To The Moon

As I sit here on February 21, 2025, reflecting on Alibaba Group Holding Limited’s ( $Alibaba(BABA)$ ) latest earnings report and the jaw-dropping around 9% surge in BABA stock during the regular trading session on February 20—peaking at over 14% earlier—I’m both exhilarated and cautious. The buzz on social media is electric, with posts like “Alibaba Beats & Soars 15%! Time to Revalue and Load Up Now?” dominating timelines after the company reported Q3 2025 fiscal year revenue of 280.15 billion yuan ($38.4 billion), up from 260.35 billion yuan last year. Net income soared to 48.945 billion yuan ($6.72 billion), crushing expectations of 40.6 billion yuan. Is this the catalyst for a revaluation that propels Alibaba to new highs, or are we riding a wave that could crash if the AI boom fades? Let’s dive deep into the numbers, the past, the present, and my take on what’s next.

Unpacking the Earnings: A Blockbuster Beat

I’ve pored over Alibaba’s unaudited condensed consolidated statements of cash flows for the three and nine months ended December 31, 2024, alongside their Q3 earnings release. The revenue beat of $38.4 billion (slightly above the $38.35 billion consensus) and the profit surge from 14.433 billion yuan last year to $6.72 billion are nothing short of impressive. The Cloud Intelligence unit grew 13%, with AI-related products posting triple-digit growth for the sixth straight quarter, while Taobao and Tmall e-commerce rose 5%, and international commerce (AliExpress) jumped 32%. CEO Eddie Wu’s emphasis on “aggressively investing” in AI, coupled with the launch of the Qwen 2.5 model outpacing rivals like DeepSeek, has investors buzzing. I’ve seen traders calling this “AIibaba’s rebirth,” I can’t help but feel the excitement—it’s a stark contrast to the gloom of late 2024.

Statement of Cash Flows

But as I dig into the cash flow data, my enthusiasm tempers. Operating cash flow for Q4 2024 hit RMB 70,915 million ($9,715 million), up 9.6% from Q4 2023, yet over nine months, it dropped 14.6% to RMB 135,989 million ($18,630 million) from RMB 159,253 million. Investing cash outflows ballooned—RMB 111,003 million ($15,207 million) in Q4 and RMB 145,868 million ($19,984 million) over nine months, up 85.2% and 180% year-over-year, respectively. This reflects Alibaba’s AI and cloud push, but it’s burning cash fast: net cash decreased RMB 22,506 million ($3,084 million) in Q4 and RMB 80,458 million ($11,023 million) over nine months, leaving cash reserves at RMB 205,966 million ($28,217 million), down 30% from 2023. Free cash flow (FCF), estimated as operating cash minus capex, turned negative at ($5,492 million) in Q4 and ($1,354 million) over nine months, down from a positive $10,646 million in 2023. This cash strain makes me wonder if the rally’s foundation is as solid as it seems.

Why BABA Fell: The October 2024-January 2025 Plunge

To understand if this surge can be sustained, I need to revisit why BABA tumbled from ~$117 in early October 2024 to ~$81 in early January 2025—a 31% drop that left me, like many on social media, sceptical of China’s tech giants. Back then, China’s economic slowdown was the main culprit: retail sales growth slowed to 3% YoY in October, property prices fell 6.3% YoY by December, and deflation fears (0.2% inflation in November) crushed consumer confidence, hitting Alibaba’s e-commerce core. Beijing’s September 2024 stimulus (rate cuts, $1.4 trillion) initially lifted BABA to $117, but doubts about its scale led to a sell-off. Geopolitical tensions, especially Trump’s re-election and tariff threats (up to 60% on Chinese goods), spooked investors, threatening AliExpress margins. Competition from PDD ( $PDD Holdings Inc(PDD)$ ) and ByteDance (Douyin), with PDD’s 44% YoY revenue growth outpacing Alibaba’s 1% China commerce growth, eroded market share. Technically, BABA hit resistance at $110, triggering profit-taking to $81.

I remember feeling frustrated during that period, when many readers decried “China’s dead cat bounce” and questioned Alibaba’s edge. The cash flow strain I see now—negative FCF and shrinking reserves—was likely a silent driver, amplifying macro fears.

Why BABA Rose: The January-February 2025 Rebound

Fast-forward to today, and BABA’s up ~53% from $81, closing at $124.73 on February 14 and jumping 8.62% on February 20 post-earnings. What changed? First, the Q3 earnings beat—profit growth, AI momentum, and international gains flipped sentiment. Jack Ma’s January 2025 meeting with the Chinese Government signalled support for private tech, easing regulatory fears. December 2024 retail sales rose 3.7% YoY, and January’s 0.8% inflation spike hinted at stabilization. The Apple partnership for AI-powered iPhones in China, announced on February 11, added fuel, while Ma and Joe Tsai’s $200 million+ stock buys in Q4 2024, plus hedge fund interest, boosted confidence. Technically, BABA reclaimed $95 support, broke $106 resistance, and hit $129 intraday on February 20, with volume spiking.

I’ve seen traders cheer “BABA’s back” and “AI-driven rally,” and I share their optimism—but the cash flow data nags at me. Is this AI hype masking deeper issues?

Are the Fall Factors Still Influential?

Many drivers of the fall linger. China’s economy isn’t fully recovered—3.7% retail growth is better but lags pre-COVID norms, and property woes persist. Geopolitical risks remain, with Trump’s January 20, 2025, inauguration looming and potential 10% tariffs threatening AliExpress. PDD and Douyin still challenge Alibaba’s domestic dominance, though international and AI gains offset this. Sentiments flipped from despair to euphoria, but the cash burn—negative FCF and $28.2B cash (down from $40B+)—could rekindle doubts if macro headwinds hit.

AI’s Role: The Heart of the Rally

A major factor in today’s surge is Alibaba’s AI progress. Triple-digit growth in AI products, the Qwen 2.5 model’s outperformance, and cloud/AI revenue up 13% signal a tech pivot. But what’s the outlook for AI in China? I see a bright but volatile horizon. Beijing’s “AI 2030” plan targets $150 billion in AI investment, with state-backed projects like SenseTime and Baidu’s Ernie Bot competing. Some people highlight China’s 2024 AI patents (over 37,000, vs. U.S.’s 30,000) and a 20% AI market growth forecast for 2025. Alibaba’s cloud leadership (40% market share) and partnerships (e.g., Apple) position it well, but regulatory risks—data privacy laws, U.S. chip bans—could slow progress. If the AI boom recedes, say due to regulatory crackdowns or slower adoption, who’s “swimming naked”? I suspect smaller players like SenseTime might struggle, but Alibaba’s scale ($28.2B cash, $38.4B revenue) gives it a buffer. Still, if AI returns disappoint (e.g., <10% growth), BABA’s stock could plunge below $100, exposing its cash burn.

Personal Reflections: Bullish, But Wary

I’m torn. The earnings beat and AI momentum make me want to “load up” at $124, targeting $140-$150 if China stabilizes and AI delivers. But the cash flow strain—negative FCF, shrinking reserves—keeps me cautious. I recall the October 2024 rally fading after stimulus hype, and I worry history repeats if macro risks or AI overinvestment bite. I’ve seen some traders set targets from $125 to $138, but some warn of $110 support if sentiment sours. My gut says hold or buy on dips ($115-$120), but I’ll watch Q1 2025 cash flow for clarity. If Alibaba’s AI bets pay off in 2026, we’re golden; if not, I’ll be among those scrambling as the tide goes out.

Will BABA hit a new high tonight? It’s possible—$138 was intraday, and momentum’s strong—but I’d brace for volatility. This rally feels sustainable for now, but I’m not betting on the farm until the cash flow picture clears.

@TigerWire