In recent years, Alibaba’s stock has been at multi-year lows, and market sentiment was rock-bottom. However, a remarkable turnaround recently ignited a rally, stirring market excitement. What were the driving forces behind this sentiment shift?
Alibaba December Quarter 2024 Earnings
Alibaba recently reported its December quarter 2024 earnings and the results were decent. Revenue reached 280.15 billion yuan, surpassing analyst expectations of 279.34 billion yuan. Let’s break down this revenue further by Alibaba’s business units (in RMB millions):
| Dec Quarter 2023 | Dec Quarter 2024 | YoY% | |
|---|---|---|---|
| Tabao and Tmall | 129,070 | 136,091 | 5% |
| International Digital Commerce | 28,516 | 37,756 | 32% |
| Cloud Intelligence | 28,066 | 31,742 | 13% |
| Cainiao Smart Logistics Network | 28,476 | 28,241 | -1% |
| Local Services | 15,160 | 16,988 | 12% |
| Digital Media and Entertainment | 5,040 | 5,438 | 8% |
| Others | 47,023 | 53,102 | 13% |
| Consolidated Revenue | 260,348 | 280,154 | 8% |
Although the overall revenue growth of 8% is not impressive, the hidden gem is the Cloud Intelligence revenue growth, which re-accelerates and grows at 13% year over year. The International Digital Commerce segment also grows at a healthy rate of 32% YoY.
As the world becomes increasingly fascinated with AI and its significant data-center needs, the growth of cloud services indicates that Alibaba’s offerings are in high demand and capable of supporting this AI revolution.
Share Buybacks
In addition to the decent earnings results, Alibaba continued its share buyback program, with a USD 1.3 billion repurchase in the latest quarter. Fewer shares in circulation lead to higher earnings per share, making each share more valuable.
Alibaba’s Focus on AI
The latest earnings results have alleviated investors’ concerns that Alibaba is merely an e-commerce company. Alibaba’s growth in its cloud segment demonstrates that it is a significant player in the cloud computing industry, which is expected to expand rapidly in the coming years as we enter the age of artificial intelligence. Additionally, Alibaba has made significant strides in AI through breakthroughs, various partnerships, and investments.
Qwen 2.5 Max Model
Alibaba recently launched its large language model (LLM), Qwen 2.5 Max. According to various benchmarks, this model outperforms some of the top AI models available, including ChatGPT-4o and DeepSeek V3. Furthermore, like DeepSeek’s model, Qwen 2.5 Max is also a cost-effective option. Alibaba’s Qwen 2.5 launch has positioned the company as a leader in the AI industry.
Apple Partnership on AI Features
Alibaba announced it will partner with Apple to integrate AI features into iPhone devices in China.
A partnership with Apple boosts Alibaba’s global brand image and showcases its importance in cloud and AI solutions in China. This collaboration can strengthen Alibaba’s position in the AI and cloud computing market, drive substantial revenue growth for Alibaba Cloud, and enhance its status in global AI competition.
Investment in AI and Cloud
Alibaba also plans to invest USD 52 billion over the next three years in AI and cloud infrastructure, surpassing its investment in these areas over the past decade. We believe this strategic move can position Alibaba as a leader in AI and cloud computing in the long term.
What Do We Do?
We think the Chinese tech market sentiment has begun to shift, and the government’s stance toward tech companies has also improved. Alibaba has also demonstrated that it is not just an e-commerce company but also a powerhouse in AI and cloud computing, offering more significant potential for future growth.
Given the strong rally in recent weeks, a pullback may occur soon, possibly presenting an opportunity for those looking to add positions in Alibaba. However, since we already have a decent position in Alibaba, we are unlikely to increase our holdings unless there is a significant pullback opportunity.
How about you? What do you think of Alibaba and the broader Chinese tech market?
If you are interested in Alibaba, you can buy its stocks through the US and Hong Kong markets. The stock ticker in the US stock market is BABA, while the ticker in the Hong Kong stock market is 9988.
Our summary of the best online brokerage accounts in Singapore can help you find stock brokers with access to the US or HK markets.
