2025-08-31 16:21Summary of Alibaba Group (BABA US & 9988 HK) Conference Call Company Overview - Company: Alibaba Group Holding Limited - Ticker Symbols: BABA US (US), 9988 HK (Hong Kong) Key Financial Results - 1QFY26 Performance: - Top line and bottom line results were largely in line with expectations, better than fears following disappointing results from JD and Meituan - Adjusted net profit decreased by 18% YoY to RMB 33.5 billion, which was 4% and 10% below JP Morgan estimates and consensus respectively [1] - Adjusted EBITA from the newly-defined China Ecommerce Group was weaker than expected, impacting overall results [1] Revenue Growth - Key Revenue Sources: - Ecommerce customer management (CMR) grew by 10% YoY - International business revenue increased by 20% YoY - Cloud revenue rose by 26% YoY, with AI-related revenue growing at triple digits [1] - Quick Commerce Revenue: - Revenue from quick commerce, including Taobao Instant Commerce and Ele.me, grew by 12% YoY, reflecting aggressive investment in this area [1] Management Guidance and Market Reaction - Management's Comments: - Future comments from management will be critical for investors to assess the impact of aggressive spending in quick commerce during the September quarter [1][8] - Expected Stock Reaction: - Anticipated positive response in share price due to better-than-expected results, but management's guidance will be more significant [8] Segment Performance - AIDC (International Business): - Adjusted EBITA loss improved to RMB 59 million, significantly better than losses of RMB 3.7 billion in 1QFY25 and RMB 3.6 billion in 4QFY25 [6] - Revenue growth of 20% YoY, in line with previous quarter and estimates [6] - Cloud Business: - Accelerated revenue growth of 26% YoY, with EBITA of RMB 3 billion and a margin of 9% [6] - China Ecommerce Group: - Adjusted EBITA declined by 21% YoY to RMB 38 billion, below JP Morgan estimates of RMB 42 billion [6] Investment Thesis - AI Strategy: - Positive outlook due to NVIDIA's resumption of H20 AI chip sales in China, aligning with Alibaba's AI strategy as a "shovel seller" [9][12] - Capex Forecast: - Reported RMB 16 billion in capex for the March quarter, with a forecast of RMB 109 billion for FY26, indicating a focus on cloud and quick commerce investments [9][12] Valuation - Price Target: - Price target set at $140.00 for BABA and HK$135.00 for 9988 HK, based on a 13x CY26E P/E ratio [5][13] Risks to Rating and Price Target - Key Risks: - Competition from large Chinese internet companies like Tencent and Baidu in local services [11][15] - Long-term margin pressure from investments in digital content [11][15] - Slower-than-expected progress in mobile monetization and sustainability of China's retail marketplace growth [11][15] Conclusion - Overall, Alibaba's 1QFY26 results indicate resilience amidst market challenges, with significant growth in cloud and international segments. However, management's future guidance and competitive pressures remain critical factors for investors to monitor.