In the past year, among the leading Internet companies in China, Alibaba has experienced the most drastic changes. In April 2024, on the occasion of the first anniversary of the reorganization, Ma Yun, the founder of Alibaba, who has stepped down as chairman of the board of directors for 5 years, posted on the intranet that the core change of Ali in the past year is not to catch up with KPIs, but to recognize himself and return to the track of customer value. At the end of the article, he emphasized that Ali needs more positive changes and greater reforms in the future.
Alibaba's financial report, released a month later, may explain the founder's rare voice at the time: Alibaba is still under pressure to "maintain growth".
On May 14, Alibaba released its financial results for the quarter ended March 2024 and its fiscal year 2024 results. According to the data, Alibaba's revenue in fiscal year 2024 will be 941.168 billion yuan, a year-on-year increase of 8.34%, and the net profit attributable to the parent company will increase by 9.97% year-on-year to 79.741 billion yuan.
In fiscal year 2024, Alibaba's revenue growth will remain in the single digits. Drafting: Ma Yunfei
Focusing on the latest quarter, Alibaba showed a situation of "increasing revenue but not increasing profits". In the first quarter of 2024, Alibaba's revenue was 221.874 billion yuan ($30.729 billion), a year-on-year increase of 7%, slightly higher than the market expectation of 219.8 billion yuan; net profit was 919 million yuan (US$127 million), down 96% year-on-year; Excluding equity incentives, investment losses, intangible asset impairment, etc., Alibaba's adjusted net profit under non-GAAP still decreased by 11% year-on-year to 24.418 billion yuan.
After the earnings report, Alibaba's U.S. stock fell nearly 6% in pre-market trading, and maintained its decline after the open, and finally closed at $79.51, down 6.02%. On May 15, Alibaba's Hong Kong stock closed at HK$82.65, up 1.85%.
Photo by Jack Ma
The growth rate of core business is slow
Taotian is still the basic market of Ali e-commerce, but the growth rate has slowed down significantly. Dismantling Alibaba's revenue data for the quarter, of the total revenue of 221.874 billion yuan, 93.216 billion yuan came from Taotian Group, a year-on-year increase of 4%, and the growth rate was the third from the bottom among its six major business groups; Adjusted EBITA was $38,501 million, down 1% compared to the same period in 2023.
In December 2023, Alibaba CEO Wu Yongming replaced Dai Shan as CEO of Taotian Group, and started a new round of adjustments. At the financial report analysis meeting in the last quarter, Wu Yongming said that in the coming year, he will increase investment in improving the core user experience to support Taotian Group to regain growth and consolidate its market leadership, and shared Taotian Group's three key investment directions: commodity supply, price power and efficiency, and good service construction.
Wu Yongming said at the latest financial report analysis meeting that the group's investment in price power and user experience has received positive feedback from consumers, and the number of buyers and purchase frequency in the quarter have grown strongly, driving GMV to achieve double-digit growth, reflecting the increase in consumer willingness and user trust on the platform. At the same time, the Group continued to improve the rights and services of its members, with the number of 88VIP members increasing by more than 35 million by a double-digit year-on-year.
"For this year, our top priority remains to improve the consumer experience and drive GMV growth through the improvement of consumer experience." According to Wu Yongming, it is expected that in fiscal year 2025, Taotian GMV will gradually resume healthy growth with the improvement of consumer experience, and in the second half of fiscal year, the company will launch commercial products that match the new mechanism and algorithm to further improve the revenue level with CMR (customer management revenue) as the core.
In addition to e-commerce, it is also an indisputable fact that Alibaba Cloud, which is also in the highest priority of the group, is struggling to grow. Although Alibaba Cloud continued to be profitable in the quarter, with adjusted EBITA up 45% year-on-year to RMB1.432 billion, revenue grew only 3% year-on-year to RMB25.595 billion, and revenue growth in the previous quarter was also 3%, ranking last among its six major business groups with single-digit year-on-year growth. At the same time, Alibaba Cloud's revenue scale has been surpassed by the International Digital Business Group (AIDC).
In China's cloud computing market, Alibaba Cloud continues to occupy the first position, but with the slowdown in revenue growth, its market share is also quietly changing. At the end of April, IDC released the "China Public Cloud Service Market (Second Half of 2023) Tracking" report, which shows that in the second half of 2023, the overall market size of China's public cloud services (IaaS/PaaS/SaaS) will be 20.48 billion US dollars (about 148.4 billion yuan), Alibaba, Huawei, China Telecom, Tencent, and China Mobile are among the top five. In particular, Alibaba Cloud's share fell sharply, down 5.5 percentage points year-on-year.
At the end of February, Alibaba Cloud announced the "largest price reduction in history", announcing a high-profile price reduction of more than 100 products and more than 500 products with an average price reduction of more than 20%, and a maximum reduction of 55%. Less than two months later, on April 8, Alibaba Cloud announced a price cut across the board, with an average reduction of 23%, covering core cloud products deployed in 13 regional nodes around the world, with a maximum reduction of 59%.
"On the issue of medium- to long-term margins in the cloud business, we believe that most of our public cloud products are currently maintaining reasonable and healthy margins." "We are in the very early stages of a decade-long IT cycle for AI-related products, so we expect to maintain a healthy profit margin while making more sustained long-term investments in the early stages of AI," Wu said at the earnings conference. Overall, we expect all of our public cloud offerings to maintain a healthy margin. ”
Losses in international business widened
Compared with Taotian Group and Cloud Intelligence, among the six major business groups, in the first quarter of 2024, Alibaba International Digital Business Group (AIDC) became the fastest-growing sector with a year-on-year growth rate of 45%, with a revenue of 27.448 billion yuan in the quarter, and the proportion of revenue increased from 11% in the previous quarter to 12.37%, of which the revenue of international wholesale business increased by 11% year-on-year, and the revenue of international retail business increased by 56% year-on-year to 22.278 billion yuan.
It is worth noting that the other side of AIDC's rapid revenue growth is that its adjusted EBITA loss widened to 4.085 billion yuan, compared with a loss of 2.171 billion yuan in the same period in 2023. Alibaba explained in the financial report that the main reason for the year-on-year increase in losses was the increase in investment in the cross-border business of AliExpress Choice and Trendyol, but it was partially offset by the improvement in the monetization rate.
AIDC mainly includes businesses such as Lazada, AliExpress, Trendyol, Daraz, and Ailibaba.com. In response to investors' questions about the current scale of AIDC investment, Jiang Fan, co-chairman and CEO of AIDC, replied in the earnings call that the loss mainly came from two large investments, "On the one hand, we made more aggressive investments in some emerging markets last quarter, especially in the Middle East. On the other hand, we need to invest heavily in new projects such as Trendyol in the Gulf region. In addition, the proportion of business models such as AE Choice is rising, but in this switching process, its profitability will take time to improve, and there is a certain gap with our past platform model. ”
Following AIDC, in this quarter, the second largest revenue growth rate of Alibaba's six major business segments is Cainiao, with Cainiao's revenue from January to March 2024 being 24.557 billion yuan, a year-on-year increase of 30%. In addition, driven by the rapid growth of orders from Ele.me and AutoNavi, Alibaba Local Life Group's revenue in the quarter was 14.628 billion yuan, an increase of 19% compared with 12.340 billion yuan in the same period of 2023. In terms of profit, the loss of this sector has narrowed from 4.063 billion yuan in the same period of 2023 to 3.198 billion yuan, a year-on-year decrease of 21.3%.
In contrast, Dawen Entertainment Group was the only one among the six major groups to experience negative revenue growth in the quarter, with revenue of 4.945 billion yuan, a year-on-year decrease of 1%; The adjusted EBITA loss narrowed to 884 million yuan from 1.129 billion yuan in the same period last year, and the financial report explained that it was mainly due to the narrowing of Youku's loss.
In addition, in the quarter, the revenue of other segments, including Sun Art Retail, Freshippo, Ali Health, Lingxi Interactive Entertainment, Yintai, Intelligent Information, Fliggy, DingTalk, etc., was 51.458 billion yuan, down 3% year-on-year, and the adjusted EBITA loss was 2.818 billion yuan, compared with a loss of 1.855 billion yuan in the same period last year. Alibaba explained that the decline in revenue was mainly due to the decline in revenue of Sun Art Retail and Ali Health, but it was partially offset by the revenue growth of Freshippo; The loss was due to the increase in the loss of Hema and the decline in the profitability of Lingxi Mutual Entertainment.
In a recent conference call, Alibaba emphasized that in fiscal year 2024, if it excludes businesses with physical retail operations such as Sun Art Retail, Hema and Yintai, Alibaba will perform better in terms of revenue and adjusted EBITA margin - after exclusion, the group's total revenue will increase by about 11%, and the adjusted EBITA margin will also increase by about 3.6 percentage points to about 21%.