The performance was basically in line with expectations, maintaining a high level of buyback: FY2Q25 revenue was RMB 236.5 billion, up 5% year on year, slightly lower than market expectations of 1%; adjusted net profit was 36.5 billion yuan, down 9% year on year, better than market expectations of 3%. FY2Q25 repurchased 4.1 billion US dollars of shares. The number of shares in circulation decreased by 2.1% month-on-month, leaving about 22 billion US dollars in the repurchase plan amount.

Taotian grew steadily, and international e-commerce remained strong: FY2Q25 Taotian Group's revenue increased 1% year over year to RMB 99 billion, of which customer management revenue increased 2% year over year, mainly due to GMV growth, and the take rate remained stable year over year; the adjusted EBITA rate fell to 45%, mainly due to increased investment related to user experience. FY2Q25 GMV growth was mainly driven by a year-on-year double-digit increase in order volume. The frequency of purchases continued to increase, and the average order amount declined. During the “Double Eleven” period, Taotian GMV achieved strong growth, and the number of buyers reached a record high. The number of 88VIP members continued to achieve double-digit year-on-year growth, reaching 46 million. The company's open strategy for payment and logistics brings consumers a better shopping experience and is expected to bring the company an increase in users. With the steady increase in software service fees and the merchant penetration rate for sitewide promotion, it is expected to offset the growth of new business models with low monetization rates, and the company's future monetization rate may remain relatively stable. FY2Q25's international commercial revenue increased 29% year over year to RMB 31.7 billion, mainly driven by AliExpress's Choice business; the adjusted EBITA rate was -9%, and losses narrowed month-on-month, the economic efficiency of Choice units improved month-on-month, and Lazada's operating losses were drastically reduced. FY2Q25 AliExpress launched an overseas hosting model, using local inventory to enhance product abundance and optimize contract fulfillment efficiency. The synergy with Cainiao Cross-border Logistics has significantly shortened the average contract fulfillment time compared to the previous month, helping to enhance AliExpress's competitiveness.

Cloud business growth accelerated, and profits continued to improve: FY2Q25 cloud business revenue increased 7% year over year to RMB 29.6 billion, achieving accelerated growth. Among them, revenue from public cloud products achieved double-digit growth and revenue from AI-related products achieved three-digit growth; the adjusted EBITA rate improved to 9%.

The company continues to invest in AI infrastructure and other aspects to maintain its leading position in the market. With the rapid growth of AI-related products, we expect the cloud business to achieve double-digit growth in the second half of the fiscal year.

Maintain the “hold” rating and adjust the target price to HK$91/$94: We slightly adjusted the FY25E/FY26E revenue forecast to 990.5 billion/1064.4 billion dollars, adjusted the net profit forecast to 140.7 billion/145.4 billion, and adjusted the target price to 91 HKD/94 dollars, corresponding to FY25E/FY26E11.6x/11.2x P/E. Considering that the competitive environment in the industry is still fierce, the company's continued investment on the merchant and user side may still put pressure on short-term revenue and profits, and maintain a “holding” rating.

Investment risks: Competition in the industry intensifies; business growth falls short of expectations; profits are weaker than expected.