Alibaba Q3 Earnings: Revenue And EPS Beat, Eyes Global E-Commerce Profitability In FY25, Increase Investments In AI

Alibaba Group Holding Limited BABA stock is trading higher Thursday after the company’s fiscal third-quarter report.

The Jack Ma co-founded e-commerce giant reported fiscal third-quarter 2024 revenue growth of 8% year-on-year to $38.38 billion, beating the analyst consensus estimate of $38.19 billion. Adjusted earnings per ADS of $2.93 beat the analyst consensus estimate of $2.66. Adjusted net income rose 7% Y/Y to $7 billion.

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Segments: Revenue from Taobao and Tmall Group grew by 5% year over year to $18.64 billion. Revenue from Alibaba International Digital Commerce Group increased by 32% year over year to $5.17 billion, driven by the growth of cross-border businesses.

Local Services Group revenue grew by 12% year over year to $2.33 billion, driven by the order growth of Amap and Ele.me and revenue growth from marketing services. 

Cainiao Smart Logistics Network Limited’s revenue decreased 1% year over year to $3.87 billion due to ongoing restructurings with its e-commerce businesses taking on specific logistics platform roles. 

Cloud Intelligence Group revenue grew by 13% Y/Y to $4.35 billion.

Digital Media and Entertainment Group rose 8% Y/Y to $745 million. All other revenue grew by 13% Y/Y at $7.28 billion.

In the Taobao and Tmall Group, customer management revenue grew 9% year over year due to the growth in online GMV and improvement in take rate.

Revenue from China’s commerce retail business grew 5% year over year to $17.74 billion, while direct sales and other revenue declined by 9% year over year to $3.94 billion, primarily attributable to our planned reduction of certain direct sales businesses.

Revenue from China’s commerce wholesale business grew by 24% year over year to $901 million due to the increase in revenue from value-added services provided to paying members.

Alibaba International Digital Commerce Group: International commerce retail business revenue grew by 36% year over year to $4.32 billion, primarily driven by the increase in revenue contributed by AliExpress’ Choice and Trendyol. International commerce wholesale business revenue grew by 18% Y/Y to $850 million.

Cloud Intelligence Group: Overall revenue, excluding Alibaba-consolidated subsidiaries, increased by 11% Y/Y, which was mainly driven by the double-digit revenue growth of public cloud products, including AI-related products. Recently, Alibaba launched its first cloud region in Mexico.

As of December 31, 2024, Alibaba held $83.58 billion in cash and equivalents and generated an operating cash flow of $9.72 billion, up 10% year over year.

During the quarter, it generated a free cash flow of $5.35 billion, down 31% year over year. This was mainly due to the increase in expenditure related to its investments in cloud infrastructure.

Outlook: Alibaba said during the conference call that it expects its international e-commerce unit to turn profitable next fiscal year and looks to invest more in Cloud and AI over the next three years than in the past decade.

Alibaba stock surged 72% in the last 12 months, buoyed by China’s stimulus measures to drive the economy and as the e-commerce juggernaut’s affordable AI models gained traction.

Recently, Apple Inc. AAPL tapped Alibaba to co-develop and integrate AI features into its iPhones for the Chinese market.

Price Action: BABA shares traded higher by 10.50% at $139.05 premarket at the last check on Friday.

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