BUY Ronald Keung, CFA +852-2978-0856 | ronald.keung@gs.com Goldman Sachs (Asia) L.L.C. Steve Qiu 26 November 2025 | 4:25AM HKT Equity Research Alibaba Group (BABA) 2QFY26 review: Cloud/CapEx beat reinforces the AI-driven narrative despite slower eCommerce; Buy | BABA | 12m Price Target: $197.00 | Price: $160.73 | Upside: 22.6% | | --- | --- | --- | --- | | 9988.HK | 12m Price Target: HK$192.00 | Price: HK$157.80 | Upside: 21.7% | Alibaba reported a solid beat in cloud growth (+34% yoy) and AI capex intensit ...

Alibaba Group (NYSE:BABA) Q2 2026 Earnings Call November 25, 2025 07:30 AM ET Company ParticipantsJiang Fan - CEO of Alibaba E-commerce Business GroupRonald Keung - Managing DirectorEddie Wu - CEOKenneth Fong - Managing DirectorGary Yu - Equity Research covering China-based Telecommunications and Technology CompaniesToby Xu - CFONone - TranslatorJialong Xi - Head of China Internet Equity ResearchLydia Liu - Head of Investor RelationsConference Call ParticipantsAlex Yao - Managing Director and Senior Equity ...

Alibaba Group (NYSE:BABA) Q2 2026 Earnings Call November 25, 2025 07:30 AM ET Company ParticipantsJiang Fan - CEO of Alibaba E-commerce Business GroupRonald Keung - Managing DirectorEddie Wu - CEOKenneth Fong - Managing DirectorGary Yu - Equity Research covering China-based Telecommunications and Technology CompaniesToby Xu - CFONone - TranslatorJialong Xi - Head of China Internet Equity ResearchLydia Liu - Head of Investor RelationsConference Call ParticipantsAlex Yao - Managing Director and Senior Equity ...

Financial Performance - Total revenue increased by 5% year-over-year to RMB 247795 million for the quarter ended September 30, 2025[10] - Income from operations decreased significantly by 85% year-over-year to RMB 5365 million[10] - Adjusted EBITA decreased by 78% year-over-year to RMB 9073 million[10] - Net loss from free cash flow was RMB 21840 million, compared to a positive free cash flow of RMB 13735 million in the same quarter of 2024[10] Segment Performance - Alibaba China E-commerce Group revenue increased by 16% year-over-year[7] - Alibaba International Digital Commerce Group (AIDC) revenue increased by 10% year-over-year[7] - Cloud Intelligence Group revenue increased significantly by 34% year-over-year[7] - All Others segment revenue decreased by 25% year-over-year[25] Business Highlights - Quick commerce revenue increased by 60%, driven by order growth from "Taobao Instant Commerce"[31] - Customer management revenue increased by 10% year-over-year, driven by improved take rate[8] - The company repurchased 17 million ordinary shares (equivalent to approximately 2 million ADSs) for a total of US$253 million[14]

Core Insights - Alibaba Group has entered an investment phase focusing on AI technologies and infrastructure, leading to strong growth in its AI + Cloud and consumption businesses, with Cloud Intelligence Group revenue up 34% and AI-related product revenue achieving triple-digit growth for the ninth consecutive quarter [2][3] Financial Performance - For the quarter ended September 30, 2025, Alibaba reported revenue of RMB247,795 million (US$34,808 million), a 5% year-over-year increase, with a like-for-like growth of 15% excluding disposed businesses [4][23] - Income from operations decreased by 85% year-over-year to RMB5,365 million (US$754 million), primarily due to a significant drop in adjusted EBITA, which fell 78% to RMB9,073 million (US$1,274 million) [4][51] - Net income attributable to ordinary shareholders was RMB20,990 million (US$2,948 million), a 52% decrease year-over-year, while non-GAAP net income dropped 72% to RMB10,352 million (US$1,454 million) [4][59] - Diluted earnings per ADS were RMB8.75 (US$1.23), down 52% year-over-year, with non-GAAP diluted earnings per ADS at RMB4.36 (US$0.61), a 71% decrease [4][61] Segment Performance - Alibaba China E-commerce Group revenue increased by 16% year-over-year to RMB132,578 million (US$18,623 million), with customer management revenue up 10% [27][31] - Quick commerce revenue surged 60% year-over-year to RMB22,906 million (US$3,217 million), driven by order growth from "Taobao Instant Commerce" [31][34] - Cloud Intelligence Group revenue grew 34% year-over-year to RMB39,824 million (US$5,594 million), with public cloud revenue growth attributed to the adoption of AI-related products [36][17] - The All Others segment saw a 25% revenue decline to RMB62,969 million (US$8,846 million), primarily due to the disposal of Sun Art and Intime businesses [38] Strategic Initiatives - The company is focusing on enhancing user experience and operational efficiency in its quick commerce business, onboarding approximately 3,500 Tmall brands to improve product offerings [9] - Alibaba Cloud continues to lead the AI cloud market in China with a 35.8% market share, driven by comprehensive AI capabilities and strong customer adoption [19][17] Cash Flow and Investments - Net cash provided by operating activities was RMB10,099 million (US$1,419 million), a 68% decrease year-over-year, while free cash flow was an outflow of RMB21,840 million (US$3,068 million) [64] - As of September 30, 2025, cash and other liquid investments totaled RMB573,889 million (US$80,614 million) [5]

Core Insights - Alibaba's AliExpress successfully introduced China's Singles' Day shopping event to the UK, leveraging the global shopping trend to boost sales [1] Group 1: Sales Performance - Labubu dolls experienced high demand during a shopping livestream in London, indicating strong consumer interest and engagement with the event [1] Group 2: Market Expansion - The event marks a significant step for Alibaba in expanding its market presence in Britain, tapping into the worldwide craze of Singles' Day [1]

Core Insights - Alibaba and Baidu are leading players in China's tech sector, with Alibaba focusing on e-commerce and cloud services, while Baidu specializes in online search and video streaming [1][2] Company Overview - Alibaba's revenue primarily comes from its online marketplaces, Taobao and Tmall, with a smaller portion from its cloud business, which has lower margins [3] - Baidu generates most of its revenue from online advertising, including search and video ads, with a growing but still minor contribution from its AI Cloud platform [7] Market Challenges - Alibaba faces regulatory challenges and competition from smaller e-commerce rivals due to antitrust regulations that limit its business practices [4] - Baidu is under pressure from competitors like Tencent's WeChat and ByteDance's Douyin, which are attracting younger users and diversifying their services [8] Growth Prospects - Analysts project Alibaba's revenue and earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of 8% and 12%, respectively, from fiscal 2025 to fiscal 2028, driven by AI enhancements and logistics improvements [11] - In contrast, Baidu's revenue is expected to grow at a CAGR of only 3% from 2024 to 2027, with EPS projected to decline at a negative CAGR of 5% due to unprofitable service expansions [13] Investment Outlook - Alibaba is viewed as a better investment opportunity compared to Baidu, as its strategy appears more sustainable despite both companies sacrificing near-term margins for long-term growth [14][15] - Alibaba's valuation is considered reasonable at 20 times next year's earnings, while Baidu's stock does not seem like a bargain at 19 times next year's earnings [12][13]

Core Insights - The article highlights the strong growth momentum of non-gaming mobile applications from China in the global market during Q3 2025, particularly in content entertainment, AI tools, and cross-border e-commerce platforms [1] Group 1: Content Entertainment Applications - Short drama applications have significantly benefited from summer content strategies and social sharing tactics, with leading apps like DramaBox and ReelShort maintaining high download and revenue levels [10] - New emerging short drama apps, such as Melolo from ByteDance, saw a remarkable 101% increase in downloads, particularly in Southeast Asia, leveraging ultra-short video formats and social sharing rewards [10] - FlareFlow emerged as a standout performer with a 269% increase in mobile revenue in Q3, marking its entry into the overseas revenue rankings [10] Group 2: AI Tools - AI tools showed active performance in Q3, with Seekee and Cici experiencing download increases of 114% and 60% respectively, expanding their user bases in emerging markets [11] - The rise of theme beautification tools, exemplified by Themepack with a 159% increase in downloads, highlights the demand for personalized aesthetic solutions among younger users [11] - WPS Office and Meitu continued to grow steadily, with WPS benefiting from global mobile office demands and Meitu leveraging AI technology for high-quality growth in emerging markets [11] Group 3: E-commerce and Content Platforms - TikTok maintained its leadership in global downloads and active users, supported by its strong algorithm and creator ecosystem, while its video editing tool CapCut also saw stable revenue growth [12] - The international version of Xiaohongshu, renamed rednote, reported a 55% increase in overseas revenue, indicating the successful integration of content community and e-commerce [12] - Cross-border e-commerce platforms like Temu and SHEIN are expanding their user penetration in North America, Europe, and the Middle East through supply chain optimization and localized marketing [12] Group 4: Long Video Platforms - iQIYI's revenue growth is attributed to its continued investment in overseas content and multilingual adaptation strategies, solidifying its market share in the global long video sector [13] Group 5: Emerging Market Insights - New applications entering the Q3 rankings are primarily from emerging markets, particularly in Latin America and Southeast Asia, indicating a strong interest in AI technology [14] - Xiaomi's ecosystem advantages are evident as its system-level tool applications maintain multiple positions in the active user rankings, benefiting from substantial smartphone shipments in South Asia and Southeast Asia [14]

Core Viewpoint - Palantir Technologies has experienced significant growth but is highly valued, while Alibaba, despite slower growth, presents a more sustainable valuation opportunity in the current market environment [1][6]. Palantir Technologies - Palantir's annual revenue increased from $1.1 billion in 2020 to $2.9 billion in 2024, achieving profitability in 2023 and more than doubling its net income in 2024 [2]. - Analysts project Palantir's revenue and earnings per share (EPS) to grow at a CAGR of 38% and 63%, respectively, from 2024 to 2027 [3]. - The growth is supported by increased government contracts and the expansion of its commercial business, with geopolitical factors favoring its Gotham platform and rising demand for its Foundry services [4]. - Palantir's current market cap is $423 billion, trading at over 300 times next year's earnings and 75 times next year's sales, indicating a potential market cap reduction to $227 billion if valuations normalize [5]. Alibaba Group - Alibaba, the largest e-commerce and cloud infrastructure company in China, trades nearly 50% below its all-time high due to regulatory fines, COVID-19 lockdowns, and U.S.-China trade tensions [7][8]. - The company is stabilizing its business by expanding into higher-growth overseas markets and enhancing its logistics platform [9]. - Alibaba's cloud infrastructure is benefiting from the rollout of its large language models (LLMs) and increased spending on cloud services driven by the AI boom [10]. - From fiscal 2025 to fiscal 2028, Alibaba's revenue and EPS are expected to grow at a CAGR of 8% and 12%, respectively, while trading at just 19 times next year's earnings and 2.3 times next year's sales [11][12]. - If Alibaba meets analysts' expectations and achieves a valuation of four times its forward sales, its market cap could nearly double to $710 billion, potentially surpassing Palantir's market cap [13].

Summary of Alibaba Group Holding Conference Call Company Overview - **Company**: Alibaba Group Holding - **Ticker**: BABA (US), 9988.HK (HK) - **Market Cap**: US$432.3 billion / HK$3.39 trillion Key Industry Insights - **E-commerce and Cloud Services**: The company is focusing on aggressive subsidies in its Shangou business, which is impacting its financials but is expected to lead to a rebound in future quarters as demand for AI cloud services increases. Core Financial Insights - **FY2Q26 Revenue and Profit Estimates**: - Total consolidated revenues are projected at **Rmb242.8 billion**, reflecting a **2.7% YoY increase** [3] - Non-GAAP net profit is estimated at **Rmb9.05 billion**, with a **3.7% margin**, significantly lower than previous estimates [3][57] - China E-commerce Group revenues are expected to be **Rmb126.6 billion**, with a **10.2% YoY growth** in CMR [3][52] - Cloud revenues are projected to grow by **28% YoY** to **Rmb37.9 billion** [3] - **Revisions in Estimates**: - Adjustments made to reflect aggressive subsidies and increased costs associated with AI model upgrades [2][57] - For FY2Q26, revenue estimates were revised up by **0.5%**, while non-GAAP profit estimates were revised down by **59%** [57] - For FY26-28E, total revenues and non-GAAP net profits were adjusted by **+0.4%/-10.9%**, **+0.7%/-5.7%**, and **+0.8%/-12.3%** respectively [57] Strategic Initiatives - **Double 11 Promotions**: Tmall's presale for the Double 11 shopping festival is set to begin on **October 15th**, aiming to enhance consumer experience through a comprehensive shopping approach [10] - **Taobao Global Initiatives**: Investment of **Rmb1 billion** in marketing to boost overseas user growth during Double 11, with cross-border free shipping and returns [11] - **Amap Local Services**: Amap's AI agent has surpassed **400 million MAU**, enhancing user engagement with local services [43] Cloud and AI Developments - **AliCloud Partnerships**: Collaborations with SAP and Xpeng to enhance cloud solutions and security capabilities [46] - **Product Launches**: Introduction of new AI-native products and upgrades to existing services, including a new server operating system and database technology [48] Market Position and Future Outlook - **Target Prices**: Slight adjustments to target prices, now set at **US$218** and **HK$216** [1] - **Investment Rating**: Maintained a "Buy" rating, indicating confidence in the company's long-term growth potential despite short-term challenges [1] Additional Insights - **User Growth Metrics**: Taobao's MAU showed a consistent upward trend, with a peak growth of **12% YoY** in August [20] - **Online Retail Sales**: YTD online sales reached **Rmb9.98 trillion**, reflecting a **9.6% YoY growth** [27] This summary encapsulates the key points from the conference call, highlighting Alibaba's current financial status, strategic initiatives, and market outlook.