for the third quarter of fiscal year 2024 as of the end of 2023, showing that in the current period, Alibaba's revenue was 260.348 billion yuan, a year-on-year increase of 5%, but the operating profit of 22.511 billion yuan was a year-on-year decrease of 36%, and the adjusted EBITA was 52.843 billion yuan, a year-on-year increase of 2%.

On the same day, Alibaba also announced that it would add an additional $25 billion to the new share repurchase program, bringing the total buyback to $65 billion. Previously, Alibaba founder Jack Ma has become the largest single shareholder of Alibaba by increasing his holdings.

While the buyback wants to boost the stock price, Alibaba Group CEO Wu Yongming also said on the same day that the group's top priority is to rekindle the growth momentum of the two core businesses of e-commerce and cloud computing. While committed to driving the growth of its core business, who is Alibaba going to let go?

Who will be laid down

With the arrival of new management in September last year, Alibaba is accelerating its exit from non-core businesses.

At the investor conference on the evening of February 7, Alibaba Group Chairman Joe Tsai said in response to questions about the "sale of non-core assets" that so far in fiscal 2024, Alibaba has completed the exit of $1.7 billion in non-core assets in nine months, and is also actively looking at how to exit listed stocks, and has set up a special team. At present, Alibaba's balance sheet still has some traditional brick-and-mortar retail businesses, which are not core focused businesses, and Alibaba's exit is reasonable, but considering the current market conditions, the exit may take time to achieve. ”

Compared with withdrawing from external companies such as Meinian Health, Focus Media, and Xpeng Motors, Alibaba's treatment of internal "non-core" businesses has attracted more attention from the outside world. Previously, businesses such as Ele.me, Yintai and RT-Mart have all appeared in the legendary withdrawal list.

Regarding the rumors of the sale of Ele.me, Alibaba denied it resolutely. Xu Hong, CFO of Alibaba, said on the earnings call on February 7 that Ele.me is still an important asset for Alibaba's near-field. According to the Q3 financial report, the revenue of the local life group where Ele.me is located in the current period was 15.16 billion yuan, a year-on-year increase of 13%, mainly due to the growth of orders from AutoNavi business and Ele.me. Its adjusted EBITA for the current period was a loss of 2.068 billion yuan, a year-on-year decrease of nearly 30%, which was due to the continuous narrowing of the loss of the "Daojia" business due to the improvement of Ele.me's unit economic efficiency and the expansion of its scale.

Internet analyst Ding Daoshi told the China Times that Ele.me, as an important part of Alibaba's local life services, is closely linked with core businesses such as Alipay and Taobao, and in the local life service market, Ele.me and Meituan's competition is becoming increasingly fierce, and selling it at this time will undoubtedly weaken Alibaba's competitiveness in this field.

As for the news of the sale of Yintai and Sun Art's retail businesses, Alibaba has not confirmed the reporter's verification. However, the new financial report shows that "all others" businesses, including Sun Art Retail, Freshippo, Yintai, DingTalk, etc., achieved revenue of 47.023 billion, a year-on-year decrease of 7%, Ali explained in the financial report that this is mainly due to the reduction in the scale of the supply chain business and the decline in Sun Art's retail revenue due to the decrease in customer unit price. The adjusted EBITA for the period was a loss of 3.172 billion yuan, an increase of 87% year-on-year, which Alibaba said was mainly due to the year-on-year increase in losses caused by the downsizing of certain businesses of Sun Art Retail.

E-commerce and cloud are top priorities

Compared with the unclear who will be put down, it is already clear that domestic and foreign e-commerce and cloud computing are Alibaba's two core businesses, and they are also the focus of its investment. Previously, Wu Yongming had concurrently served as the CEO of Alibaba Cloud Intelligence Group and Taotian Group. How to bring e-commerce and cloud computing back to rapid growth in the fierce market competition is also an important task for the new management of Alibaba.

It can be seen from the just-released Q3 financial report that these businesses are facing their own problems within Alibaba.

In the current period, Jiang Fan's international business revenue was 28.516 billion yuan, and the year-on-year revenue growth rate of 44% ranked first within the group, but the loss of adjusted EBITA also ranked first in the group. Alibaba Cloud's adjusted EBITA of 2.364 billion yuan in the current period ranked first with a year-on-year growth rate of 86%, but 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, the lowest year-on-year revenue growth rate was Alibaba's ballast business Taotian Group, with a revenue of 129.07 billion yuan, accounting for about half of Alibaba's current revenue, 4.5 times the scale of the second place international business revenue, but the 2% year-on-year revenue growth rate ranked last in the group. However, Taotian Group is still Alibaba's largest source of profits, with its adjusted EBITA of 59.93 billion yuan in the current period being 1.3 times that of the group as a whole, but only 1% year-on-year.

Behind these figures, under the impact of many strong competitors such as JD.com, Pinduoduo, Douyin, and Kuaishou, Taotian is facing the most fierce market competition.

Low prices are a strategy that it has been executing in recent years. Alibaba's financial report shows that after the Double 11 event, Taobao Tmall orders increased by double digits year-on-year in the second half of the Q3 fiscal quarter, reflecting the effective promotion of the price power strategy. Some industry insiders also believe that when communicating with the "China Times" reporter, Taotian is now focusing on the low-price model of Pinduoduo, in addition to the launch of the "refund only" function, its emphasis on the Tao factory has also been increased to a certain level, in addition, C-end users can consume on the 1688 platform, which has been based on wholesale before, "This may also be one of its changes." ”

Wu Yongming also said in the earnings call on February 7, "The price power we focus on is a good price on the basis of good goods, which is the demand of consumers across the cycle, and it is also the duty of doing business." In addition, he also said that in the coming year, Alibaba will increase investment in improving the core user experience, "through comprehensive capacity building in 2024, we are very confident that Taotian will return to growth." As for how to retain users or increase the frequency of user shopping in the fierce competition, he said that the most important thing is how to accurately identify the hierarchical consumption needs of many users on the Taotian platform, and provide them with better products, better prices and better services.

On February 7, Alibaba's U.S. stock closed at $73.64, down 5.87%, with a total market value of $187.545 billion.

Editor-in-charge: Huang Xingli Editor-in-chief: Han Feng