To The Moon

Just now, Alibaba has released its fiscal Q3 report for FY2025, covering the fourth quarter of last year. The results have beaten analyst expectations across the board.

Alibaba’s stock shot up 10% before the U.S. market opened, and Chinese stocks are buzzing tonight!

So, what makes Alibaba’s earnings report so exciting? Is this the moment for a full stock rebound?

Revenue Beats Expectations

In Q3 of FY2025, Alibaba generated 280.15 billion RMB in revenue, up 7.6% YoY, beating the expected 277.37 billion RMB. This marks the highest growth rate in a year.

But that’s just the start. Breaking it down by segments:

1.Taobao & Tmall (Alibaba’s core e-commerce platforms) brought in 136.09 billion RMB, up 5.4% YoY, the highest growth in five quarters, surpassing the expected 131.72 billion RMB.

Breaking down Taobao & Tmall even further:

• Customer management (ads, commissions) earned 100.79 billion RMB, up 9% YoY, driven by online GMV growth and higher take rates.

• Direct Sales down 9% YoY, but this isn’t bad news. Alibaba has been scaling back this low-margin segment, which is a smart move given how tough the margins are in direct e-commerce.

International E-commerce reached 37.76 billion RMB, growing by 32.4%, higher than the forecasted 36.16 billion RMB.

2.Another major bright spot is Alibaba Cloud. Investors have long hoped for Alibaba Cloud to replicate $Amazon.com(AMZN)$ ’s success. After some struggles with expansion and price wars with $TENCENT(00700)$ , it’s now bouncing back.

For Q3 FY2025, Alibaba Cloud’s revenue hit 31.7 billion RMB, up 13% YoY, urpassing the forecast of 30.78 billion RMB. AI-related products saw triple-digit growth for the sixth consecutive quarter!

Looking ahead, Alibaba’s CEO hinted that AI-driven cloud growth will continue to accelerate. With $Apple(AAPL)$ recently confirming a partnership with Alibaba for AI services on iPhones, the future looks bright.

Alibaba isn’t just playing catch-up. In January, they open-sourced their next-gen multimodal model, Qwen2.5-VL, and launched the flagship Qwen2.5-Max, both ranking in the global top 10 in benchmark tests.

Clearly, Alibaba is no slouch when it comes to AI technology.

Non-Core Segments: Mixed Bag

Let’s quickly look at the non-core businesses.

Alibaba’s Local Services earned 16.99 billion RMB, up 12% YoY, slightly below the expected 17.2 billion RMB.

Cainiao Logistics saw a small revenue drop of 0.8%, revenue of 28.2 billion RMB, missing the expected 31.36 billion RMB. Alibaba explained that this decline was due to an ongoing business adjustment where its e-commerce units are taking on more logistics functions. The logistics unit will focus on building a global intelligent logistics network and providing services to both Alibaba’s e-commerce business and third-party customers.

The logistics sector isn’t a huge deal—it’s low-margin and not highly valued by investors. So, this slight miss isn’t a big issue.

In Digital Media and Entertainment Group , Youku’s ad revenue helped boost the segment to 5.44 billion RMB, a 7.9% growth, slightly above the expected 5.38 billion RMB.

Other revenue was 53.1 billion RMB, up 12.9% YoY, beating the expected 49.6 billion RMB.

Adjusted EBITA for Core Segments

• Taobao & Tmall’s EBITA was 61.08 billion RMB, higher than the expected 58.5 billion RMB.

• Cloud EBITA was 3.14 billion RMB, beating the expected 2.83 billion RMB.

• International Commerce EBITA was a weak spot, reporting a a loss of 4.95 billion RMB, worse than the expected 3.3 billion RMB loss. But, given the high revenue growth, this isn’t a huge concern. As Alibaba’s management mentioned, they expect the segment to turn profitable in the first quarter of the next fiscal year.

Strategic Moves: Focus on Core, Repurchases, and AI

Beyond the core business improvements, Alibaba has been offloading non-core assets, such as selling its stake in $SUNART RETAIL(06808)$ and Intime. Though these moves led to investment losses, they mark a shift in focus back to the company’s key strengths.

The stock is already getting a boost thanks to this renewed focus. In Q4 last year, Alibaba repurchased 1.3 billion USD worth of shares, with another 20.7 billion RMB in buyback authorization remaining.

During the earnings call, Alibaba’s management largely focused on AI rather than competition with $JD.com(JD)$ $JD-SW(09618)$ or $PDD Holdings Inc(PDD)$ . The company announced that it plans to outpace the last 10 years’ worth of cloud and AI infrastructure investments over the next three years, with major increases in research funding to ensure technological leadership in AI.

This shift in focus to AI is definitely exciting for investors. It’s clear that AI will be the key driver for Alibaba’s stock price moving forward.

In addition to Alibaba’s standout earnings, both $BILIBILI-W(09626)$ $Bilibili Inc.(BILI)$ and $Luckin Coffee Inc.(LKNCY)$ also reported strong results, causing their stocks to skyrocket. Looks like it’s a night of celebration for Chinese stocks!