With the increase in the market value of equity holdings, Alibaba's Q2 net profit surged 63% year-on-year, and revenue grew 5% year-on-year | Financial Report Insights

Wallstreetcn
2024.11.15 13:24
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Thanks to the changes in the valuation of equity investments at market value, the reduction in investment impairment, and the improvement in the company's operating profit, the net profit attributable to ordinary shareholders increased by 63% year-on-year. During this year's Double 11 period, Taobao and Tmall's GMV achieved strong growth, with the number of buyers reaching a record high

Alibaba's second-quarter revenue fell short of expectations, but thanks to changes in the valuation of equity investments, a decrease in investment impairment, and an increase in operating profit, the net profit attributable to ordinary shareholders grew by 63% year-on-year.

On November 15, Alibaba Group released its Q2 financial report for the fiscal year 2025:

1) Key Financial Data

  • Revenue: Revenue was RMB 236.503 billion, a year-on-year increase of 5%, below the expected RMB 239.43 billion.
  • Net Profit: Net profit was RMB 43.547 billion, a year-on-year increase of 63%.
  • Net Profit Attributable to Ordinary Shareholders: RMB 43.874 billion, a year-on-year increase of 58%.
  • EBITA: Adjusted EBITA decreased by 5% to RMB 40.561 billion.
  • Earnings Per Share: RMB 15.06, higher than the expected RMB 14.93.
  • Cash Flow: The net cash flow from operating activities was RMB 31.438 billion, a decrease of 36% compared to RMB 49.231 billion in the same period of 2023.

2) Business Revenue Data:

  • Taotian Group: Revenue was RMB 98.994 billion, a year-on-year increase of 1%, with revenue from wholesale business in China increasing by 18%.
  • Alibaba Cloud: Revenue was RMB 29.61 billion, a year-on-year increase of 7%, compared to RMB 26.549 billion in the previous quarter, a quarter-on-quarter increase of 11.5%.
  • International Digital Commerce Group: Revenue was RMB 31.672 billion, a year-on-year increase of 29%.
  • Cainiao Group: Revenue was RMB 24.647 billion, a year-on-year increase of 8%.
  • Local Life Group: Revenue was RMB 17.725 billion, a year-on-year increase of 14%.

Alibaba Group's Chief Financial Officer Xu Hong stated:

"This quarter's revenue growth was driven by the Taotian Group's steady increase in monetization rates, including service fees based on GMV and merchants adopting our marketing tools for full-site promotion. In line with our strategy, we continue to invest in our core business and improve operational efficiency.

This quarter, we repurchased $4.1 billion in shares, further reducing the number of outstanding shares by 2.1% compared to the end of June, delivering better returns for shareholders."

After the financial report was released, Alibaba's U.S. stock rose in pre-market trading, currently up over 4%.

Alibaba Cloud's Growth Accelerates for Four Consecutive Quarters, Profit Soars by 89%

In the second fiscal quarter, Alibaba Cloud's commercialization revenue growth accelerated, with quarterly revenue increasing by 7% year-on-year, continuing to be driven by double-digit growth in public cloud services. Revenue from AI-related products has achieved triple-digit year-on-year growth for five consecutive quarters; adjusted EBITA increased by 89% year-on-year.

This quarter, the new generation open-source model Qwen 2.5 from Tongyi Qianwen was released. As of September, the cumulative downloads of the Tongyi open-source model have surpassed 40 million, making it the world's largest family of generative language models.

The financial report shows that from its first open-source release in 2023 to September 30, 2024, there are over 70,000 derivative models based on the Tongyi family developed in the Hugging Face community.

Alibaba Group CEO Eddie Wu stated:

“The cloud business has accelerated growth compared to previous quarters, with public cloud product revenue achieving double-digit growth and AI-related product revenue achieving triple-digit growth.

We are more confident in the prospects of our core business than in the past and will continue to invest to support long-term growth. The operational efficiency of other businesses continues to improve, with most businesses either enhancing profitability or reducing losses.”

Double 11 Sees Record Number of Buyers, 88VIP Membership Reaches 46 Million

From July to September, the order volume on Taotian grew by double digits year-on-year, driving online GMV growth, while the number of 88VIP members continued to grow by double digits to 46 million. During this year's Double 11 period, Taobao and Tmall's GMV achieved strong growth, with the number of buyers reaching a historical high, and 589 brands achieving sales exceeding 100 million throughout the cycle, setting a new record.

Eddie Wu stated:

“This quarter, the Taotian business continued to invest in user experience, enriching product offerings to better serve consumers. We have established long-term collaborations with technology peers to expand payment and logistics services on the Taobao and Tmall platforms, which is expected to bring significant incremental effects to the overall platform.”

The strong performance of active users and online GMV lays a solid foundation for the platform's commercialization level improvement. The financial report shows that the take rate of Taotian Group remained stable year-on-year this quarter. The merchant penetration rate of the AI-driven marketing tool "Full Site Promotion" steadily increased, helping merchants enhance marketing efficiency and further rhythmically improve the level of commercialization

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