Alibaba's earnings release this year is a bit rushed.
Alibaba, which has often announced its financial reports after the Spring Festival in previous years, released its financial report for the third quarter of fiscal year 2024 on February 7 this year. According to the financial report data, Ali's revenue in the third quarter was 2603500 million yuan, lower than market expectations of 26124.7 billion yuan, compared with 2477 in the same period last year5.6 billion yuan, a year-on-year increase of 5%, the lowest growth rate in three quarters. Adjusted net profit was 4795.1 billion yuan, down 4% year-on-year.
Regarding the decline in operating profit and net profit, Alibaba said that the year-on-year decline in operating profit was mainly due to the impairment of Sun Art Retail's intangible assets and Youku's goodwill, while the decline in net profit was due to the change in the mark-to-market value of equity investments held, as well as the reduction in operating profit due to the mentioned impairment.
After experiencing major organizational changes, "historic events" such as being surpassed by Pinduoduo in terms of market capitalization, and weak growth of its two main businesses, Alibaba will face a more severe test in the new year.
Taotian Group is still the focus of development
Judging from the financial report data, Taotian Group is still the most important revenue of Alibaba Group**, with a revenue of 1290 in the quarter700 million yuan, a year-on-year increase of 2%. In addition, the financial report mentioned that the order volume in the second half of the quarter increased by double digits year-on-year, and the number of 88VIP members exceeded 32 million, which also achieved double-digit growth year-on-year. However, this does not hide the problem that Taotian's revenue growth is only 2% year-on-year, especially since this part of the growth is mainly contributed by wholesale commerce (1688 business), and the core e-commerce revenue, including the Double 11 promotion, has barely increased.
In the financial report, Alibaba CFO Xu Hong said that the overall realization rate of Taotian has decreased slightly, behind which is the change of GMV structure, the current consumers have a stronger preference for powerful goods, and the average order amount has been improved, and emphasized that this quarter in the Tmall merchant realization rate remains unchanged, the realization rate of merchants is increasing, so although the number of transaction buyers and order volume have increased, but part of it is offset by the decline in conversion rate and the impact of the average order amount. Behind the "average order amount**", it reflects the growth of Ali's retail business sector in China in recent years, and the financial report data shows that Alibaba's retail business revenue in China is 16576.5 billion yuan, down 1% year-on-year.
Nowadays, consumers pay more attention to price comparison, which means that the adjustment of Taotian Group's ** chain has brought a certain amount of pressure, not to mention the new e-commerce forces such as Douyin, Xiaohongshu, and Pinduoduo, which have brought many challenges to the revitalization of Taotian Group.
In terms of the size of Taotian Group, adjustment is not a simple matter. In its earnings report, Alibaba said: "We are in the process of reviving Taotian Group and preparing for future growth. Our growth strategy is to put users first, build an ecosystem that allows brands and merchants to thrive on our platform, and enable technology-driven innovation. ”
In fact, Alibaba's strategy of reviving Taotian Group emerged early after Wu Yongming became the CEO of Taotian Group. In Alibaba's new strategic blueprint disclosed by Wu Yongming in the second half of last year, the three directions of technology-driven Internet platform business, AI-driven technology business and global business network will become the top priority of Alibaba's development in the next ten years, which coincides with the statement of the quarterly financial report. It is worth noting that after he and Tsai Chongxin took over as chairman and CEO of Alibaba Group in September last year, they identified two strategic priorities of "user first, AI-driven", which were also reflected in the quarterly financial report.
Wu Yongming pointed out that 2024 is a year for Taotian Group to improve its comprehensive capabilities and investment, and said: "In the coming year, we will increase our investment in improving the core user experience to support Taotian Group to regain growth and consolidate its market leadership position." ”
Rekindle the Cloud Intelligence Group as the highest priority
According to the 2022-2027 China Cloud Service Market Demand** and Development Trend Prospect Report, the scale of China's public cloud service market will reach 2591 in 20224.7 billion yuan, a year-on-year increase of 287%。In the first half of 2023, the overall market size of China's public cloud services will be about 13908.5 billion yuan (190..)100 million US dollars), it is expected that the market size of China's public cloud services will reach 2926 in 20237 billion yuan, and it is expected to exceed 300 billion yuan in 2024. It can be seen that there are great business opportunities behind the field of cloud computing.
Alibaba also sees the potential of cloud computing, and Wu Yongming pointed out that Alibaba Group should first rekindle the growth momentum of its two core businesses, e-commerce and cloud computing, in other words, Taotian Group and Cloud Intelligence Group will be Alibaba's top priority for future development.
According to the financial report data, the revenue of Cloud Intelligence Group in this quarter was 280$6.6 billion, up 3% year-over-year, and adjusted EBITA increased 86% year-over-year, a record high for the fiscal year. Judging from the data alone, the profitability of Cloud Intelligence Group, which is regarded as the second growth curve of Alibaba, has improved, and the future profit potential needs to be developed to a greater extent.
Previously, Alibaba Cloud proposed an "AI-driven, public cloud-first" strategy, and Alibaba also said in the financial report that the improvement of profitability is due to the effective implementation of the strategy. It is understood that Alibaba Cloud has launched a number of products and services in the underlying computing power, AI platform and model services, which has greatly improved the cost performance of model services on the public cloud. In addition, Alibaba Cloud recently open-sourced the 72 billion parameter model QWEN-72B, which also achieved the best results in 10 authoritative benchmarks, becoming the industry's strongest open-source model. It is worth mentioning that QWEN-72B topped the Open LLM Leaderboard of Hugging Face, the world's largest model community.
However, compared with the absolute advantage of Alibaba Cloud in the early days, the current Wenxin Yiyan, Huawei's Pangu, and Tencent's hybrid model are also going hand in hand and launching fierce competition. In the melee of a number of domestic manufacturers, who will fall into the sand, who will emerge, there is no certainty, whether Alibaba Cloud can successfully break through with a solid technical foundation, need to wait for time to test.
Other businesses that are commendable
The rest of Alibaba Group's businesses also performed remarkably.
According to the financial report data, the revenue of Alibaba International Digital Business Group increased by 44% year-on-year in this quarter, and the overall orders increased by 24% year-on-year, and all its overseas retail platforms achieved growth. AliExpress, as the "Four Tigers Going to Sea", achieved a year-on-year increase of more than 60% in quarterly orders in the quarter. Thanks to the growth of Alibaba International Digital Business Group, Cainiao Group's revenue has also risen. According to the data, Cainiao Group's revenue in the quarter was 2847.6 billion yuan, a year-on-year increase of 24%. The financial report mentioned that cross-border logistics is the main growth driver of Cainiao Group.
However, the other two large entertainment groups and local life groups, which can be called "non-core businesses", have performed mediocre. According to the data, the revenue of Dawen Entertainment Group in the quarter was 504 billion yuan, a year-on-year increase of 18%, mainly due to the revenue growth of Alibaba Pictures' offline entertainment business. For a long time, including Youku and Ali Pictures, the two core businesses acquired and other related businesses, have not achieved substantial results, and they have always burned money and lost money. Competitors in this field are very strong, such as iQiyi, Mango TV, Tencent**, the strength of these opponents should not be underestimated, if it cannot be among the forefront of the industry, it is still difficult for the big entertainment group to achieve large-scale profitability.
The local living group revenue for the quarter was 1516 billion yuan, a year-on-year increase of 13%, driven by the growth of Ele.me and AutoNavi Map. It is worth noting that at the earnings meeting, Alibaba once again refuted the rumors of Ele.me, and said that Ele.me is an important asset of Alibaba.
Alibaba's IPO plans for Cainiao and Hema have also changed. On November 16, 2023, Alibaba revealed in its financial report that the listing plan of Hema was temporarily shelved. On September 26 last year, Cainiao submitted an IPO application to the Hong Kong Stock Exchange, but there has been no further news so far. At this financial report meeting, in response to the listing of Hema and Cainiao, Tsai Chongxin, chairman of the board of directors of Alibaba Group, said that Alibaba's previous spin-off plan was mainly to hope that each business could reflect its value in the capital market, but whether and how these transactions were promoted depends on market conditions. Alibaba believes that current market conditions do not reflect the true value of these businesses. But there is also news that Cainiao will be available this spring.
Looking at the entire financial report, it is not difficult to see that among Alibaba's six major businesses, Taotian Group, Cloud Intelligence Group and Alibaba International Digital Business Group are the core forces of Alibaba in the future, especially Taotian Group and Cloud Intelligence Group. Local Life Group, Cainiao Group, Dawen Entertainment Group and a number of other N businesses may usher in different fates, and some businesses may even face asset liquidation and sell-off.
The impact of the adjustment and change is still ongoing, Alibaba is going through a painful period of scraping bones, but after a year of organizational restructuring and personnel executive changes, the future development direction of Alibaba is very clear, although it may also experience a period of downturn, but Alibaba is regrouping and preparing to fight back.
Kejihui Zhang Zipeng newsmedia007
Kejihui, a pioneer in finance and technology, a senior content team, and 30 online platforms are synchronized. The accuracy and authenticity of the above content is not guaranteed. The market is risky, and investors should be cautious in their transactions. The subject matter involved does not make any recommendations, and the investment and transaction are carried out at your own risk. ）