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Alibaba's first quarterly report after one year of transformation shows that strategic focus and continuous investment have paid off. On the evening of August 15, Alibaba Group announced its first quarter results for fiscal year 2025, which is the second quarter of this year. The financial report shows that in the quarter ending June 30, Alibaba's revenue was 243.236 billion yuan, a year-on-year increase of 4%, in line with market expectations. With continued investment, Alibaba's profits have been affected, but the adjusted EBITA for this quarter was 45.035 billion, a year-on-year decrease of 1%, exceeding institutional expectations. Taotian Group's revenue was 113.373 billion, a year-on-year decrease of 1%. Among them, the core profit source customer management revenue (CMR) increased by 1% year-on-year, GMV (transaction volume) achieved a year-on-year high single-digit growth and a year-on-year double-digit growth in order volume. Regarding the gap between CMR and GMV, which is widely concerned by the outside world, Alibaba has made many new moves this quarter to improve the matching degree between the two and increase the overall monetization rate. Wu Yongming, CEO of Alibaba Group, said that in the next few quarters, the growth rate of CMR will gradually match the growth rate of GMV.

Taotian GMV grew by high single digits year-on-year

Compared with the sharp decline in profits in the previous quarter, Alibaba's operating profit in the first quarter of the new fiscal year exceeded expectations. The financial report shows that the adjusted EBITA is 45.035 billion, a year-on-year decrease of 1%. The loss is significantly narrowed compared with the previous one and is lower than the agency's forecast of a decrease of 1.9% to 13.5%. The financial report mentioned that the year-on-year decline was due to increased investment in e-commerce business, which was partially offset by improved operating efficiency.

As Alibaba continues to increase its investment, investors have expectations for its profit performance, and they are more concerned about the performance of Taotian Group after the strategic focus. The second quarter is also the peak season for e-commerce, and Taotian's GMV and order volume maintain a good growth momentum. The financial report mentioned that Taotian's GMV this quarter achieved a high single-digit year-on-year growth and double-digit year-on-year growth in order volume, driven by the increase in the number of buyers and purchase frequency. This also means that Taotian's GMV growth rate this quarter outperformed the social retail market.

As the growth rate of CMR (customer management revenue) slowed down in the past few quarters, the outside world and analysts generally paid more attention to the matching degree between CMR and GMV, that is, how to improve the core overall monetization rate (CMR/GMV) of e-commerce. CMR is the revenue obtained by Alibaba from providing marketing services to merchants on Taobao and Tmall platforms, including advertising fees and commissions. It is Alibaba's core business and main source of profit.

It is worth noting that Alibaba has made many new moves to improve the overall monetization rate this quarter. Wu Yongming said that many new product forms that have been invested in, such as Taobao's live broadcast and 10 billion yuan in subsidies, have brought high user retention and repurchase, which will promote the commercialization process in the next few quarters. Secondly, Alimama's new tool "full site promotion" will see obvious results 6 to 12 months after its launch. It is understood that this advertising product was officially launched in April this year and is now fully open to all Taobao Tmall merchants.

In addition, starting from September 1, Taobao will start charging a basic software service fee of 0.6% for orders with a transaction status of "successful" on the platform. For small businesses with annual sales of less than a certain amount, Taobao will refund the service fee. Alibaba executives said that the basic software service fee is expected to start contributing revenue in the remaining seven months of this fiscal year.

"Taotian's priority is to improve user experience, thereby driving shopping frequency and GMV growth. After the market share was initially stabilized, this quarter we began to accelerate the progress of projects aimed at improving the overall monetization rate and commercialization measures." Wu Yongming said that in the next few quarters, the growth rate of CMR will gradually match the growth rate of GMV.

Alibaba executives respond to high industry return rate

Since Alibaba has emphasized its focus on the two main businesses of e-commerce and cloud computing, it has withdrawn from some non-core businesses. When will other businesses become profitable besides the main businesses? In addition to the two core businesses of e-commerce and cloud computing, Alibaba has also readjusted its business strategy for the group's important Internet technology business - most businesses prioritize commercialization capabilities while maintaining product competitiveness. This quarter, the profitability of these businesses has improved significantly, and this trend is expected to continue in the next few quarters. "We estimate that most businesses will gradually achieve break-even within 1-2 years, and gradually begin to contribute to scale profitability." Wu Yongming said.

Taotian Group, as the core, includes China Retail Business and China Wholesale Business. In this quarter, China Wholesale Business revenue was 5.952 billion, a year-on-year increase of 16%. This also shows that the development of 1688, which has been upgraded to a first-level business, continues to improve.

What dragged down the company was Taobao's direct sales and other businesses in China's retail business. The revenue of this part was 27.306 billion, a year-on-year decrease of 9%. Direct sales and other revenue mainly came from Tmall Supermarket, Tmall Global and other businesses. Alibaba executives said that Taobao took the initiative to reduce the scale of its direct sales business because it believed that the direct sales model was not the best.

Alibaba's free cash flow this quarter fell 56% year-on-year, which is related to the shrinking business scale. The above-mentioned executive said that the direct sales business is actively shrinking, and some businesses are passively shrinking. In the retail industry, there is a 60 to 90-day payment period for purchasing goods from suppliers, which can bring positive cash flow. Shrinkage means capital outflow.

Since "returning to users", Alibaba upgraded the 88VIP benefits in April this year, which can provide unlimited free shipping. Another highlight of the financial report is that the number of 88VIP members continued to grow by double digits year-on-year this quarter, exceeding 42 million. The number exceeded 35 million in the first quarter of this year and 32 million in the fourth quarter of last year, respectively.

The high return rate was a hot topic during this year's 618 shopping festival. In response, Alibaba executives said at the earnings conference: "The overall return rate of domestic e-commerce is rising, and Taobao's return rate is slightly lower than the industry average. We see that when consumers' retention rate, purchase frequency, and shopping experience feedback improve with the improvement of return experience, we think it is healthy."

He also observed that the NPS (Net Promoter Score, an index reflecting customer loyalty) of mid- to high-end users continued to improve, which also reflected the improvement in satisfaction with after-sales services such as convenient returns. "We are not particularly worried about affecting merchants' willingness to place orders on the platform."

Alibaba International revenue grew 32%, Alibaba Cloud profit surged

This quarter, the synergy of cross-border business and cross-border fulfillment services continued to emerge, driving Alibaba International Digital Business Group and Cainiao Group to maintain rapid growth. Among them, Alibaba International Digital Business Group's revenue increased by 32% year-on-year to 29.293 billion. Cainiao's quarterly revenue increased by 16% year-on-year.

AI has driven Alibaba Cloud back to growth, with quarterly revenue increasing by 6% to RMB 26.549 billion, including triple-digit growth in revenue from AI-related products and double-digit growth in public cloud business. Alibaba Cloud's profits have soared, with adjusted EBITA increasing by 155% year-on-year, reaching RMB 2.337 billion in the quarter.

Wu Yongming said that in the future, the company will continue to optimize its cloud product structure, focus on competitive public cloud products with sustainable gross profit and replicable revenue, and strengthen the synergy of cloud products in the AI ​​era, so as to help old customers implement new AI needs on Alibaba Cloud and enable AI-native enterprises to grow and succeed on Alibaba Cloud. "We are confident that Alibaba Cloud's revenue from customers outside the Alibaba Group will resume double-digit growth in the second half of the fiscal year and gradually accelerate. With high-intensity R&D investment, we will maintain sustained profitable growth and become an AI cloud service provider with healthy profitability and leading market share."

Written by: Southern Metropolis Daily reporter Huang Pei