This article first appeared on GuruFocus.
Total Revenue: RMB247.7 billion.
Revenue Growth (Excluding Sun Art and Intime): 10% year over year.
China E-commerce Group Revenue: RMB140.1 billion, an increase of 10%.
Cloud Intelligence Group Revenue Growth: 26% year over year.
AI-Related Product Revenue: Maintained triple-digit growth for the eighth consecutive quarter.
Adjusted EBITA: Decreased 14% due to strategic focus on quick commerce.
GAAP Net Income: Increased 76% due to mark-to-market changes and gains from disposals.
Operating Cash Flow: RMB20.7 billion.
Free Cash Flow: Outflow of RMB18.8 billion.
CapEx Investment in AI and Cloud Infrastructure: RMB38.6 billion for the quarter.
Share Repurchase: Approximately 7 million ADS for USD815 million.
Quick Commerce Business Revenue Growth: 12% due to order growth.
Adjusted EBITA Margin (Cloud Segment): Stable at 8.8% year over year.
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Release Date: August 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Alibaba Group Holding Ltd (NYSE:BABA) reported a 10% year-over-year revenue growth on a like-for-like basis, excluding Sun Art and Intime.
The Cloud Intelligence Group saw a 26% year-over-year revenue increase, driven by AI demand and customer adoption.
AI-related product revenue maintained triple-digit growth for the eighth consecutive quarter, with AI-related revenue accounting for over 20% of revenue from external customers.
Alibaba's strategic partnership with SAP highlights its cloud infrastructure and AI capabilities, enhancing its global enterprise recognition.
The integration of Taobao and Tmall Group, Ele.me, and Fliggy into Alibaba China e-commerce group aims to create a comprehensive consumption platform, enhancing consumer experience and driving synergies.
Negative Points
Adjusted EBITA decreased by 14%, primarily due to strategic investments in quick commerce, impacting profitability.
Free cash flow was an outflow of RMB18.8 billion, attributed to increased CapEx in AI + Cloud infrastructure and Taobao instant commerce.
The adjusted EBITA from Alibaba China e-commerce group decreased by 21%, despite growth in other areas.
All other segment revenue decreased by 28%, primarily due to the disposal of Sun Art and Intime.
The company faces challenges in achieving efficiency in its quick commerce business, with significant upfront investments required for new user acquisition.
Q & A Highlights
Q: Can management share the vision for the quick commerce growth opportunity in China and the investment plan for it? How long will the heavy investment last, and what long-term value will it bring to Taobao and the China e-commerce platform? A: Yongming Wu, CEO: Since launching Taobao instant commerce, we've seen significant engagement from users and merchants, with growth in order volume, user scale, and delivery capacity exceeding expectations. We are now the market leader in food delivery orders. Xu Hong, CFO: Our peak daily order volume reached 120 million, and monthly active consumers hit 300 million in August. We've created over 1 million new jobs. Quick commerce is driving user engagement and incremental income for our e-commerce business, contributing to advertising and CMR growth. We expect to reduce UE losses by half in the short term and achieve industry-leading efficiency in the long term.
Q: How should we think about the acceleration in Alibaba Cloud's growth and its future outlook? What is the margin outlook, and how are different industry sectors performing? A: Yongming Wu, CEO: There's a strong demand for AI products, with more AI applications being developed. Many vendors are leveraging AI for traditional functions, driving robust demand. Xu Hong, CFO: We've seen fast growth in inference workloads and new training opportunities in sectors like automotive and education. Our strategic focus is on user growth and expanding use cases rather than short-term margin increases. We plan to continue our RMB380 billion investment in cloud and AI, with backup plans for supply chain changes.
Q: What are Alibaba's plans for expanding the in-store part of local services, given the cross-selling success in food delivery? A: Yongming Wu, CEO: With our large user base in quick commerce, we see synergy in providing diverse services to users who go offline in-store. We're already testing and piloting in selected cities to expand these offerings.
Q: What is the pace of investments in the consumption market, and what impact will quick commerce have on CMR growth? A: Xu Hong, CFO: Our RMB50 billion investment in quick commerce is incremental to ongoing investments in users and supply chains. CMR growth was driven by increased take rates and AI-powered QCT penetration. Quick commerce is expected to drive user growth and higher take rates, leading to rapid CMR growth in the coming quarters.
Q: What additional capabilities and investments are needed for the transition to an agent-centered era in AI models? A: Xu Hong, CFO: Models now require larger context windows and the ability to utilize multiple tools. This creates opportunities for Alibaba Cloud to provide sandbox environments for agents. Our coding capabilities are crucial for connecting models to enterprise systems, offering automated solutions across the Alibaba ecosystem.
Q: How is Alibaba approaching the quick commerce market differently this time compared to past efforts with Ele.me? A: Xu Hong, CFO: Ele.me has made significant progress in infrastructure and capabilities, enabling rapid development of Taobao instant commerce. The integration with Taobao provides a vast user base, merchant network, and logistics system. Our investment logic now focuses on the overall incremental benefits to our e-commerce business.
Q: How should we view the return on invested capital from quick commerce investments compared to AI investments? A: Xu Hong, CFO: We are seizing two historic opportunities: AI and consumption. Our resources allow us to invest substantially in both. While AI investments are driving cloud growth, quick commerce integration with Taobao is increasing traffic and advertising. Balancing short-term and long-term returns is crucial, and we are confident in achieving good returns from these investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
