BABA(BABA) - 2025 Q4 - Annual Report

Financial and Business Highlights Key Financial and Business Highlights Alibaba Group reported strong Q4 and FY2025 results, with revenue growth driven by its 'user first, AI-driven' strategy and accelerated core business performance - The company's 'user first, AI-driven' strategy is proving effective, with accelerated growth in core businesses. Cloud Intelligence Group's quarterly revenue growth hit 18%, and AI-related product revenue saw triple-digit growth for the seventh consecutive quarter[5] Q4 FY2025 Financial Highlights | Metric | Amount (RMB millions) | YoY Change | | :--- | :--- | :--- | | Revenue | 236,454 | 7% | | Income from operations | 28,465 | 93% | | Adjusted EBITA | 32,616 | 36% | | Net income | 11,973 | 1203% | | Non-GAAP net income | 29,847 | 22% | Full Fiscal Year 2025 Financial Highlights | Metric | Amount (RMB millions) | YoY Change | | :--- | :--- | :--- | | Revenue | 996,347 | 6% | | Income from operations | 140,905 | 24% | | Adjusted EBITA | 173,065 | 5% | | Net income | 125,976 | 77% | | Non-GAAP net income | 158,122 | Stable | - Free cash flow for Q4 FY2025 decreased by 76% YoY to RMB 3,743 million, mainly due to increased cloud infrastructure expenditure. For the full fiscal year, free cash flow decreased 53% to RMB 73,870 million for the same reason[8][14] Business and Strategic Updates Strategic updates for Q4 FY2025 highlight strong segment performance, with growth in core businesses and narrowed losses across several groups Taobao and Tmall Group Taobao and Tmall Group saw customer management revenue grow 12% due to improved monetization and increased 88VIP membership - Customer management revenue grew 12% YoY to RMB 71,077 million in Q4, driven by an improved take rate from services like the Quanzhantui marketing tool[10] - The number of 88VIP members, the highest-spending consumer group, surpassed 50 million, showing double-digit YoY growth[13] - The company continued to invest in user experience enhancements, including price-competitive products, customer service, and AI applications, leading to stronger new consumer growth[11] Alibaba International Digital Commerce Group (AIDC) AIDC revenue grew 22% driven by strong cross-border business, with narrowed losses and a focus on key international regions - AIDC revenue grew 22% YoY to RMB 33,579 million in Q4, driven by strong cross-border business performance. The segment's losses narrowed year-over-year due to improved operational efficiency[15] - The strategic focus remains on key regions like select European markets and the Gulf Region, with AliExpress and Trendyol diversifying product offerings by engaging local merchants[16] Cloud Intelligence Group Cloud Intelligence Group's revenue increased 18%, fueled by continued triple-digit growth in AI-related products and open-sourced models - Quarterly revenue increased 18% YoY to RMB 30,127 million, with public cloud revenue growing even faster, driven by AI product adoption[17] - AI-related product revenue maintained triple-digit YoY growth for the seventh consecutive quarter. The AI coding assistant, Lingma, has seen strong adoption and revenue growth[18] - In April, the company launched and fully open-sourced the Qwen3 series of AI models, including a flagship MoE model, to drive innovation and adoption[20] Cainiao Smart Logistics Network Limited Cainiao's quarterly revenue decreased 12% due to increased integration of logistics offerings into the company's e-commerce businesses - Quarterly revenue decreased by 12% YoY to RMB 21,573 million, a result of increasing integration of logistics offerings into the company's e-commerce businesses[21] Local Services Group Local Services Group revenue grew 10% driven by order growth from Amap and Ele.me, with overall losses continuing to narrow - Quarterly revenue grew 10% YoY to RMB 16,134 million, driven by order growth from both Amap and Ele.me. Overall losses continued to narrow YoY due to increased scale and improved unit economics[23] Digital Media and Entertainment Group Digital Media and Entertainment Group revenue increased 12%, achieving positive adjusted EBITA primarily due to Youku's improved profitability - Quarterly revenue increased 12% YoY to RMB 5,554 million. The segment's adjusted EBITA turned positive during the quarter, primarily driven by Youku's improved profitability[24] Shareholder Returns Alibaba demonstrated commitment to shareholder returns through significant share repurchases and a substantial dividend distribution in FY2025 - In fiscal year 2025, the company repurchased US$11.9 billion of shares, resulting in a 5.1% net reduction in outstanding shares after accounting for ESOP issuances[25] - The board approved a total dividend of US$4.6 billion, equivalent to US$2.00 per ADS. This consists of an annual regular dividend of US$1.05 per ADS and a one-time extraordinary dividend of US$0.95 per ADS[26] March Quarter 2025 Financial Performance Summary Financial Results (Quarterly) Alibaba's Q4 FY2025 revenue grew 7% to RMB 236.5 billion, with operating income surging 93% and net income increasing significantly due to investment changes March Quarter 2025 Financial Summary | Metric | Q4 2024 (RMB millions) | Q4 2025 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 221,874 | 236,454 | 7% | | Income from operations | 14,765 | 28,465 | 93% | | Operating margin | 7% | 12% | - | | Adjusted EBITA | 23,969 | 32,616 | 36% | | Net income | 919 | 11,973 | 1203% | | Non-GAAP net income | 24,418 | 29,847 | 22% | | Non-GAAP diluted earnings per ADS | 10.14 | 12.52 | 23% | Segment Results (Quarterly) Q4 FY2025 segment results show revenue growth across most groups, notably AIDC and Cloud Intelligence, with several segments narrowing losses or achieving profitability Q4 FY2025 Revenue by Segment (RMB millions) | Segment | Q4 2025 Revenue (RMB millions) | YoY Change | | :--- | :--- | :--- | | Taobao and Tmall Group | 101,369 | 9% | | Alibaba International Digital Commerce Group | 33,579 | 22% | | Cloud Intelligence Group | 30,127 | 18% | | Cainiao Smart Logistics Network Limited | 21,573 | (12)% | | Local Services Group | 16,134 | 10% | | Digital Media and Entertainment Group | 5,554 | 12% | Q4 FY2025 Adjusted EBITA by Segment (RMB millions) | Segment | Q4 2025 Adjusted EBITA (RMB millions) | YoY Change/Improvement | | :--- | :--- | :--- | | Taobao and Tmall Group | 41,749 | 8% | | Alibaba International Digital Commerce Group | (3,574) | 13% (loss narrowed) | | Cloud Intelligence Group | 2,420 | 69% | | Cainiao Smart Logistics Network Limited | (606) | 55% (loss narrowed) | | Local Services Group | (2,316) | 28% (loss narrowed) | | Digital Media and Entertainment Group | 36 | N/A (turned profitable) | Other Financial Results (Quarterly) Q4 FY2025 saw improved cost of revenue percentage, increased sales and marketing, reduced share-based compensation, and a significant decrease in free cash flow - Cost of revenue as a percentage of revenue (excluding share-based compensation) decreased from 66.3% to 61.4% YoY, mainly due to scaling back low-margin direct sales and improving monetization[59] - Sales and marketing expenses as a percentage of revenue increased from 12.7% to 15.0% YoY (excluding share-based compensation), reflecting increased investments in e-commerce businesses[61] - Total share-based compensation expense decreased 52% YoY to RMB 3,435 million, primarily due to a reduction in awards granted and a shift towards long-term cash incentives[63][64][66] - Free cash flow decreased 76% YoY to RMB 3,743 million, mainly attributed to increased capital expenditure on cloud infrastructure[84] - The number of employees decreased to 124,320 from 194,320 in the previous quarter, mainly due to the sale and deconsolidation of Sun Art[87] Fiscal Year 2025 Financial Performance Summary Financial Results (Annual) Alibaba's FY2025 revenue grew 6% to RMB 996.3 billion, with operating income up 24% and net income increasing significantly, while non-GAAP net income remained stable Fiscal Year 2025 Financial Summary | Metric | FY 2024 (RMB millions) | FY 2025 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 941,168 | 996,347 | 6% | | Income from operations | 113,350 | 140,905 | 24% | | Operating margin | 12% | 14% | - | | Adjusted EBITA | 165,028 | 173,065 | 5% | | Net income | 71,332 | 125,976 | 77% | | Non-GAAP net income | 157,479 | 158,122 | 0% | | Non-GAAP diluted earnings per ADS | 62.23 | 65.41 | 5% | Segment Results (Annual) FY2025 segment results show varied performance, with strong revenue growth in AIDC and Cloud Intelligence, but also widened losses in AIDC and Cainiao's EBITA decline FY2025 Revenue by Segment (RMB millions) | Segment | FY2025 Revenue (RMB millions) | YoY Change | | :--- | :--- | :--- | | Taobao and Tmall Group | 449,827 | 3% | | Alibaba International Digital Commerce Group | 132,300 | 29% | | Cloud Intelligence Group | 118,028 | 11% | | Cainiao Smart Logistics Network Limited | 101,272 | 2% | | Local Services Group | 67,076 | 12% | | Digital Media and Entertainment Group | 22,267 | 5% | FY2025 Adjusted EBITA by Segment (RMB millions) | Segment | FY2025 Adjusted EBITA (RMB millions) | YoY Change/Improvement | | :--- | :--- | :--- | | Taobao and Tmall Group | 196,232 | 1% | | Alibaba International Digital Commerce Group | (15,137) | (88)% (loss widened) | | Cloud Intelligence Group | 10,556 | 72% | | Cainiao Smart Logistics Network Limited | 302 | (78)% | | Local Services Group | (3,689) | 62% (loss narrowed) | | Digital Media and Entertainment Group | (554) | 64% (loss narrowed) | Other Financial Results (Annual) FY2025 saw improved cost of revenue percentage, increased sales and marketing, reduced share-based compensation, and a significant decrease in free cash flow due to cloud investments - Cost of revenue as a percentage of revenue (excluding share-based compensation) decreased from 62.0% to 59.8% YoY, due to scaling back low-margin direct sales and improved efficiency[119] - Sales and marketing expenses as a percentage of revenue increased from 12.0% to 14.2% YoY (excluding share-based compensation), due to increased investments in e-commerce[122] - Total share-based compensation expense decreased 16% YoY to RMB 15,577 million, mainly due to a reduction in awards granted[124][125][127] - Free cash flow decreased 53% YoY to RMB 73,870 million, mainly due to increased capital expenditure on cloud infrastructure[149] - As of March 31, 2025, cash, cash equivalents, and short-term investments totaled RMB 597,132 million[148] Financial Statements and Reconciliations Unaudited Consolidated Financial Statements Unaudited statements as of March 31, 2025, show total assets of RMB 1,804.2 billion and total equity of RMB 1,078.4 billion, with significant cash flows from operations Consolidated Balance Sheet Highlights (as of March 31, 2025) | Item | Amount (RMB millions) | | :--- | :--- | | Total Current Assets | 674,049 | | Total Assets | 1,804,227 | | Total Current Liabilities | 435,346 | | Total Liabilities | 714,121 | | Total Equity | 1,078,393 | Consolidated Cash Flow Highlights (FY 2025) | Item | Amount (RMB millions) | | :--- | :--- | | Net cash provided by operating activities | 163,509 | | Net cash used in investing activities | (185,415) | | Net cash used in financing activities | (76,215) | Reconciliations of Non-GAAP Measures Detailed reconciliations of GAAP to non-GAAP measures are provided for FY2025, including adjustments for Net Income to Adjusted EBITA, Non-GAAP Net Income, and Free Cash Flow - For FY2025, Net Income (RMB 125,976 million) is reconciled to Adjusted EBITA (RMB 173,065 million) by adding back items such as income tax, interest expense, share-based compensation, and amortization, while subtracting interest/investment income[178] - For FY2025, Net Income (RMB 125,976 million) is reconciled to Non-GAAP Net Income (RMB 158,122 million) by adjusting for non-cash share-based compensation, amortization, investment gains/losses, and impairment charges[179] - For FY2025, Net cash provided by operating activities (RMB 163,509 million) is reconciled to Free Cash Flow (RMB 73,870 million) primarily by subtracting purchases of property and equipment (RMB 84,278 million)[185] Other Information and Disclosures Liquidity and Capital Resources Alibaba maintained strong liquidity with RMB 597.1 billion in cash and investments, issuing new notes to optimize capital structure, leading to an increased debt-to-EBITDA ratio - As of March 31, 2025, the company held RMB 597,132 million in cash, cash equivalents, and other treasury investments unrestricted for use[194] - In FY2025, the company issued US$5.0 billion in convertible senior notes (May 2024) and US$2.65 billion plus RMB 17 billion in unsecured senior notes (November 2024)[196][197] - The Group's total debts to Adjusted EBITDA ratio increased to 1.14 as of March 31, 2025, up from 0.89 a year prior[198] Significant Investments, Acquisitions, and Disposals Key investments include a 33% stake in Ant Group, while significant disposals involved the sale of stakes in Sun Art and Intime during FY2025 - The company holds a 33% equity interest in Ant Group and received RMB 2,630 million in dividends from it during FY2025[199] - Completed the sale of its ~74% stake in Sun Art for approximately HKD 9.7 billion (RMB 9.1 billion)[202] - Substantially completed the sale of its ~99% stake in Intime for approximately RMB 7.4 billion[203] Share Repurchases In FY2025, Alibaba repurchased approximately 1,078 million ordinary shares for US$10.7 billion across various markets, with all repurchased shares cancelled FY2025 Share Repurchases | Market | Shares Repurchased (million) | Consideration | | :--- | :--- | :--- | | Hong Kong Stock Exchange | 343.1 | HK$ 25.3 billion | | New York Stock Exchange | 735.2 | US$ 7.4 billion | | Privately Negotiated | 118.6 | US$ 1.2 billion | | Total | ~1,197 | ~US$ 11.9 billion | Corporate Governance and Other Disclosures The company confirmed Corporate Governance Code compliance, with the audit committee reviewing results, and disclosed increased capital expenditures for infrastructure and remuneration policies - The company complied with all applicable provisions of the Corporate Governance Code from its primary listing conversion on August 28, 2024, to March 31, 2025[222][223] - Capital expenditures totaled RMB 85,972 million in FY2025, a significant increase from RMB 32,087 million in FY2024, mainly for cloud, e-commerce, and logistics infrastructure[210] - The audit committee has reviewed the unaudited annual results, which have been agreed by the auditor, PricewaterhouseCoopers, to the draft financial statements[226][227]