Increasing investment in AI triggers market imagination. How long can Alibaba continue to rise? | Zhike
作者 |Author
编辑 |Editor
After the Hong Kong stock market closed on February 20, Alibaba released its financial report for the third quarter of fiscal year 2025.
Data shows that in this quarter, the company achieved revenue of 280.15 billion yuan, a year-on-year increase of 8%, far exceeding market expectations. By business segment, Taotian Group achieved revenue of 136.09 billion yuan in the quarter, a year-on-year increase of 5%. Among them, customer management revenue was 100.79 billion yuan, a year-on-year increase of 9%; Alibaba International Digital Commerce Group achieved revenue of 37.76 billion yuan, a year-on-year increase of 32%; Cloud Intelligence Group achieved revenue of 31.74 billion yuan, a year-on-year increase of 13%; Cainiao, Local Life, and Great Entertainment achieved revenue of 28.24 billion yuan, 16.99 billion yuan, and 5.44 billion yuan respectively, with year-on-year growth of -1%, 12%, and 8%.
Chart: Alibaba's Revenue Performance Data Source: Company Financial Report, Compiled by 36Kr
In terms of profits, the company achieved an operating profit of 41.21 billion yuan in this quarter, a year-on-year increase of 83%. The adjusted EBITA was 54.85 billion yuan, a year-on-year increase of 4%. The net profit attributable to the parent company was 48.95 billion yuan, and the Non-GAAP net profit was 51.077 billion yuan, a year-on-year increase of 6%.
Chart: Alibaba's Profit Performance Data Source: Alibaba Financial Report, Compiled by 36Kr
Overall, under the strategy of "User First, AI-Driven", in the past year, Alibaba has continuously reduced its burden and streamlined its business by selling non-core businesses, and has continuously focused on the two core businesses of e-commerce and AI + Cloud, achieving remarkable results. In recent quarters, the core businesses have shown an accelerating growth trend. In this quarter, the company's e-commerce business growth accelerated, the number of new buyers and order volume both grew strongly, and customer management revenue increased by 9% year-on-year. The 88VIP core user group maintained double-digit growth, and the total membership size increased to (approximately) 49 million; at the same time, Alibaba Cloud's commercial revenue returned to double-digit growth of 13%, and the revenue of AI-related products has maintained triple-digit growth for six consecutive quarters.
In the earnings analyst conference call that night, Alibaba CEO Wu Yongming also announced that the company will increase investment in three major AI fields in the next three years. This represents the first time that a Chinese technology company has shown the investment intensity of an international technology giant, which has greatly boosted market confidence.
Benefiting from the continuous emergence of positive factors, the capital market has reignited its investment enthusiasm in Alibaba. After the financial report was released, Alibaba's US stocks jumped higher at the opening on February 20 and finally closed up 8% significantly; after the opening of the Hong Kong stock market on February 21, Alibaba also jumped higher at the opening and closed up more than 14% by the end of the trading day. At the same time, the better-than-expected growth of Alibaba Cloud's business and the management's confirmation of large-scale capital expenditures in the next three years in the conference call directly triggered the performance of the domestic computing power sector within the day, causing many stocks to limit up.
So, what is the quality of Alibaba's financial report this quarter? What is the logic of AI reshaping the company's valuation? Does it still have the basis for an upward trend in the future?
Focusing on the Main Business, Taotian's Performance Stabilizing
In this quarter, under the combined measures of improving operations to attract merchants to return and increasing the stickiness of core users with a user-centered approach, Taotian's business continued to achieve stable growth that exceeded expectations. According to the financial report data, Taotian Group achieved revenue of 136.09 billion yuan in the quarter, a year-on-year increase of 5%. Among them, China's retail business achieved revenue of 129.52 billion yuan, a year-on-year increase of 5%. The most core customer management revenue (CMR) was 100.79 billion yuan, a year-on-year increase of 9%; China's wholesale business achieved revenue of 6.58 billion yuan, a year-on-year increase of 24%.
In the past few years, the weakening of the consumer market and the intensification of industry competition have brought unprecedented challenges to Alibaba's e-commerce business, and the company's e-commerce GMV share has continued to decline from 2020 to 2023. In order to cope with the crisis and consolidate its share, Alibaba has carried out a series of reforms since 2023. At the group business level, it is reflected in the continuous sale of non-core assets such as Gaoxin Retail and Intime Department Store, and focusing on the development of the core businesses of e-commerce and Alibaba Cloud + AI. At the e-commerce business level, it responds to the fierce competitive environment by improving the operation mode to enhance the platform's attractiveness. Specifically, (1) by changing the traffic distribution rules, tilting the traffic distribution towards Taobao and introducing a store rating system to attract the return of small and medium-sized merchants, increase the platform's vitality and improve the overall competitiveness; (2) with the user as the center, through platform subsidies, 88VIP return shipping fee coverage and other value-added services to continuously improve the user experience and increase the stickiness of core users.
Under the new strategy, Alibaba's e-commerce business has warmed up for several consecutive quarters, the GMV share has stabilized, and the performance has been continuously better than the consumer market. At the same time, in order to accelerate commercialization, the platform began to charge an additional 0.6% technical service fee in early September and accelerate the improvement of the全站推广 permeability, driving the improvement of Taotian's monetization rate. Customer management revenue has accelerated growth for three consecutive quarters, and this quarter even showed a relatively fast growth of 9%. Looking forward to the future, benefiting from the continuous improvement of the monetization rate, the profit inflection point of Taotian will also gradually become clear.
"AI + Cloud" Reshaping Alibaba's Valuation
In addition to the stabilization of the e-commerce business, the strongest growth of AI and cloud businesses is the biggest highlight of Alibaba in this quarter. According to the financial report data, relying on the leading product portfolio in the AI field, Alibaba Cloud's revenue achieved double-digit growth of 13% in the quarter. Among them, the external commercialization revenue increased by 11% year-on-year, and the revenue of AI-related products has maintained triple-digit expansion for six consecutive quarters.
Looking forward to the future, standing at the starting point of a new round of technology cycle, the expansion of the AI business will not only bring a new growth engine for Alibaba, but also drive the company's valuation system to transform from an e-commerce giant to an AI core player, thereby enhancing the company's overall technology attributes and valuation attractiveness.
Since the launch of ChatGPT at the end of 2022, AI has become the core investment theme in the global market. Among them, the seven US stock technology giants, including NVIDIA, Apple, Microsoft, Meta, Alphabet, Amazon, and Tesla, have become the main leaders of the AI market in the past two years, with an average stock price increase of more than 250%.
However, the sudden emergence of the DeepSeek R1 model in January this year, along with other Chinese AI models with global competitiveness and cost-effectiveness such as Alibaba's Qwen2.5-Max, completely broke the previous AI investment logic dominated by the United States, reigniting investors' optimism about the growth and economic benefits of the Chinese AI industry, and driving the revaluation of related technology companies.
Take Alibaba as an example. Since the release of Qwen2.5-Max on January 29, the company's Hong Kong stock price has increased by more than 50%. If calculated from the decline of NVIDIA caused by DeepSeek on January 24, its stock price has increased by nearly 70%, but during this period, Alibaba's fundamental performance has not changed significantly. That is to say, behind the continuous rise of Alibaba's stock price in this round, it more reflects the market's redefinition of the development of the domestic AI industry and Alibaba's own AI narrative logic.
Looking forward to the future, with the further clarification of the growth logic and valuation logic, domestic AI leaders represented by Alibaba will fully benefit from the β dividend of the rapid expansion of the industry and the performance improvement and valuation enhancement brought about by their own strength.
In the context of limited high-end computing power, domestic large-scale model enterprises have achieved model capability breakthroughs and cost reduction through algorithm innovation, and the models are open source. This fully demonstrates the talent and technical reserve strength of the domestic AI technology industry, successfully opening the ChatGPT moment of the domestic AI industry, bringing a positive β expectation to the market and continuously driving the market sentiment to recover.
Based on the experience of the overseas market in the past two years, when the AI industry enters a rapid growth stage, enterprises with strong technical strength and a definite profit logic represented by NVIDIA will become the most core beneficiaries. At the same time, considering that this round of AI growth in China has a greater cost advantage than that in previous overseas markets, it may accelerate the development and implementation of AI applications, thereby further increasing the demand for AI computing power or cloud supporting services, and promoting the rapid improvement of the AI business of the underlying cloud vendors.
In this context, Alibaba's "AI + Cloud" strategic layout will fully benefit from the expansion dividend of the industry. On the one hand, in terms of large-scale models, based on its strong technical advantages, Alibaba's basic large-scale model Tongyi Qianwen Flagship Edition Qwen2.5-Max is at the industry-leading level in many authoritative benchmark evaluations. Currently, the global derivative models of Tongyi Qianwen exceeded 90,000 as of the end of January, ranking first in the mainstream organizations. More than 290,000 enterprises and developers have called the Tongyi API in the Alibaba Cloud Bailian platform. Recently, the market even reported that Alibaba is cooperating with Apple to develop AI functions for Chinese iPhones, further verifying the strong competitiveness and leading position of Alibaba's AI capabilities in China and the world. Moreover, if the cooperation progresses smoothly, according to Citigroup's view, Alibaba will benefit from the influx of a large number of application developers who choose Tongyi Qianwen or Alibaba Cloud as the model or cloud service, which is expected to further open up unlimited monetization opportunities related to artificial intelligence or the cloud.
On the other hand, as the largest cloud service provider in China, Alibaba has strong technical and scale advantages, and will benefit from the surge in demand for computing power under the rapid expansion of the industry. Its performance is expected to continue to improve. At the same time, Alibaba's investment in fixed assets in this quarter exceeded 31 billion yuan, significantly higher than the market's original expectation of just over 14 billion yuan. Moreover, according to the confirmation of Alibaba's management in this conference call, Alibaba's investment in cloud and AI infrastructure in the next three years is expected to exceed the sum of the past ten years. This represents the first time that a Chinese technology giant has shown the capital expenditure intensity matching that of North American cloud vendors, meaning that the global computing power competition will enter a new stage led by domestic technology giants, which is expected to further increase the market's optimism and drive valuation expansion.
How Much Upside Potential Is There?
After refocusing on the main business in the past year, Alibaba's business structure and profit logic have become increasingly clear, eliminating the market's pessimism to a certain extent and bringing about a valuation repair. Since DeepSeek ignited the domestic AI industry in January this year, the market has begun to revalue the narrative logic of the Chinese AI industry and related technology companies. As a leading participant, Alibaba's stock price has also shown an accelerating recovery trend. Under the double favorable conditions, the company's cumulative stock price increase has been close to 90% since January last year.
So, after the significant rebound in the early stage, does Alibaba still have the basis for a continued upward trend in the future?
By disassembling Alibaba's stock price rally in the past year, the valuation repair driven by the restoration of core businesses and the improvement of profitability brought about by focusing on the main business is about 20%, and the valuation improvement brought about by the reshaping of the valuation logic driven by AI is about 70%. Although the current change in the AI business valuation logic has contributed a considerable market performance for the company, it is expected that this valuation reshaping is likely still in its infancy.
On the one hand, as mentioned earlier, after the domestic AI business enters a rapid expansion stage, Alibaba, as the largest cloud provider, its overall valuation logic begins to shift from an e-commerce giant to an AI core player, thereby driving the valuation reshaping of Alibaba Cloud's business. The current market performance is precisely based on this logic. However, even after the previous rise, the current valuation of Alibaba Cloud has not reached the average level of US-listed SAAS cloud providers, indicating that even without considering the leading premium, the valuation reshaping stage of Alibaba Cloud is far from over.
On the other hand, in view of past experience, after AI enters a rapid expansion stage, infrastructure providers such as computing power and cloud providers have the most definite profit logic. Considering Alibaba's comprehensive competitiveness in the domestic cloud business and the huge capital expenditure on computing power in the next few years, it is expected that Alibaba Cloud will fully benefit from the dividend brought by the expansion of the domestic AI industry, driving the unexpected growth of the cloud business performance, thereby enabling the valuation of Alibaba Cloud to further shift from a simple valuation reshaping to a two-wheel drive of performance and valuation.
According to JPMorgan Chase's calculation, if calculated based on Microsoft's expected enterprise value/revenue multiple of 10.5 times in 2025, the value of Alibaba Cloud is expected to reach 185 billion US dollars, corresponding to a comprehensive valuation of 391 billion US dollars, indicating that there is still more than 20% upside potential compared to the current US stock market value.
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