Produced by Radar Finance and Economics, edited by Xiao Sa, Deep Sea
Ali, who has undergone a great change, has finally handed in the papers, what is the actual situation? On the evening of May 14, Alibaba released its fourth quarter and annual results for fiscal year 2024.
According to the financial report, in fiscal year 2024, Alibaba's revenue will reach 941.168 billion yuan, a year-on-year increase of 8%, compared with a growth rate of 2% in the previous year. In the fourth quarter of fiscal year 2024 (i.e., the first quarter of 2024), Alibaba's revenue was 221.874 billion yuan, a year-on-year increase of nearly 7%. Although this growth rate is not impressive, it has exceeded market expectations.
Such revenue results are also achieved in the context of Alibaba's emphasis on investing heavily in strategic priority businesses in the past year.
But on the other side of increasing investment to drive growth, Ali has also paid the price of declining profits. In the first quarter of 2024, the company's adjusted EBITA, a non-GAAP financial measure, decreased 5% year-over-year to 23.969 billion yuan.
Ali said that the decline was mainly due to the group's increased investment in the e-commerce business and the retention incentives granted to rookie employees. As a result, the company's U.S. stock fell more than 6% after its performance.
Despite the loss of profits, Alibaba's investment cycle is not over. In the post-earnings call, Wu Yongming, CEO of Alibaba Group and chairman of Taotian Group, said that Alibaba will continue to focus on investing in and executing a user-first, AI-driven strategy, and is confident in the company's long-term development.
At the same time, Alibaba is still increasing shareholder returns, with its board of directors approving a dividend of about $4 billion in fiscal 2024, following the dividend payment of about $2.5 billion in fiscal 2023. At the same time, Alibaba continues to implement the share repurchase plan and prepares for a primary listing in Hong Kong, which is expected to be completed by the end of August. Some analysts believe that after Alibaba's primary listing in Hong Kong, it is expected to enter the Hong Kong Stock Connect and increase its valuation.
In terms of employees, the total number of employees of the company was 204,900 at the end of March, a decrease of 14,400 compared with the end of last year. So far, Ali has had layoffs for nine consecutive quarters, and a total of 54,400 talents have been sent to the society.
More than 50,000 employees have been reduced in more than two years
According to the financial report, as of the end of March 2024, the number of Alibaba employees has been reduced to 204891, a decrease of 14,400 from the end of last year.
On the evening of November 19 last year, Alibaba clarified a rumor that "Ali is about to lay off 25,000 people". "Fake! This was a rumor from May, and it was debunked at that time. Yan Qiao, the head of public relations of Ali Group, refuted the rumors in the circle of friends.
But judging from the actual number of employees reduced by Alibaba, the layoffs are not empty.
As of the end of June last year, the company had a total of 228675 employees. By the end of the first quarter of this year, the number of Alibaba employees had fallen by 24,000, which was comparable to the number of layoffs that the company was involved in in rumors in May last year.
Radar Finance noticed that Ali had a period of soaring employee numbers.
At the end of March 2018, Alibaba had 66,421 employees, and at the end of March 2019, the number increased to 101958, an increase of 53.5%. At the end of March 2020, Ali further rose to 117,600, an increase of 15.34%.
At the end of March 2021, the total number of employees at Alibaba rose to 251462. The surge in numbers is mainly due to Alibaba's completion of the acquisition of Sun Art Retail, the parent company of RT-Mart.
At the end of 2021, the number of employees of Alibaba was as high as 259316, which was the peak of the number of employees of Alibaba.
Since the beginning of 2022, Alibaba's employees have begun to enter the decline range, with a decrease in the number of employees for 9 consecutive quarters, with a total decrease of 54,400 in just over two years.
In response to the "graduation" of Ali employees, at the beginning of 2020, a statement by Ma Yun was widely circulated: "After 30 years, we will export at least 1,000 Ali people who have been more than 10 years old to the society every year, and they should participate in the construction of society and go to various companies."
Some people think that this is a signal of Ali's "disguised layoffs", and some netizens said that "I can raise the layoffs to such a height, I am convinced", which is the "art of speaking".
On January 7, 2020, Ma Yun responded to the previous rumors of "Ali layoffs" on the Internet when he returned to class, saying that it is very difficult for employees to survive Ali for 3 years, and it is a treasure to survive until 10 years. The reason why they are sent to the society is that after Alibaba's rigorous training, they surpass many other companies in terms of digital economy and execution, so they should go to other places such as government departments and universities.
But judging from the final layoff results, Ali's layoffs far exceeded Jack Ma's "1,000 graduates a year" remark at that time.
Cainiao and overseas e-commerce are increasing
The financial report shows that in the past quarter, Alibaba's six major businesses have achieved increased revenue except for the business of Dawen Entertainment Group.
Among them, Alibaba International Digital Business Group (AIDC), Cainiao Group ('Cainiao'), and Local Life Group all achieved double-digit year-on-year revenue growth in the first quarter of 2024.
Specifically, in this quarter, Alibaba's AIDC revenue increased by 45% year-on-year to 27.448 billion yuan, and the overall orders of AIDC's retail platform increased by 20% year-on-year, which was brought by the strong performance of AIDC's cross-border business growth, especially the growth brought by AliExpress's Choice business.
It is reported that the original AliExpress is also regarded as an overseas version of Taobao, which is the first step for Ali International to go overseas. AliExpress has now launched three modes: full custody, semi-custody and overseas custody, and Choice is its new service channel launched in March last year to provide overseas consumers with products with competitive prices and high delivery speed.
According to the financial report, this quarter, AliExpress continued to achieve strong year-on-year order growth, benefiting from Choice's competitive prices and high delivery speed for consumers. In April 2024, Choice accounted for about 70% of AliExpress's overall orders.
At the same time, Trendyol (the Turkish e-commerce platform controlled by Alibaba) continued to record double-digit order growth during the quarter. While maintaining its position as a leading e-commerce company in Turkey, Trendyol has further expanded its cross-border business in the Gulf region.
Also driven by the revenue from cross-border logistics fulfillment services supporting AliExpress, in the first quarter of 2024, Cainiao's revenue increased by 30% year-on-year to 24.557 billion yuan.
In May last year, Alibaba announced the independent listing of Freshippo, Cainiao and Alibaba Cloud in its 2023 fiscal year report, and the international digital business group is also seeking independent external financing. But by March this year, Cainiao withdrew its application for a Hong Kong IPO because "the challenging IPO environment does not reflect Cainiao's true valuation".
In terms of revenue data, Cainiao has performed well in growth in the past year. According to the financial report, in fiscal year 2024, Cainiao's revenue will reach 99.02 billion yuan, a year-on-year increase of 28% over fiscal year 2023.
Local Life Group is another high-growth business segment of Alibaba, with revenue from this segment increasing by 19% year-on-year to RMB14.628 billion in the first quarter of 2024, mainly driven by Ele.me and AutoNavi.
Ali said that in the quarter, benefiting from the increase in transaction users and purchase frequency, Ele.me's order volume increased strongly year-on-year; During the same period, AutoNavi's business achieved rapid growth, driven by large travel scenarios and "to destination" services.
In addition to the above businesses, as the core e-commerce foundation of Alibaba, Taotian Group's performance in this quarter was decent, with revenue in the quarter increasing by 4% year-on-year to 93.216 billion yuan. However, relevant core indicators have resumed growth, such as the double-digit year-on-year growth in online GMV and order volume in the first quarter, and the double-digit year-on-year growth in the number of 88VIP members.
Wu Yongming believes that Taotian Group's "user first" strategy has been effective, and it has received positive feedback from consumers around the investment in price power and user experience. He expects that in FY2025, Taotian's GMV will gradually return to healthy growth with the improvement of consumer experience.
In the first quarter of 2024, Alibaba Cloud Intelligence Group's revenue was 25.595 billion yuan, a year-on-year increase of 3%. Although the revenue growth rate is not obvious, the cloud intelligence group is still expected.
Management said on the conference call that the company's cloud business revenue growth was mainly driven by new AI products. These AI products not only generate new revenue in their own right, but also boost the sales of traditional cloud computing products, especially in the public cloud space.
Among Alibaba's six existing business segments, Dawen Entertainment Group is the only one with the smallest revenue decline in the latest quarter. According to the financial report, in the first quarter of 2024, the revenue of this part will be 4.945 billion yuan, a year-on-year decrease of 1%, due to the slight decline in Youku's revenue.
In addition, all other segments, including Sun Art Retail, Freshippo, Alibaba Health, Lingxi Entertainment, Yintai, Intelligent Information (which mainly includes UC Youshi and Quark businesses), Fliggy, DingTalk (previously reported to the Cloud Intelligence Group segment) and other businesses, achieved revenue of approximately RMB51.5 billion in the quarter, down 3% year-on-year.
In the first quarter, "increase in revenue but not increase in profits"
In this quarter, Alibaba experienced a situation of "increasing revenue but not increasing profits".
According to the financial report, Alibaba's operating profit in the first quarter of 2024 will be 14.765 billion yuan, a year-on-year decrease of 3%. Adjusted EBITA (earnings before interest, taxes and amortization) decreased 5% year-on-year to RMB23,969 million, mainly due to the company's increased investment in the e-commerce business and retention incentives granted to rookie employees.
Alibaba's net profit attributable to ordinary shareholders in the quarter was 3.270 billion yuan and net profit was 919 million yuan, down 96% year-on-year. Ali said that this was mainly due to the net loss caused by the change in the market value of the company's equity investment in listed companies, compared with the net income in the same period last year.
The market does not seem to be able to adapt to a declining profitability of Alibaba. On May 14, Alibaba's U.S. stock closed down 6.02%.
It is reported that in the first quarter, Alibaba maintained the positions of Xpeng Motors and Weibo unchanged, but liquidated 10 million shares of Bilibili, 8.43 million shares of Zhiwen Group (Momo's parent company), and bought more than 1.7 million shares of Zhihu.
Non-GAAP net income for the quarter ended March 31, 2024, excluding equity incentive expenses, gains and losses on investments, impairment of intangible assets and certain other items, was 24.418 billion yuan ($3.382 billion), down 11% from 27.375 billion yuan for the same period in 2023.
For Alibaba, although the business stall is very large, only the core e-commerce Taotian and Cloud Intelligence Group are really profitable at this stage, and the other businesses are all loss-making.
Taking the data of the first quarter of this year as an example, Taotian Group's adjusted EBITA for the quarter was 38.5 billion yuan, down 1% year-on-year. According to Alibaba, the decline was mainly due to the user experience (which improves consumer retention and increases the frequency of purchases) and increased investment in technology infrastructure.
In the quarter, Cloud Intelligence Group's adjusted EBITA was 1.432 billion yuan, a year-on-year increase of 45%, which is also the company's largest year-on-year increase in adjusted EBITA. According to the financial report, the increase in profit in this segment is mainly due to the improvement of product structure and operational efficiency caused by the company's focus on public cloud.
Wu also noted that these high-growth and high-margin areas are expected to continue to drive overall revenue growth in the coming quarters and offset the decline in low-margin project revenue.
Among the many loss-making businesses, AIDC, Cainiao, and all other businesses, including Sun Art Retail, had adjusted EBITA losses of RMB4.1 billion, RMB1.3 billion, and RMB2.8 billion, respectively, representing a year-on-year increase of 88%, 321%, and 52%, respectively.
Among them, Jiang Fan, CEO of Ali International Digital Business Group, responded on the call: "There are two main reasons for the loss in last quarter, one is that we have more aggressive investment in some emerging markets, especially in the Middle East; Second, AliExpress has launched a new service channel 'AliExpress Choice' overseas, and the proportion of its business model has been climbing, and its own profitability will take time in the process of switching. ”
The loss of Cainiao during the period was mainly due to the withdrawal of the retention incentive granted to Cainiao employees due to the withdrawal of its initial public offering; The increase in "all other losses" was "mainly due to the increase in losses of Hema and the decline in the profitability of Lingxi Entertainment".
In addition, Alibaba's local life and Dawen Entertainment Group both lost 3.2 billion yuan and 880 million yuan in adjusted EBITA in the first quarter of this year, but both reduced their losses by about 2% year-on-year. Among them, the decrease in the local life business was mainly due to the improvement in the unit economic performance and the expansion of the scale of Ele.me.
It is not difficult to see that among all the businesses of Alibaba, only Cloud Intelligence Group is currently the second profit point outside Taotian Group. On the other hand, Dawen Entertainment and other businesses, including brick-and-mortar retail, have been growing slowly and losing money all year round, eroding Alibaba's overall profit level.
Continue to repurchase and return to shareholders
Although the increase in investment has hurt profits to a certain extent, Ali's investment pace will not stop there.
In this regard, management said that Alibaba will continue to focus on investing in and executing a user-first, AI-driven strategy. And the company is highly disciplined about any investment, and will only continue to invest after seeing a clear return on investment. The exact amount of investment will be determined based on the progress of improving the customer experience and product richness.
While investing heavily in strategic priority businesses, Alibaba has also satisfied investors through measures such as large dividends and share repurchases.
According to the financial report, Alibaba's board of directors has approved the payment of dividends for fiscal year 2024, including annual regular cash dividends and one-time special cash dividends, with a total dividend of approximately US$4 billion. In fiscal 2023, Alibaba announced an annual dividend of approximately $2.5 billion.
In addition, Alibaba continues to implement a share repurchase program. In the first quarter of 2024, Alibaba repurchased 524 million shares of common stock for a total of $4.8 billion under a share repurchase program. In fiscal 2024, Alibaba repurchased a total of 1.249 billion common shares for a total of $12.5 billion, a move that resulted in a net decrease of 5.1% in Alibaba's outstanding shares.
Another thing investors can look forward to is that they have been preparing for a primary listing in Hong Kong, which is now expected to be completed by the end of August 2024.
In this regard, it is pointed out that the main role of Hong Kong as the main listing venue is that Alibaba can enter the Hong Kong Stock Connect and accept funds from the more familiar business of the south, which will help improve the situation of Alibaba's continued undervaluation.