On the evening of August 15th, Alibaba Group released its Q1 FY2025 (ending June 30, 2024) financial report.

The financial report shows that Alibaba's revenue was 243.24 billion yuan during the reporting period, a year-on-year increase of 4%; operating profit was 35.989 billion yuan, a year-on-year decrease of 15%; the adjusted EBITA decreased by 1% year-on-year to 45.035 billion yuan; the net profit attributable to ordinary shareholders was 24.269 billion yuan, and the net profit was 24.022 billion yuan, a year-on-year decrease of 27%.

On the Q1 FY2025 analyst conference call, Alibaba Group CEO Wu Yongming said that besides the two core businesses of e-commerce and cloud, the group has carefully evaluated and analyzed the product capabilities and market competition of other important businesses, and re-adjusted its business strategy. "For most businesses, improving commercial capabilities will be a priority while maintaining product competitiveness."

"We evaluated that most businesses will gradually achieve breakeven within 1-2 years and gradually begin to contribute to scalable profitability." Wu Yongming said.

Increase investment in e-commerce.

The total transaction volume (GMV) of Taotian Group increased by a high-single-digit percentage year-on-year, and the number of buyers and purchase frequency continued to grow, with a year-on-year increase in order volume in double digits. Among them, the number of 88VIP members continued to grow at a double-digit rate, exceeding 42 million. This means that in the competitive e-commerce market, Taobao has maintained a stable market share.

However, Taotian Group's revenue declined. During the reporting period, Taotian Group contributed 113.373 billion yuan, a decrease of 1.37% compared to the same period last year's 114.953 billion yuan.

Tmall Supermarket, Tmall International, and other direct sales businesses contributed 27.306 billion yuan, a year-on-year decrease of 9.48% compared to the same period last year's 30.167 billion yuan. Alibaba explained in the financial report that this was mainly due to increased investment in consumer retention, purchase frequency, and technological infrastructure, and was partially offset by losses from several businesses.

It is worth noting that Taotian Group may achieve revenue growth by adjusting the operating rules for merchants. Starting from September 1 this year, Alibaba will charge all merchants, including Taobao and Tmall, a "basic software service fee" of 0.6% of the transaction amount, and cancel the annual fees of 0.03 million and 0.06 million charged only to Tmall merchants. At the same time, Xianyu also announced that it will charge all sellers a 0.6% basis software service fee starting from September 1, with a maximum charge of 60 yuan per transaction.

In addition, on July 26th, Taobao took the lead in announcing the "loosening" of only refunds, optimizing the "only refunds" strategy for all merchants; on August 9th, Taobao officially launched the "only refunds" optimization strategy for all merchants.

According to Alibaba, data shows that in the first week after the strategy was launched, thanks to the upgrade of the model for identifying abnormal behavior of "only refunds" and the enhancement of merchants' autonomy in after-sales service, the intervention of the entire Taobao Tmall platform in the "only refund" scene for "goods received only refund" has been reduced by 20%, and the number of unreasonable "only refunds" has sharply decreased.

"Comprehensively considering internal and external information, we have seen changes in the market share of the e-commerce market, reflecting the trend of Taotian Group's gradually stabilizing market share, which further verifies the effectiveness of investing in the user shopping experience." On the Q1 FY2025 analyst conference call, Alibaba Group CE Wu Yongming said that the priority is to focus on improving users' buying experience, thereby driving users' purchase frequency.

AI and price reduction drive Aliyun's growth.

During the reporting period, the revenue contributed by the Yunzhijia Group increased from 25.065 billion yuan in the same period last year to 26.549 billion yuan, a year-on-year increase of 6%, of which revenue from AI-related products achieved triple-digit growth, and public cloud business achieved double-digit growth.

At the same time, Aliyun's profits rose accordingly, with adjusted EBITA profits growing 155% year-on-year, reaching 2.337 billion yuan in a single quarter, compared to RMB 0.916 billion in 2023.

Alibaba explained in the financial report that the growth was mainly due to focusing on the public cloud strategy and improving operating efficiency, but profit growth was partially offset by continued investment in customers and technology.

Alibaba highlighted in its financial report that Aliyun is focusing on the "AI-driven and public cloud-first" strategy, continuously expanding its technological and scale advantages. The financial report shows that Aliyun's external revenue (excluding cloud revenue from Alibaba-related companies) also increased by 6% year-on-year, mainly due to the increase in adoption rates of AI-driven related products and double-digit growth in public cloud businesses. Among them, AI-related product revenue continued to maintain triple-digit growth in the quarter, after achieving triple-digit growth in the previous quarter.

At the same time, Alibaba Cloud significantly reduced the prices of nine main large models of Tongyibot, which also stimulated the usage of Alibaba Cloud's AI products. The financial report discloses that the number of paying users of Alibaba Cloud's AI platform Baling has increased by more than 200% compared with the previous quarter.

"We are confident that the revenue from customers outside the Alibaba Group for Aliyun will recover double-digit growth in the second half of this fiscal year and accelerate gradually. With high-intensity R&D investment, we will maintain sustainable and profitable growth, becoming a healthy-profitable and market-share-leading cloud service provider that can provide competitive, sustainable gross margin, and repeatable revenue public cloud products; meanwhile, we will enhance the synergies of cloud products in the AI era, both to help old customers practice new AI needs on Aliyun and let the AI-native enterprise grow and succeed on Aliyun." Wu Yongming said at the financial report meeting that they will continue to optimize cloud product structure and focus on public cloud products with competitiveness, sustainable gross margin, and repeatable revenue, while strengthening the synergies of cloud products in the AI era.

It is worth mentioning that Alibaba Cloud's technology will achieve remote video production and transmission through cloud infrastructure at the 2024 Paris Olympics, and will replace satellites as the main transmission method for the first time in Olympic history. Two-thirds of the broadcasters use Alibaba Cloud to transmit live Olympic signals worldwide, covering billions of viewers. At the same time, Alibaba Cloud's AI technology also goes deep into 14 Olympic venues and assists in event replay.

Alibaba International's high-speed growth brings profit to Lazada.

Alibaba International's e-commerce business maintains strong growth, with revenue increasing by 32% year-on-year to RMB 29.293 billion, with international retail business growing rapidly by 38%.

Alibaba explained in the financial report that the strong performance was driven by cross-border business growth, especially the Choice business of Tmall Global. During the reporting period, Tmall Global increased the "overseas hosting" model and has joined hands with three major overseas warehouses.

Under the Alibaba International business, the cross-border e-commerce platform Lazada has achieved profitability, recording a positive EBITDA (earnings before interest, taxes, depreciation, and amortization) in July of this year. As early as 2022, Lazada announced that its Thai business had achieved profitability. Since 2023, Alibaba's financial report has also repeatedly revealed that Lazada's orders have continued to narrow their losses.

"We hope to quickly integrate the supply of Alibaba's domestic platforms for overseas expansion, such as Taobao, 1688, etc. whilst maintaining market share according to market conditions, and continuously optimizing our profit level," said Jiang Fan, CEO of Alibaba's International Digital Business Group (AIDC) during the analyst conference call. Currently, Alibaba is mainly doing some business model upgrades and transformations. In the next few quarters, it will continue to optimize efficiency and pursue healthy growth.

Efficiency improvement across multiple businesses and significant reduction in losses.

The steady growth of Alibaba International's business has also driven revenue growth and supporting construction investment of Cainiao logistics. Cainiao's revenue increased by 16% year-on-year to RMB 26.811 billion, mainly from the revenue growth brought by cross-border logistics performance and operational efficiency improvement.

Although some businesses under Alibaba International have achieved breakthroughs and growth, there are still many regions and associated cost inputs to be opened up to enter the global market.

Similarly, the local lifestyle sector has also performed well, driven by the growth of Ele.me and Gaode orders, with a year-on-year revenue growth of 12% to RMB 16.229 billion in this quarter; adjusted EBITDA losses have significantly reduced to RMB 0.386 billion compared with RMB 1.982 billion in the same period in 2023.

Specifically, under the drive of the improvement of economic efficiency and expansion of transaction scale of Ele.me, the loss of the home business has continued to narrow this quarter. In this quarter, Ele.me also announced the "Surging Plan" and released the TRUST business model. The Surging Plan is a multi-resource endeavour that included innovation projects such as "offline intelligent location selection" and "corporate-end scene exploration" and all kinds of subsidies for new stores to help restaurant merchants understand its consumers, enhance data capabilities and drive home business growth.

In addition, the operating performance of Sunart Retail, Hema, Ali Health, and Lingxiu Entertainment have also improved this quarter.