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spk06: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's June quarter of 2021 results conference call. At this time, all participants are on listen-only mode. After management's prepared remarks, there will be a question and answer session. I would like to turn the call over to Rob Lynn, Head of Investor Relations of Alibaba Group. Please go ahead.
spk04: Good day, everyone, and welcome to Alibaba Group's June quarter 2021 results conference call. With us today are Daniel Zhang, our chairman and CEO, Joe Tsai, executive vice chairman, and Maggie Gu, our chief financial officer. This call is also being webcast from the RL section of our corporate website. A replay of the call will be available on the website later today. Now, let me quickly cover the safe harbor. Today's discussion may contain forward-looking statements, forward-looking statements involving inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report on Form 20F and other documents filed with the U.S. SEC, or announce on the website of the Hong Kong Stock Exchange. Any follow-looking statements that we make on this call are based on assumptions as of today, and we do not undertake any obligations to update these statements except as required under applicable law. Please note that certain financial measures that we use on this call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, commerce adjusted EBITDA before strategic investments, non-GAAP net income, non-GAAP diluted earnings per shares or ADS, and free cash flow are expressed on a non-GAAP basis. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. Unless otherwise stated, growth rate of all stated metrics mentioned during this call refer to year-over-year growth versus the same quarter last year. In addition, during the call, management will give their prepared remarks in English A third-party translator will provide simultaneous translation in Chinese on another conference line. Please refer to our press release for details. During the Q&A session, we will take questions in both English and Chinese, and a third-party translator will provide consecutive translation. All translations are for convenience purpose only. In case of any discrepancy, management statements in the original language will prevail. With that, I will turn the call to Daniel.
spk08: Thanks, Rob. Hello, everyone. Thank you for joining our earnings call today. We started this fiscal year with a strong quarter. Over the past 22 years, Alibaba has grown into a company encompassing consumer internet and industrial internet, with multiple engines driving our long-term growth. In consumer business, we operated the largest consumer marketplace globally with 1.18 billion annual active consumers as of June 30, 2021. During the first fiscal quarter, our annual active consumers grow from 890 million to 12 million in China, and from 240 million to 255 million outside of China, representing quarterly net ads of 45 million in total. At the beginning of this fiscal year, we announced the plan to invest all of our incremental profit this year into core strategic areas such as technology innovation, support programs for merchants to lower their operating costs, user acquisition and experience enhancement, merchandising and supply chain capability, infrastructure development, and new business initiatives. They were designed to enlarge our total addressable market, differentiate consumer and merchant value propositions from our competitors, and generate greater consumer engagement and purchase frequency. Now, I would like to share an update on the business progress in these strategic areas. For our China retail marketplaces, a key strategic area for our incremental investments is to evolve from one super app of mobile Taobao into a multi-app product matrix. We are glad to see Taobao deals progress in user acquisition in less diverse areas, contributing to over 10 million of our new AACs during the quarter, thanks to its best value for money value proposition. I do fish. which is expanding from a marketplace for secondhand product trading to a consumer-to-consumer community-based marketplace for products and services, reached over 100 million app MAUs during the quarter. Mobile Taobao, our flagship app for China retail marketplaces, is focusing on creating a more engaging shopping and discovery experience while satisfying the diversified consumer demands with the most comprehensive product offerings. New retail is another strategic area for our incremental investment, where we have built a multi-format business model to serve a wide range of consumer needs. Today, our consumer can enjoy one-hour doorstep delivery of products ordered online through FisherPo and TaoxianDa. or same-day or next-day delivery of groceries purchased from Timor supermarket, or order value-for-money products delivered next day to neighborhood pickup points. We believe such multi-format, multi-service-level new retail infrastructure built on a highly efficient digitalized supply chain and fulfillment model can best satisfy the diversified demand of different consumer segments. in different regions. Our community marketplaces business grow approximately 200% quarter-over-quarter in terms of GMV, while we expanded the gross flow area of our original distribution centers at a faster rate at 260% quarter-over-quarter to provide better logistics support for business growth. We view community marketplaces not as an independent market segment, but one of the multiple business formats in new retail, which is meaningful to us for continuous consumer acquisition and engagement. In the past few months, Chinese regulators have issued ratification requirements against community marketplace players selling below cost, which hurts the market integrity and community livelihoods. We have paid full attention to the regulatory requirements and will continue to operate with discipline. We are committed to building a sustainable digital community marketplace with improvement of livelihoods and create incremental value for our consumers. In local consumer services, we completed an important organizational upgrade and formed a business matrix consisting of Erlema, AMAP, and Fliki. Erlema and AMAP will be our major consumer entry points for local services to home and to destination, respectively. During the quarter, Erlema achieved strong order growth of over 50% year-over-year. We will continue to increase our investments in Ulema, especially to grow the contribution of non-mule categories and to further enhance our operating efficiency. AMAP, after years of investment, is evolving from a MAP service provider to an important entry point for consumers' discovery of local services near their destinations. our consumers can find a wide range of services in AMAP, such as ride-hailing, fuel services, hotel booking, tourist attraction ticketing, and so on. During this fiscal year, we expect to attract over 100 million transacting consumers in AMAP across the destination-based local service. our vertical business for travel services will focus on organizing high-quality supply of hotel rooms, transportation, and the tourist attraction services for consumer platforms such as AMAP and Alipay to further expand its penetration in our more than 900 million annual active consumer base in Alibaba ecosystem. In our international market, we continue to see strong growth in both revenue and AAC across our consumer-facing business, achieving 265 million AAC, over 10 billion revenue, and a 55% year-over-year revenue growth during the quarter. Lazada recorded over 90% year-over-year order growth for the quarter, and Indonesia and achieving the highest growth of over 100% year-over-year. Aliexpress continues strong momentum in its major markets, such as Spain, France, and Russia, leveraging the improved cross-border logistics solutions in partnership with Tainil. However, as the European Union recently abolished the VAT exemption for imported goods below €22, effective on July 1, 2021, we expect AliExpress business growth in Europe will be negatively impacted starting in the September quarter. Over the long run, we remain confident towards the growth prospects for our international retail market and will continue our commitment to invest in this area. Tanyao, the digital logistics infrastructure operator for our consumer business, deliver another solid quarter with over 10 billion RMB revenue and revenue growth of 50% year-over-year, which is an indicator of healthy business development across multiple segments. The consumer logistics segment, Tanyao Post, an important network of consumer-facing logistics service points continue to process increasing volume of packages. China Post operators also see new business opportunities in our community marketplaces business, which offer the potential to their role from logistics service providers to community group promoters. In supply chain segment, China sees a major business opportunity in providing manufacturers with a highly efficient supply chain and the logistics services, alongside the rapid growth of Taobao deal. In global logistics segment, China's development of cross-border export logistics network from China to our major markets in Europe significantly improved the logistics experience for our users on the e-commerce platforms, which supported further business volume growth in e-commerce and logistics in a virtuous cycle. Alibaba Cloud's revenue increased by 29% year-over-year during the quarter, primarily driven by robust growth in revenue from customers in the internet, financial services, and the retail industries. From a product perspective, solutions for storage, analytics, learning, efficiency, and safety use of data were among the important growth engines for Ali Cloud and deliver higher revenue growth than overall business, reflecting common demands by enterprise customers as cloud infrastructure replaces traditional IT infrastructure. Similar to the last quarter, the slower year-on-year revenue growth of Ali Cloud was primarily due to revenue decline from a top cloud customer in the internet industry, which has stopped using our overseas cloud service due to local regulatory requirements. Excluding the revenue from this customer, Alibaba Cloud's revenue growth this quarter would be close to 40% year over year. As an important partner to the International Olympic Committee, Alibaba's cloud solution, in collaboration with Olympic Broadcasting Services, is supporting service delivery for rights holder broadcasters for the first time during the Olympic Games Tokyo 2020, transforming how the Olympic Games are broadcasted to the world since Tokyo 1964. Other than the updates on our business side this quarter, I believe our investors will be even more focused on the recent regulatory change in the China internet industry and expected impact on Alibaba. We are in the process of studying the regulatory requirements, evaluating the potential impacts on our relevant businesses, and we will respond positively with actions. We believe all these new regulations aim to foster the healthy development of the internet industry over the long run. In the context of China's economic growth and livelihoods improvement, this is consistent with Alibaba's long-term vision and vision to serve SMEs with digital technology, to serve the underprivileged groups and to serve our consumers' demand for a better life. We continue to stay optimistic about the long-term potential of China's economy and the long-term growth prospects of Alibaba. We will fulfill our responsibilities as a platform in accordance with the regulatory requirements and continue to carry out our commitment to be a good company that creates long-term value for the society in China and globally. Thank you all. Now, I will turn it over to Maggie, who will walk you through the details of our financial results.
spk09: Thank you, Daniel. Hello, everyone. Let me start with the financial highlights for the June quarter. We delivered a strong revenue growth of 34% year-on-year to RMB $206 billion during this quarter, which is mainly driven by robust growth of our China commerce retail business, China logistics, and international commerce businesses. Total adjusted EBITDA was $42 billion, a decrease of 8% year-over-year. Our main China retail marketplace businesses continue to generate solid profitability, but as discussed last quarter, we're investing our excess profits in key strategic areas, and have increased spending in specific programs designed to support our merchants. For businesses other than commerce, we saw improving profitability of our cloud computing segments and narrowing losses for DME segments. For June quarter, net income was 42.8 billion RMB, or 6.6 billion U.S. dollars. Non-GAAP net income was 43.4 billion RMB or 6.7 billion U.S. dollars, up 10% year-over-year. Alibaba has evolved into a multi-engine company with businesses across different runways, and our revenue continues to be more and more diversified. During the quarter, customer management revenue contributed 39% of overall revenue, while it used to be a much higher percentage of total revenue in the past years. We now have many more revenue streams from a diversified base of businesses that are also fast-growing. Businesses such as Cainiao and International Retail Commerce grew 50% or more and were important drivers of our organic revenue growth. Talk about the investment in key strategic areas. Within our commerce segment, we're investing in a number of key strategic areas to strengthen consumer experience, enhance loyalty, penetrate into less developed areas in China, and further expand our presence internationally. Now let's look at the financial impacts of these investments during the quarter. First, Idlefish and Taobao Life has achieved a robust user growth as we increased our investment in these growth businesses. We have also increased our spending on specific programs throughout the quarter to support our merchant operations in our China retail marketplaces. Service fees for several software tools designated to improve their marketing and business analytic capabilities were waived. Merchants' logistics costs relating to customer returns were also significantly reduced. Combined impact of these investments resulted in a 6 percent growth to 60 billion RMB in commerce-adjusted EBITDA before key strategic investments. Commerce-adjusted EBITDA decreased to 45.6 billion RMB. The decrease reflected stepped-up investment in key strategic areas with combined losses increasing 8.7 billion RMB year-over-year to 13.9 billion RMB for the quarter. The primary areas of incremental investments were in community marketplace, Taobao deal, local consumer services, and Lazada and other investment businesses. All of these businesses illustrated robust growth with key operating performances as you can see in the right-hand side of the slide. Daniel just now also talked about all of these growth metrics. As discussed on our call last quarter, we're committed to investing our excess profits into strategic areas within commerce as they address new consumption demands and will continue to expand our addressable market in China. We believe these businesses have the potential to be the long-term revenue growth drivers that continue to catalyze our multi-growth engine in the future. Now let's look at our overall cost trends for the quarter, including SBC as a percentage of revenue. Cost of revenue ratio increased in June quarter due to higher proportion of our direct sales businesses from the consolidation of Sunart, which resulted in increases the cost of inventory. Our cost of revenue excluding SunArt and other 1P business was relatively stable compared to the same period last year. These direct sales businesses will continue to strengthen our new retail initiatives, especially in the development of our product sourcing capabilities. Sales and marketing ratio also increased which was primarily due to an increase in marketing and promotional spending for key strategic areas and growth initiatives. Also, these areas are focusing on user acquisition and engagement enhancement on our marketplace. T&A expense ratio remained stable at 3% during the quarter. So the revenue and EBITDA segment, this slide provides you with an overall summary of our segment revenue and profitability for June quarter. Next, let me speak about our important segments. So let's take a closer look at the revenue and profitability of our business segment, commerce segment first. CMR grew 14% year-over-year to 81 billion RMB. This growth was primarily due to the growth of online physical goods, GMV, on China retail marketplace. The growth also reflected the increase in revenue from new monetization formats, such as recommendation fees, et cetera. China retail orders revenue grew 82% year-over-year to 55 billion due to consolidation of SunArts. and strong growth from our direct sales businesses, including Timo Supermarket and Hema. Commerce adjusted EBITDA decreased by 11%, primarily due to the investment we talked about just now. Alibaba Cloud. The cloud revenue grew 29% year-over-year to 16 billion RMB. Similar to last quarter, the slower quarterly revenue growth is primarily due to this revenue decline from the top customer in the internet industry that has terminated their relationship with respect to their international business due to non-product related requirements. Going forward, we believe that our cloud computing revenues will be further diversified across customers and industries. Starting this quarter, we reclassified the results of ThinkTalk business to cloud computing segments. Because ThinkTalk remains in the investment phase, the reclassification of ThinkTalk financials resulted in lower of cloud computing profitability and did not materially add to revenue during the quarter. After incorporating ThinkTalk, AliCloud still generated just the EBITDA of $340 million. Next are DME. DME revenue during the quarter was 8 billion, reflecting an increase of 15 percent year-on-year. The increase was primarily due to the increase in revenues from Youku and Alipicture. Just the EBITDA losses continue to narrow to 0.4 billion RMB during the quarter. This is primarily due to improved quality of content that resulted in reduced losses of Youku and Alipicture. Now let's review some of the items for selective financial metrics. Interest and investment income was $14 billion in the quarter. Decrease was primarily due to the lower net gains arising from the fair value changes of our investment. The above-mentioned gains were excluded from our non-GAAP net income. Share of results of equity method investees was $6 billion in June quarter. The year-over-year increase was mainly due to the increase in share of profit of our equity investment company, including Ants and a bunch of other companies. So that's the selected financial metrics notes. And for the quarter, net income attributable to ordinary shareholders was $45 billion. or $7 billion U.S. dollar. Non-GAAP net income was $7 billion U.S. dollar, an increase of 13 percent during, mainly due to an increase in share of profit of active method investees. We continue to have a strong net cash position. As of June 30th, cash and short-term investments were 471 billion RMB, which is approximately $73 billion U.S. dollar. Free cash flow was 21 billion RMB. The decline of approximately 16 billion RMB year-over-year was driven mainly by first partial settlement in the amount of $9 billion of $18.2 billion anti-monopoly fine, this payment of the penalty, and increased spending in key strategic areas and growth initiatives. Now, to conclude my prepared remarks, I'd like to talk about three things. Number one, our guidance for the fiscal year remains unchanged. Number two, our investments in new strategic growth areas remain on target, and all the businesses we have invested are showing rapid growth. In the coming quarters, we'll continue to invest additional capital into programs that support our merchants. and developing new businesses in strategic growth areas that will help us increase consumer value share and penetrate into new addressable markets. Our strong profit and cash flow generation capability gives us the internal resources to focus on long-term value creation. Number three, we are increasing our share repurchase program from $10 billion to $15 billion. This is the largest share repurchase program in the company's history because we're confident of our long-term growth prospects. Since April 1st until now, we have repurchased approximately 18 million of our ADS for about $3.7 billion. Now let's open up for Q&A. Thank you.
spk04: Hi, everyone. For today's call, you are welcome to ask questions in Chinese or English. A third-party translator will provide consecutive interpretation for the Q&A session. Our management will address your question in the language you ask. Please know that the translation is for convenience purpose only. In the case of any discrepancy, management statements in the original language will prevail. 大家好,今天的电话会议欢迎您用中文或英文提问。 我们会有第三方工作人员提供实时的翻译。 我们管理层会按您提供提问的语言回答您的问题。 翻译目的是方便大家理解。 如果有任何疑义,请以我们管理层原始语言所做的程序为准。 So now, operator, please connect speaker and SI conference lines now, and then we'll start the Q&A. Thank you.
spk06: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, please press the pounder hash key. And please stand by while we compile the Q&A roster. And to give more people the opportunity to ask questions, please keep yourself to no more than one question at a time. Once again, please press star 1 for your questions. First question comes from the line of Thomas Chong of Jefferies. Line is open. Please go ahead.
spk02: 晚上好,謝謝管理層接受我的提問。 我有一個問題是想先問一下,就是剛剛在Prepare Remarks, 管理層也提到了就是這個Multi-App Strategy。 We also saw that the number of users for the Taobao special edition is very good and very strong. I would like to ask about the future KPI of Taobao special edition in terms of user base and monetization. My other question is about Thank you very much.
spk07: Thank you very much, management. Good evening and thank you for taking my question. My first question has to do with the multi-app strategy that you presented in your prepared remarks just now. In particular, we note that Taobao Deals is developing very well with robust growth in the user base. I'm wondering if you could tell us, please, what KPIs you have set and are looking at in terms of the ongoing development of Taobao Deals in terms of the kind of user base you intend to reach and your monetization strategy. Secondly, I'd like to ask about the recent media reports that we've all been reading about increased connectivity that is expected to be realized in the Internet industry. I'm wondering how management views these reports, these ideas of opening up more connectivity and cooperation across different platform companies in terms of traffic, in terms of collaboration with the other portals. Thank you.
spk08: Thank you. Let me answer these two questions. The first one is about the special edition. As I just mentioned, in the entire Chinese consumer business, we are now using a new consumer app to form a consumer app. This is because today when our Chinese users have exceeded 9 billion users, they have different preferences. Even in different scenarios, the same user will have a different preference. So we have to give users a clearer destination to serve them, to serve different segments of consumers.
spk07: Thank you. Well, on your first question regarding the multi-app strategy, as I said in my earlier remarks, with the development of Taobao Deals, we are working on building a more complete app matrix to better serve the different needs of different consumers. We already have a very large consumer base with over 900 million AACs And they all have different preferences. In fact, the same user could well have different preferences and different needs when interacting in different contexts for different use cases. So it's very important to us to be able to cater to all of those different kinds of needs and demands with an appropriate product matrix.
spk08: Taobao special edition has a very clear value for its users.
spk07: Taobao Deals has a very clear value proposition, namely offering users the best value for money, and it's precisely that extremely clear positioning and value proposition that has allowed Taobao Deals to grow so well.
spk08: An important goal of
spk07: Taobao Deals is to help us grow the user base adding incremental new users especially from the less developed regions of China and also to cater to the special demands of certain consumers when they're looking for value for money. So Taobao Deals is all about growing the user base, growing the business and catering to these different kinds of demands.
spk08: 在这个季度当中,我们很高兴地看到因为淘宝特价版的发展为整个阿里在国内的这个消费者新增这个AAC带来了一千万,这个也是证明这个策略的有效性。 And we're particularly pleased to note that the development of Taobao Deals has already resulted in incremental growth of our user base in China, our AAC number in China by 10 million. 当然在特价版的这个在... Of course, while leveraging Taobao deals to satisfy these kinds of demands, we're also hard at work
spk07: building a highly efficient supply chain direct from manufacturer or producer, including industrial manufacturing bases, agricultural production bases, direct to consumer logistics and supply chain. Second, let me address the question about connectivity. We're aware that there have been media reports in this connection, and this will be a question of interest, I'm sure, to many investors.
spk08: Our view on...
spk07: connectivity has been consistent and extremely clear. We believe that connectivity is a core value of the Internet, and we also believe that openness is a fundamental and should be a fundamental characteristic of the digital economy. When you can achieve circulation of users, of information, of data, not only within but across and among different platforms, that certainly will be conducive to realizing greater social value to a greater extent than the smaller circulation that could only be achieved within the same platform. So we do see cross-platform openness and connectivity as a positive trend that could unlock greater dividends in the Internet era.
spk08: We also noticed that the problem of Internet communication is also a concern of many merchants, including consumers. From the point of view of merchants, what we see is that if small and medium-sized enterprises can be able to remove the blockade of the outside chain, it can actually reduce their flow costs and also reduce their operating costs, and at the same time bring convenience to their entire operation. For consumers, it is very simple. If they can We note that this issue of connectivity and openness is also of concern to our merchants and consumers.
spk07: For merchants, and in particular for SMEs, it would certainly reduce their traffic acquisition costs and help improve their operating efficiency and make it more convenient for them to do business at lower cost. Similarly, for consumers, it would enable a better user experience across platforms for shopping, for payment, for accessing different services, and bring a greater level of convenience to them as well. So for all of the key stakeholders on Internet platforms, we see this as positive.
spk08: Recently, we also noticed that at the end of July, the Ministry of Public Relations also initiated an online industry-oriented organization. In the middle, we noticed that the key organization issues included maliciously blocking network connections and interfering with China China China China China China China China
spk07: We also take note of the launch by MIIT of a regulatory review and rectification project on internet companies with a particular focus on practices like the discriminatory blocking of links to other platforms or blocking of services offered by other companies. We will attach great importance to this review and rectification project and of course ensure our compliance with all regulatory requirements. And to borrow a popular saying lately, we will work to find common ground and move forward together.
spk06: Thank you. Our next question is from the line of Eddie Leung of Bank of America Merrill Lynch. Please go ahead.
spk10: Good evening, guys. Thank you for taking my question. Just two quick questions about regulations. The first one is we have seen some regulatory focus on data in general. So how might that affect our compliance and IT infrastructure costs? And then secondly, in the past few months we have also seen media reporting regulators seems to be looking at the use of heavy subsidies in the industry, including some community group buy visas. So how may that affect our investment strategy and user acquisition tactics in some of these new initiatives? Thank you.
spk07: One aspect is the recent focus of the regulators is on data. We want to know how the direction of data supervision will affect our practices and our IT infrastructure and other plans. In addition, we also saw the media reporting that they are also investigating Okay, let me answer these two questions. First, about data, well, I think actually in recent months,
spk08: The Chinese regulators issued the data in June. They issued the data security law. And in recent months, they also have issued the guidance and also waiting for comments about the data security review. We believe this is very, very important. And we believe these laws and registrations will safeguard the long-term development of digital economy. because as digitalization is an inevitable trend, data is becoming a common understanding that data is a core asset for a company, for people, and even for a country. So to adopting these legislations relating to data security is very important, and China only country do this. Actually, when you look at what happened in U.S. and Europe, regulation on critical information infrastructure, personal data protection, so on and so forth, has already been implemented. So for Alibaba, digitalization is core of our business. Data security is always the core tenet of our business. And as always, we pay highest attention to this topic. And right now, we are carrying out a self-compliance checks on the latest regulatory requirements. And we strongly believe that to further strengthen the data protection will enhance the long-term health development of the digital economy.
spk07: Okay. Regarding data protection, we saw that in June, China issued the Data Security Act. In recent months, it has also announced some related guidelines. We believe that data protection and the relevant legislation and regulations are very important. To be able to protect data security and data privacy is a need for long-term health development in the Internet industry. We all know that digitalization is now a major trend in all industries. Under such a background, everyone's consensus is that data has become a core asset, whether it is the company, the people, or even the country. Therefore, it is very important to strengthen the protection of data security through such legislation. And not only China has such legislation, in fact, the United States, the European Union, we all see that it is related to protecting key infrastructure, maintaining personal data security, and so on. The law and regulations have been implemented. So for Alibaba, digitalization is the core of all our business. Ah, ah, 我们坚信加强对数据安全的保护是可以更好的推动数字经济健康长期的发展。 For the second question about the subsidies and the way of acquisition of new customers, I think, generally speaking, I think we are very happy to see the
spk08: see the recent actions and guidance from the regulators for an orderly market. As always, we believe that subsidies cannot create the long-term value of the business, cannot create the long-term value of the customers. So if you look at the Alibaba history, actually we never grow our business based on subsidies.
spk07: So about the second question, which is about subsidies and customers, we are happy to see some new actions and requirements in terms of supervision to create a more sustainable market environment. In fact, subsidies are impossible for the business or for consumers. We strongly believe that the key thing is still the value creation for the long term. And so that's why in this year when we plan our incremental investment, we always focus on the value creation.
spk08: And we think that for other companies who continue loss making but still try to enlarge the scale by subsidies, I think at the end of the day they have to let the market see the real results of how to make profit.
spk07: Alibaba believes that we must do long-term value creation. This is the key. So this year, you can see that the key to our increase in investment is value creation. We think that there are other companies that have been losing money and want to use this method of supplementation Many thanks, Daniel, and our translator. Thank you. Next question, please. Thank you. Our next question is from the line of Alex Yao of J.P. Morgan.
spk06: Line is open. Please go ahead.
spk03: For example, at the computing level, should we look at user growth or some other indexes? How do we consider our investment returns internally? For the second question, I would like to follow up on the topic of data. Considering the current monitoring environment, in the future, Thank you. A couple of questions, if I may. First of all, I'd like to ask about
spk07: the KPIs you are applying and will be applying to evaluate the success of these incremental investments. We see very clearly in the financial results that you've released the spending side of the equation and where these investments have gone. But could you tell us a little bit more, please, about the ROI on those investments, how you'll be tracking that, What are the KPIs you'll be looking at internally? Will it be user growth or other KPIs perhaps? And then my second question, by way of follow-up on the earlier question about data, I'm wondering how these new regulatory requirements and developments will perhaps affect Alibaba's ability going forward to make use of data, to collect data, process data, utilize data, especially for monetized services like advertising, if you could speak about that in a bit more detail. Thank you.
spk09: Okay, thank you for Alex's question. I'll answer the first question first, and then Danny will answer the second one. Regarding our investment, you all saw the report on the record. Thank you. Thank you. Thank you. 我们的国际业务Lazada 对吧 还有一些新零售的业务 包括比较少量投资在菜鸟 那针对你的问题就是说 这个支出是这样的 业务的进展怎么样 在同一张的这个PVT上面 右边呢 我们列示出来进展 你可以看到 几乎所有的投资领域 进展都非常迅速 那比如说 像这个社区这个平台市场 Our GNV has increased by 200% in a quarter. The GFA, which is the RDC area, has also increased by 260%. This is a prerequisite factor. We have this, and then the order volume will increase, and then the GNV will increase. And then we also reported that the MAU of Xianyu has exceeded 100 million. And Taote's AAC has exceeded 100 million. uh uh The total number of Alibaba users has reached 1.8 billion. This includes domestic and international users. The total number of domestic users is 9.12 billion. In one quarter, the total number of users has increased by 4.5 billion. Xiao Zi once told everyone that our goal is to see 1 billion Chinese consumers in three quarters. Now unmuted.
spk07: Thank you. Well, if you refer to the PowerPoint that I prepared to go along with my earlier prepared remarks, you will see that we outlined all of these incremental investments that we're making in terms of the different areas they're going to. So, as you say, where the expenditure is being channeled is very clear. We have our community marketplace business, Tabao Deals, local services, in the international business, Lazada, new retail, and to a lesser extent, also Cai Niao. And then on the right-hand side of that very same slide, we gave data to show how that spending is paying off. And you'll see that in all of those different areas, progress is being made and things are going very well. Be it in terms of GMV in the community marketplace business in the first quarter up by 200%, or be it in the GFA RDC, the area has been increased by 260%. So that's an upfront investment in capacity that will pay off down the road with higher orders and higher GMV. We also showed there that Idlefish has grown to MAU user base now of over 100 million. And Tabau Deals, the AAC user base has exceeded now 190 million. Ulema orders up by 150%. So, you know, in the different business areas, I think different metrics should be looked at to understand the return on investment. Certainly in the consumer business, number of users is a very important metric to keep tracking. As Daniel shared earlier, our total AAC number in China and overseas taken all together has now reached 1.18%. billion with the domestic user base in China the AAC number now having reached 912 million so the the overall China plus global user base has grown by 45 million also as Daniel has previously stated we have a goal in the foreseeable future within say three quarters of to grow our domestic user base in China to 1 billion or more. Now, you may say it's not a very big stretch to get from 900 plus million to 1 billion, but that's actually a huge difference if you think of that user base interacting with all of these different businesses, be it local services, be it Idlefish, be it Taobao, and so on. We're talking about growing that user base further, but also significantly enhancing stickiness so that those users avail themselves of all of those different businesses.
spk09: Yes, so back to our internal consideration of the progress of the business, I would like to simply say that it is the user, the user base and the user's application and the user experience. The user base that we just talked about, this number, actually only depends on the number. There is a very huge difference between this number and other platforms, which is that the amount of content in it is different, because the user can cross apps to use our services. We have different businesses providing services. The second category is applications. As you can see, we are reporting on audit growth and GNV growth. These are actually talking about usage. The third category is user experience. This will reflect the results of our infrastructure construction, including supply capacity and fulfillment capacity. Just to finish the answer,
spk07: Internally, we will evaluate the success of these investments in different ways in different businesses, but primarily in three dimensions, the first of which I was just speaking about, the user base growth, but also applications and experience. So when it comes to user base, something very important to understand that differentiates us from the other platforms and makes those numbers even more meaningful is that these users are using different apps and different services within the Alibaba ecosystem and will continue to grow their usage across those different apps. Secondly, when it comes to applications, we're tracking, of course, order growth and GMV growth and we'll continue to report to you on that. And then the third dimension is user experience and that would include improvement in supply as well as in fulfillment. And going forward, we'll certainly be sharing with you more specific KPIs in that context. For example, in our community marketplace business, our on-time delivery rate, which is already very high. But going forward, we will be reporting to you in more detail on KPIs in each of those three dimensions.
spk08: Let me answer the question about data. As I said, we have always had strict requirements for data collection and use. With more legislation, we will strictly follow the requirements of the law and the requirements of the Constitution to do our job well. But we believe that we have always maintained a high standard
spk07: Thank you. This is Daniel to answer the second question regarding data. Alibaba has always held itself to the highest standards and the strictest of requirements when it comes to collecting data and utilizing data. We've always done that consistently and will continue to do that. As new legislation and new policy requirements are developed, we will ensure strict and full compliance with the requirements of the law as well as with implementation guidance that is further developed. It is our commitment to deliver robustly on our commitment to data security and data protection.
spk08: As for what you asked about the requirements of the law, data collection and use will have more clear requirements, will it affect the growth of users, the growth of income, and the growth of business? In fact, we have not simply used the use of data, including the use of algorithms, as a single goal, especially as a single efficiency goal, as our starting point.
spk07: Your question also touched on the potential impact of new laws and policy requirements around data collection and utilization. In terms of revenue growth, business growth, I would simply underscore that Alibaba has never looked at data utilization or algorithm utilization as a single standalone KPI or a single factor that we rely on in growing the business. 这个我举个例子,比如说我们在我们的消费者业务当中的广告业务来讲,其实这个我们的整个的数据的使用,算法的应用,其实它不是单纯以这个效率的最大化或者收入的最大化来做的,我们一直都不是这样做,因为作为一个消费者平台,上面的任何的推广广告的业务,核心是
spk08: And to give a specific example to illustrate what I mean by that,
spk07: In our consumer advertising business, we have never sought to leverage data or algorithms to achieve the maximization of monetization in the consumer advertising space. We think it's much less important to maximize click-through rates compared to the paramount importance of providing a top quality user experience, a high level of user satisfaction. So we've always approached the utilization of data with the intention of growing value for the community, for the users, and society.
spk08: Yes, so from this point of view, we believe that as the law on data security, the demand for data use is getting higher and higher. A company that can use data in a more standardized way will not only be able to create better social values in the long term, but we also believe that we will be able to get better opportunities for development. We have no doubt about this.
spk07: Therefore, we see the enactment of data security legislation and efforts to ensure the better protection and stricter use of data as positive in terms of being able to foster value for society in the long term and to allow good companies like Alibaba to grow and create more value for their customers and themselves.
spk04: Thank you. Just a minor correction on the English translation before. I think we meant to say Elemant Food Delivery's order growth is 50 percent, not 150 percent. Next question.
spk06: Thank you. Our next question is from the line of Piyush Mubai of Goldman Sachs. Line is open. Please go ahead.
spk01: Thank you for taking my question. I have two questions. The first is on the cloud growth rate, which is down to 29 from 37%. Could you just take us through what happened in the quarter that resulted in that step down in growth rate when we had seen the impact of the customer moving out in the previous quarter? So how much of it was that customer? And also, if you could just shed some light on what the core growth rate for the cloud business in China is, that would be helpful. And the second is, in looking at CMR, could you just give us a feel for how the CMR is trending versus the the core GMV for your business, and any color around how GMV projections would look like through potentially the next quarter. And I ask that because through the quarter or through the past quarter also, we had, even based on NBS data, we had a sluggish May, but a remarkably better June. And I presume that a lot of the improvement in June was fostered by you. And if that pace of growth is a function of how you're fostering growth, I wonder how the rest of the year looks. Thank you.
spk07: Thank you very much. I have two questions. The first is about cloud intelligence. We just saw that the growth rate of cloud intelligence dropped from 37% to 29%. Can you please introduce this? You mentioned that there was a loss of customers in the previous quarter. How much of this drop in income growth is due to the loss of that customer? How much of it is caused by other factors? Another question is about customer management revenue. Can you introduce its trend and its relationship with GMV? And then I don't know if it's convenient to ask, what kind of outlook do you have for the next quarter of GMV? The reason I ask this question is because in the last quarter, including this quarter, we all looked at some data from the National Statistical Bureau. Thank you for your questions. Let me answer the two and then maybe Daniel's supplement. So for Claude,
spk09: we talked about this one single top cloud customer's impact on our revenue. So without this impact, our cloud revenue would have been showing close to 40% year-on-year growth. And we do see strong growth in many industries within our cloud business, like internet, finance, and retail sector, etc., Talk about this one customer impact. We expect this impact to continue for the remainder of this year until the full exit of this customer's international revenue. So looking forward, as you've seen, there are many changes and also new rules and regulations come out. There might be impact on other customers, for example, like online education customers. However, overall, we still believe the addressable market for giant cloud service is still huge. And we just kept focusing on all of these solutions, you know, products and technology are great to ensure the customer experience and to grow the business. So that's for the cloud. There will be some near-term bumps and a continued impact from that top customer. One more thing to add to the cloud revenue is about concentration risk you might have in mind. So if we take out that one customer, our top 10 external customers' revenue contribution to our total revenue is single digit. So we're pretty diversified in the clock revenue. So question two about CMR growth. The CMR growth has this linear relationship with the GME growth. So we see that relationship still there. One thing I want to highlight is that GMR as the percentage of total revenue right now is 39 percent. So, we do have a lot of new revenue streams coming in, and I think . Going forward, GMV growth, I think with the total national GMV growth, you can tell from the MBS data, We are quite representative to the total pie. If you look at our over $8 trillion total GMV as a percentage, total China's consumption is becoming very important and essential. So it can't be very different from the whole national online GMV growth. Danny, you want to supplement?
spk07: Okay, thank you. Let me answer the question about cloud-based income. What we introduced earlier is that the decline in cloud-based income is due to the fact that a single head customer cannot use an overseas cloud service. So, as Professor Fan introduced earlier, if we remove such a And our cloud computing business is growing rapidly in many different industries, especially in the field of Internet, finance, and retail. We expect the single customer impact to continue until the end of this fiscal year. By then, his international business will be completed, and he will be out of our cloud service. In the future, I think cloud services may have some difficulties. There may be other types of customers, such as online education. However, we believe that the market potential of cloud services is huge. Our focus is to improve our services, products, and technologies in all areas. can provide better customer experience, and can continue to promote our business growth. So, a related question, you may be thinking, is our cloud intelligence service, is there a so-called central risk? Then I can answer this question like this, after removing the first client we just talked about, The rest of the 10 major cloud service external customers, their total revenue of the cloud service is the unit number. The unit number means that our concentration risk is very low. The second question, you asked about the growth of customer management revenue, GMR. Indeed, it has always been the growth of GMV. uh uh uh uh uh Alibaba, as such a large platform, 80,000 billion RMB of GMV has already accounted for a larger share of online retail nationwide. It should be said that there is a certain representative, that is to say, Alibaba platform performance will not deviate from the large trend of online retail nationwide, will not deviate it too far.
spk09: One thing to add before I give to Daniel is that the future revenue stream, I think whatever we're investing nowadays, including all of these new strategic business areas, including all of these infrastructure like supply chain capability and fulfillment capability construction, is all of these aim to provide value, additional value to our customers. Once we get the development of the business and the customers keep coming to use our services, there will be opportunities for us to monetize the value provided. So these are going to be new revenue resources to our overall group revenue.
spk07: Thank you. Just to add a few words on the cloud business, I think the most important thing
spk08: to look at the cloud business about the total addressable market in the long term. And I think all the people can recognize that today is just the beginning stage. And just now Maggie shared with you our business situation from a customer portfolio perspective. Now I just want to add a few words on it from a product perspective. I think today for many enterprise customers, how to run an efficient infrastructure is basically the entry point services they need when they decided to move to cloud. And over time, we are happy to see that they get used to, when they move to the cloud, they will have a high demand in terms of how to collect and especially the computing and the usage of the data. So that's why they have a high demand not only on the data storage, but also on the data analytics, on the database, and even data security relevant services. So actually this is exactly what I said in my remarks that in this particular quarter we see a very, if you look at the growth rate by product, by services, actually the services for data usage, data storage, and data analytics, data securities, actually their growth rate is higher than the average. So I think it's more like we have these entry point services as us. And then going forward, we try to up-sales and cross-sales many more services to our enterprise clients when they are in the process of digital transformation.
spk01: Thank you, Daniel. Thank you, Daniel.
spk07: I think everyone can clearly see that the cloud technology market is only at the beginning of such a development stage. So just now, Maggie introduced the current business situation of cloud services from the perspective of our customer group. Next, I will change the perspective and introduce it from the perspective of the product. So for business users, how to use cloud services to obtain high-efficiency infrastructure. This should be said to be an entry-level need. So after they go to the cloud, they are used to using cloud services. It will have more advanced and broader needs, including in terms of operation, including data collection and use. In other words, there will be data storage, data analysis, data storage, including data security and other needs. So we can continue to provide them with these services. So just now in the speech, we also introduced that in the cloud intelligence section, data storage, data analysis, data storage, including data security, these services, their growth rate is higher than the overall 所以我们可以说IaaS是一个入门级的要求。 那么在完成了这个IaaS的升级之后呢, 我们可以给这些客户做很多升级和交叉销售。 Okay, next question. Thank you. Next question is from the line of Jerry Liu of UBS. Please go ahead. 谢谢光丽腾。
spk05: I have two questions. First, we have discussed a lot of investment issues before. I want to talk about the profit and loss of the Marketplace-Based Quad. Where is the main focus of our investment now?
spk07: Yes, thank you, management. I have a question also on investment, which we have been discussing, but I'd like to know if you could tell us a bit more about the investments you're making in the marketplace-based core and also in particular in Taobao live streaming.
spk08: Let me talk about it. Actually, the answer is very simple. How to look at this Marketplace-based call, the change of the profit, the change of EBITDA. In fact, the simplest answer is because we put a lot of effort into the new Marketplace business. Because today, traditionally, when we talk about Marketplace, we talk about Taobao and Tianmao. But today, as we build on the new Marketplace, Thank you. Well, I'll take that question. I think it's a very simple answer. When you ask about the marketplace-based core at EBITDA,
spk07: there and how we should look at that. We're investing, as we said, in new businesses. So when we used to talk about marketplace-based core, it was Tabao and Tmall. But now we're working hard on building all of these different businesses, each with its own unique and compelling value proposition and collectively forming a matrix of marketplace-based core businesses, so that requires that we take a different perspective in evaluating marketplace-based core profit. 对于直播来讲,我们一直认为直播它是一种新型的销售方式,但是它是整个商家整体的数字化经营的一个组成部分。 In terms of live streaming, we see that not merely as a new approach to selling goods online. Rather, we see it as an integral part of a merchant's overall approach to digital operation.
spk08: So for Alibaba, our advantage is that we can provide our customers with a variety of scenarios, a variety of forms, and a variety of technologies to support them.
spk07: So one of the key things that Alibaba brings to merchants and that distinguishes Alibaba is our ability to provide multi-dimensional, multi-use case multi-value services, 365 degrees across an entire ecosystem, creating value for merchants, and live streaming is just one part of that.
spk08: From a business perspective, they need a service that can run the entire user life cycle, and can be measured throughout the entire operating cycle. And what merchants really want and need is the ability to conduct lifecycle management of their customers, the ability to track and measure a range of KPIs around their customers, their
spk07: and not just the ability to track the success of one or two live streaming sessions. That's just one part of the process, but the bigger picture is the customer lifecycle. So going forward, we will continue to develop this comprehensive digital ecosystem and a comprehensive suite of services to support and enable merchants. And when merchants are supported and enabled in this way, of course, that is how consumers will be able to experience the best possible online experience.
spk04: Okay, I believe that's all our time for today. I thank everyone for joining today. And if you have any questions, follow-up, please do contact me and the IR team. Thank you very much.
spk06: Thank you. Thank you. Thank you. Yes, this concludes today's conference call. Thank you for participating. You may now disconnect.
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