Alibaba Earnings Review | Cloud and International Business Soars as China E-Commerce Loses Ground
$Alibaba(BABA)$
Due to fierce competition in China, its Chinese e-commerce business recorded single-digit revenue growth, but EBITA fell by 21%. Its international business revenue slowed, but losses narrowed significantly. Meanwhile, its cloud business exceeded expectations, with revenue growth accelerating from 17.7% last quarter to 25.8%.
Core Financial Indicators
Revenue was RMB 247.65 billion (US$34.57 billion), marking a 2% increase year-over-year. Excluding revenue from the divested businesses of Sun Art and Intime, revenue on a like-for-like basis would have grown by 10% year-over-year.
Net income was RMB 42.38 billion (US$5.92 billion), showing an increase of 76% year-over-year, primarily due to mark-to-market changes from equity investments.
Non-GAAP net income for the quarter ended June 30, 2025, was RMB 33.51 billion (US$4.68 billion), a decrease of 18% compared to RMB 40.69 billion in the same quarter of 2024.
Non-GAAP diluted earnings per share was RMB 1.84 (US$0.26 or HK$2.02), representing a decrease of 10% year-over-year.
Business Segment Breakdown
Alibaba China E-commerce Group
In the three months ending June 30, 2025, Alibaba China E-commerce Group achieved overall growth, with total revenue reaching 140.07 billion yuan (approximately $19.55 billion), a year-over-year (YoY) increase of 10%.
Within the segment, revenue from customer management amounted to 89.25 billion yuan (approximately $12.46 billion), marking a 10% increase YoY; revenue from direct sales, logistics, and other services was 29.36 billion yuan (approximately $4.09 billion), up by 7% YoY, making the total revenue for the e-commerce segment 118.58 billion yuan (approximately $16.55 billion), a 9% increase YoY.
Quick commerce business revenue was 14.784 billion yuan (approximately $2.064 billion), up by 12% YoY.
China commerce wholesale business revenue reached 6.711 billion yuan (approximately $937 million), showing a 13% increase YoY.
Alibaba International Digital Commerce Group
Revenue from AIDC grew 18.6% year-over-year to RMB 34.74 billion (US$4.85 billion), primarily driven by strong performance in cross-border businesses.
AIDC remained focused on operating efficiency, leading to significantly narrowed losses both year-over-year and quarter-over-quarter.
In fact, the significant reduction in losses for Alibaba's international business was anticipated. Taking Southeast Asia as an example, after Alibaba acquired Lazada, there were notable differences between the corporate cultures and management styles of Alibaba and the original Lazada. Frequent management changes led to a mass exodus of the Southeast Asian team. Initially, Alibaba focused too heavily on integrating Lazada with its ecosystem, aiming to quickly replicate its successful model in China, while not paying sufficient attention to the unique characteristics and changes of the Southeast Asian market. This approach caused it to quickly fall behind Shopee, which is under Sea Limited.
The turning point came when Alibaba promoted Dong Zheng, the CEO of Lazada Thailand, to CEO of the entire Lazada Group. After taking office, Dong Zheng replaced many positions, previously held by Alibaba's executives from China, with outstanding local employees from various Lazada branches in Southeast Asia who had relevant local experience. This strategic shift led to Lazada turning a profit in the previous fiscal year.
Cloud Intelligence Group
Revenue from the Cloud Intelligence Group was RMB 33.40 billion (US$4.66 billion), an increase of 26% year-over-year. This momentum was primarily driven by public cloud revenue growth, including the increasing adoption of AI-related products. AI-related product revenue maintained triple-digit year-over-year growth for the eighth consecutive quarter.
Alibaba is currently leveraging Lingyang(Antelope) Company to handle enterprise-level AI Agent clients, particularly in e-commerce-related cloud customer service, which could be one of the new growth curves for its cloud business.
Summary
Overall, the earnings report was mixed, with the Chinese e-commerce business performing below expectations, international business losses significantly narrowing, and the cloud business greatly exceeding expectations.
The stock price increased by 3.5% after the earnings release.
Valuation:
Currently, Alibaba's PE ratio is 15.91, which is below the industry average of 30.15, and is at the 13th percentile historically.
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