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spk09: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's September quarter 2021 results conference call. At this time, all participants are only in only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to Rob Lynn, Head of Investor Relations of Alibaba Group. Please go ahead.
spk08: Good day, everyone, and welcome to Alibaba Group's September quarter 2021 results conference call. With us today are Daniel Zhang, Chairman and CEO, Joe Tsai, Executive Vice Chairman, Maggie Wu, Chief Financial Officer. This call is also being webcast from the IR section of our corporate website. A replay of the call will be available on our website later today. Now, let me quickly go over the safe harbor. Today's discussion may contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussion of these risks and uncertainties, please refer to our latest annual report on Form 20F and other documents filed with the US SEC or announced on the website of Hong Kong Stock Exchange. Any forward-looking statements that we make on this call are based on assumptions as of and we do not undertake any obligation 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 share or ADS, and free cash flow are expressed on a non-GAAP basis. Our gap results and reconciliation of the gap to non-gap measure can be found on our earnings press release. Unless otherwise stated, growth rates of all stated metrics mentioned during the call refers to year-over-year growth versus the same quarter last year. In addition, during today's 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 the case of any discrepancies, management statements in the original language will prevail. With that, I will now turn the call over to Daniel.
spk12: Thank you, Rob. Hello, everyone. Thanks for joining our earnings call today. In the past quarter, Alibaba continued to firmly invest into our three strategic pillars of domestic consumption, globalization, cloud computing, and data intelligence. We believe this will establish solid foundations of our long-term goal of sustainable growth in the future. Some context on the China macro environment before I share our business updates. In the September quarter, China's GDP and consumption continued to grow but slower than the previous quarters. Overall retail sales for the quarter increased 5% year-over-year. Online retail of physical goods rose 8% year-over-year compared to the 19% during the same period last year. Offline retail has only just returned to the same level as two years ago. These economic headwinds coupled by intensifying market competition also affected our core commerce business in China. In line with industry retail trends in China, physical goods GMV year-over-year growth rate moderated to single-digit this quarter, mainly due to a slowdown in apparel and general merchandise categories. That said, growth rates of consumer electronics and home furniture categories remain resilient. In the challenging macro environment, we continue to invest in user acquisition and have seen promising progress in low-tier cities, which I will elaborate on later. Our global annual active consumers reach approximately 1.24 billion. which is a net increase of 62 million quarter-over-quarter and a 20% growth year-over-year this past quarter. Our AAC grew to 953 million in China and 285 million overseas. We are on track to deliver the 1 billion China AAC target by the end of this fiscal year. and remain firmly committed to achieving our long-term target to serve 2 billion consumers globally. Let me turn to our long-term investment strategies. In less developed areas across China, Taobao deals have continued incremental growth to our overall user base and stimulate more user activity and engagement in our China consumer ecosystem. Taobao Deals AAC surpassed $240 million this past quarter. Close to half of Taobao Deals daily active users are unique incremental users in addition to Taobao App DAUs. Consumers are attracted by the value for money products and differentiated user experiences offered by Taobao Deals. At the same time, manufacturers take advantage of its one-stop full-service solution that includes online stock operation and fulfillment to sell directly to end customers. We call this solution M2C, or manufacturers to consumers. During this past quarter, Taobao deals M2C orders grow nearly 400% year-over-year. For our community marketplace's business, Tao Cai Cai, We continue to focus on investing in and building a new digitalized community commerce model that is sustainable and healthy. Taozhai has expanded operations to close to 200 cities, and its GMV growth surpassed 150% year over quarter over quarter. We are deliberate in our approach and faithful to our belief in true value creation rather than blinded pursuit of unqualified and unsustainable growth. We are instead focused on leveraging core capabilities that Alibaba has built over years in the supply chain, logistics, user engagement, and the channel development. We aim to grow a new digitalized social commerce infrastructure that offers consumers quality services and products with highly competitive price. Consumer survey results have shown that product quality is the top deciding factor for consumers to choose TaoCaiCai over other platforms. TaoCaiCai has contributed to increasing the purchase frequency of our core commerce consumers. More than 50% of TaoCaiCai users were first time buyers of fresh produce on our China retail marketplaces. We believe the ultimate value proposition of the community commerce infrastructure is in our ability to elevate the quality of routine everyday services in local communities. It ranges from guaranteeing supplies during pandemic lockdowns, supporting local farmers to sell high quality produce, vocational training and job creation, we will continue to enhance these services to create value for our communities. In local services, we are creating a product and service matrix centering around synergies between ULMA, AMAP, and FLEGI. ULMA and AMAP are positioned as our two main user entry points for home-bound and destination-bound local services, respectively. Ullama delivered 29% growth in AACs and 30% growth in order volume year-over-year, with non-meal delivery order growth outpacing total order growth this past quarter. In addition to MAP navigation services, AMAP has been expanding into service offerings around the users' journeys and destinations, such as ride-hailing, hotel bookings, et cetera. During the quarter, transacting users of these destination services on AMAP increased more than 200% year-over-year. Although the recent resurgence of COVID-19 in parts of China impacted stability in the supply of hotel rooms and travel products in many provinces, we see the positive contribution in user value from adding fleeky product supply to AMAP and other and our other user platforms. We just celebrate our 13th November 11 Global Shopping Festival with a record GMV of 54.03 billion RMB, excluding unpaid orders, representing a year-over-year growth rate of 8.5% for the 11-day campaign. The stable and healthy growth of the high base over last year reflects China's consumption power and economic resilience. Looking forward, we remain confident in development of China's consumption. Today, we already have the largest and the most valuable consumer base in China, with 953 million AACs which are still growing. At the same time, we will serve our large and a diverse consumer population through user segmentation, addressing different needs and use cases through an assortment of apps with differentiated value propositions. Further, through cross-selling of products and services, we will increase our user sickness, water share, and overall retail penetration. Outside of China, we continued healthy expansion of our user base and revenues, achieving 285 million AACs and a 33% revenue growth during the quarter. In Southeast Asia, Lazada produced 82% order growth year over year during the quarter, with triple digit growth in Thailand, Vietnam, and Malaysia. Trendio, the largest e-commerce platform in Turkey, delivered GMV growth of over 80% year-over-year. AliExpress GMV growth decelerated this quarter due to the negative impact of net VAT rules in Europe and the gradual recovery of the local supply chain and consumption in its destination markets. Looking ahead, AliExpress will further invest to expanding local operations in its strategic markets in Europe. For our logistics business, Tanya Post has achieved coverage in over 200 cities as of the end of September. They have become our stations for consumer services in more than 100 counties and towns across less developed areas. The daily average package volume delivered to Tanya Post increased nearly 70% year-over-year to $69 million during the quarter. In the domestic supply chain business, China's fulfillment volume for Taobao Deal's M2C business increased by more than 200% year over year. As part of its global logistics network expansion, China launched new initiatives to improve the user experience for international consumers by introducing self-pickup lockers in Russia, Spain, France, and Poland. while continuing to enhance its cross-border end-to-end logistics capabilities. Last but not least, Alibaba Cloud delivered revenue growth of 33% year-over-year this past quarter, driven by strong revenue growth from customers in the Internet, financial services, and retail sectors. In October, we held our 13th Apasara Conference, which is now the biggest technology conference in China by attendees. We unveiled several new proprietary product and technologies upgrades, including ETN 710 server chip, the X-Dragon architecture, Kanjio Cloud Native Server Series, Alibaba AI, and Big Data Platform. and a new generation of PolyDB database. These show that Alibaba Cloud is benchmarking against the world's top cloud computing technologies and a milestone in its proprietary product capabilities in OS and POS. In September, we announced 10 initiatives and pledged to invest 100 billion RMB by 2025 to advance scientific and technological innovation, economic development, high-quality employment, and vulnerable growth support in China. We believe these four areas are among the common focus of all responsible companies in the world under the ESG framework. We will incorporate these 10 initiatives into the social responsibility pillar of our ESG strategy and hope that our digital commerce and technology ecosystem can contribute our part in these areas. Looking ahead, we will continue to invest heavily into our three growth engines of domestic consumption, globalization, cloud computing, and data intelligence, as we announced at the beginning of our fiscal year. In cold commerce, we have started to see encouraging initial results of our investment in low-tier cities, local services, and logistics in the form of user growth and enhanced logistics capabilities. Our investment in globalization has also delivered progress in user base, consumption, and revenue growth. In cloud computing and data intelligence, we will strengthen our market leadership by further enhancing our core product and technology capability. No matter the challenges in the current macroeconomic environment and with more and more players entering into the industry, we remain very confident in our business strategy and our future. We will continue to focus on capacity building, value creation, and a multi-engine approach to growth. We firmly believe our strategy and perseverance will bring mid- and long-term returns to our customers and investors. Now, I would like to turn it over to Maggie, who will walk you through the details of our financial results.
spk04: Thank you, Daniel. Let me share some high-level thoughts on our financial results first. Our revenue growth continues to be strong. and our revenue are becoming more diversified. So overall, we grew revenue by 29% year-over-year to $200 billion. Revenue of our international commerce business and cloud computing exhibited robust growth of 34% and 33%, respectively. Our adjusted EBITDA was $28 billion. But our core profitability before investments in key strategic areas remain very significant and stable at about $52 billion. So I will talk about our investment areas later. The decline of $13.2 billion RMB year-over-year in total adjusted EBITDA is a result of our investment in strategic areas and merchant support. We have one of the most diversified and loyal customer base in China, And then we believe these investments will further strengthen our position. And our overseas investment will also help us gain mindshare in many international markets in the future. So here we provide a revenue breakdown by segment, where you can see that Alibaba has evolved into a multi-engine growth company with businesses across different runways and our growth and revenue continue to be more and more diversified. Cost trends. Now let's look at our overall cost trends, excluding SBC as a percentage of revenue. Cost of revenue ratio increased in September quarter due to higher proportion of our direct sales business, mainly from the consolidation of SunArt. This direct sales business will continue to strengthen our retail initiatives especially in the development of our product sourcing capabilities. For example, our community marketplace business continued to grow rapidly, which is partly thanks to the strong procurement and supply chain capability in perishables, FMCG, and general merchandise categories of San Art. Sales and marketing ratio also increased in September quarter, due to an increase in marketing and promotional spending for user acquisition and engagement for our mobile commerce businesses, such as Taobao Deal, Lazada, Elema, and also Tao Caicai. G&A expense remains stable at 4% compared to the same quarter last year. Now let's look at our profitability and area of investment. Commerce adjusted EBITDA before key strategic investments was largely flat at $52 billion. Primarily reflected our support to merchants as well as the increased spending in user acquisition engagement on our marketplaces. So excluding our merchant support program spendings, the growth of commerce adjusted EBITDA before key strategic investments was similar. to that of our CMR revenue growth, suggesting a relatively stable EBITDA margin of our China retail marketplace. Adjusting EBITDA decreased by $13.2 billion. The decline primarily reflects $12.6 billion year-over-year increase in combined losses of key strategic areas such as Taobao Deal, local consumer service, community marketplaces, and Lazada within commerce, Let's take a closer look at the business progress, revenue, and profitability of our business segments during the quarter. Before, okay, first on our commerce segment, revenue from our commerce segment in quarter was 171 billion, 31% year-over-year growth. Revenue of China commerce business showing 14% year-over-year growth, excluding salary consolidation. and CMR is growing 3%. There are two key reasons for the slower growth of CMR. First, our CMR growth was primarily tied to single-digit physical goods GMV growth that resulted from slowing market conditions, and more players entered into this sector, the China e-commerce market. China's NBS statistics have shown a slowdown of overall consumptions, we experienced a larger impact given our position as the largest e-commerce player in China. Secondly, CMR growth was lower than physical goods GMV growth, primarily due to the incremental year-on-year increase in merchant support and subsidies. Revenue of international commerce grew 34% year-over-year, with continuous strength of both international wholesale and international retail businesses, such as Lazada, Alibaba.com, AliExpress, and Trendio. Commerce adjusted EBITDA decreased by 12.7 percent. The decrease reflected 12.7 billion. The decrease reflected increased investment in those strategic initiatives. Now, these initiatives we invested within commerce. As noted, we're investing in growth business that strengthen consumer experience, enhance loyalty, penetrate into less developed area in China, and further expand our presence internationally. So during the quarter, the business is also robust growth. Taobao Deal and Tao Caicai, continue to penetrate into less developed markets of China and they extend our addressable market. Taobao deal achieved the 240 million AAC, up 49 million. Tao Cai Cai grew GMV by over 150% Q on Q. As a reminder, our community marketplace business started early this year. Alamo continues to deliver strong order growth of 30% year-over-year and is one of the main consumer gateways for our local service business with high-frequency purchasing intent. Lazada and Trendio continue to generate robust growth in new international markets. Lazada order grew 82% year-over-year. Trendio GMV grew over 80% year-on-year. Let's take a look at the comparison A cloud computing business. AliCloud's revenue grew 33% year-on-year to 20 billion RMB during this quarter, which accelerated compared to the June quarter growth. We saw strong revenue growth from customers in internet, financial services, and retail industries. AliCloud generated an adjusted EBITDA of 396 million, given strong revenue growth and economic scale. Next, our DME business during the quarter was $8 billion in revenue. And if you look at the losses, it slightly increased year over year because the investment in accounting, et cetera. But overall, it continued to narrow in losses in the first half of the fiscal year. Income statement selected financial metrics Let's review some of these line items. Interest and investment income was a loss of $11 billion in September quarter, primarily due to net losses arising from changes in market prices of our equity investments in publicly traded companies in the quarter. This is compared to net gains in the same quarter of 2020. Income tax expense in the quarter were $6.1 billion, compared to $1.9 billion the same quarter of last year. In the same quarter of last year, tax expenses reduced by approximately $6 billion because during that quarter, certain subsidiaries were officially notified that they were approved of key software enterprise status for calendar 2019, which entitled them to a reduced tax rate of 10%. Share of results of equity method investees was $5.5 billion during the quarter. Here we show a gap and non-gap net income attributable to shareholders. Besides the reasons we discussed above, the year-over-year decrease was also due to losses arising from the changes in market prices of our equity investment in publicly traded companies. September quarter free cash flow. We continue to have a strong net cash position. As of the end of the quarter, our cash cash equivalents and short-term investments were 443 billion RMB, which is approximately 69 billion U.S. dollars. Free cash flow was 22 billion RMB. The decline was driven by a decrease in the profits. Before we go into Q&A, I would like to provide some perspective on our financial outlook. Over the last six months, we have observed a softer market conditions with slowing consumption growth in China. Given a slower than expected domestic consumption growth since we provided our revenue guidance in May, We now expect our physical 22 revenue growth to be 20 to 23% year-over-year. The adjustment primarily reflects lowering of commerce revenues that include both direct sales and the customer management revenue. Let me share with you a bit more our investment and profitability. So firstly, in China, we're seeing more players entering into the e-commerce industry. Our peers are increasing investments to acquire users, and most of them continue to show a high level of spending. We will continue to invest in our e-commerce business that creates value for consumers and merchants and keep our market leadership position, and then for the competitive strength in the longer term. Secondly, we believe our local service business still have ample long-term potential. These businesses have generated strong transaction growth and high user retention rate, setting a strong foundation to compete for long-term. We're seeing robust GME and user growth in our international commerce business. These businesses, Lazada, Trendio, Aliexpress, are exhibiting robust growth driven by localization strategy, as well as our ongoing investment in building technology and logistic capabilities. Lastly, we continue to expect exciting growth opportunities for our cloud business that will benefit from digitization in the industrial internet era. Given our significant profit generation and a strong balance sheet, we believe It is important to grow and expand into new addressable markets for the long-term despite near-term weakness in domestic microenvironment. As such, we will continuously invest into the above-mentioned areas and will report to you the business development progress along the road. We believe this business will continue to increase consumer mindshare and wallet share that will be important to our long-term growth and value. Lastly, before we go to Q&A, we'd like to inform you that we will be hosting an investor day on December 16th and 17th. During the event, our senior management team will provide you an update on Alibaba's key businesses and our vision for the future. Over the last several quarters, investors and analysts have communicated their desire to understand better on how we measure the success of our growth businesses mentioned, and these businesses' long-term prospects. This investor day will be an opportunity to provide you with more details and insights. Now, let's open the floor for Q&A. Thank you.
spk09: Thank you.
spk08: Hi, everyone. Thank you. 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 asked. Please know that the translation is for convenience purpose only. In the case of any discrepancy, our management statement in the origin language will prevail. Operator, please connect speaker and SI conference line now and then start the Q&A session when ready. Thank you.
spk09: Thank you. As a reminder, to ask a question, you will need to press star and the number one on your telephone. To withdraw your question, please press the pound or 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 yourselves to know more than one question at a time. Once again, please press star one for your questions. Our first question is from the line of Thomas Chong of Jefferies. Your line is open. Please go ahead.
spk11: Good evening. Thanks, management, for taking my questions. I have a question regarding our new initiatives. Given that Tao Chai Chai, Taobao Deals, the results are doing very good, and we are seeing Taobao Deals, the AAC, already surpassing 240 million. So just want to get a sense about regarding our new initiative, when should we expect the monetization to ramp up? And on the other hand, over the long run, how should we think about the revenue scale of this new initiative versus our existing business? And then I have a second question regarding connectivity. Given that it has been quite a while after we have been cooperating with our peers on connectivity, just want to get a sense about any latest progress or the modernization potential that can be shared. Thank you. 非常感谢管理层教授的提问。
spk06: 我先提个问题呢是关于我们的新兴将领领域我们看到淘菜才淘宝特价版他们取得良好的业绩那么尤其是淘特在AC也超过了4.4亿 So I want to know when these new field of business can start to expand its transformation. So in the long term, these new field of business, its income compared to the current mature field of business, what will be the proportion? Second, I also want to ask a question about Internet communication, because this aspect of cooperation has been in progress for a while. Okay, let me answer the questions one by one. For the first one, I think today our priority for Taobao deals and Taocaicai is still to build the right infrastructure in terms of the
spk12: manufacturers to consumers model in Taobao deal, as well as a hyperlocal community marketplace infrastructure. So I think these are our priorities. And in terms of user engagement, we see very, very strong user engagement in the past quarters. As you can see, the AAC for Taobao deals reached 240 million. And for Tao Cai Cai, because this is more like additional services on Taobao mobile app and Taobao deals, which also show a very good user conversion to the fresh produced and the food categories. So we are very confident that if we can provide value to the consumers as well as the manufacturers and the suppliers from the farmers, And we believe that we can find a very – we can generate also the value to the platforms as well.
spk06: It is an additional service. It is an additional service on Taobao's APP and Taote's APP. It can bring you good convenience, especially in fresh products. Our idea is that if we can bring good service to consumers, farmers, and manufacturers, we can create value for the platform.
spk12: So looking ahead, I think for the value creation model, I would say it's not only like a marketplace to monetize the traffic in the marketplace, but also we can see a strong potential as a result of the supply chain optimization for the manufacturer to the consumer business as well as the farmer to table business.
spk06: So in the future, we are a value-creating model. It is not just a mode of increasing traffic, but it can promote our M2C business model through the optimization of the supply chain, including the promotion of farmers to the dining table. It can create great value.
spk12: For your second question, connectivity, as we always said, connectivity and openness are the core value of Internet. We strongly believe that it will be a win-win situation if all platform companies can embrace openness and connectivity in substance and not in form. So I think for us, we will continue to promote the non-discriminatory user sharing and consistent all cross-platform to make sure consumers have the consistent user experience. Because today, if you are a Taobao user, you may have the experience that when you want to share some product links with your friends in social platforms, the experience is actually bad. So I think this is for our mutual customers' benefit to improve the experience when they try to do whatever they want across ecosystems. And we actually have already made necessary preparations for the future interconnectivity.
spk06: Your second question is about mutual understanding. We have always believed and we have always said that Internet communication is the core value of the Internet. We believe that when all platforms can embrace Internet communication in practice, then this will be a win-win situation. 那我们认为我们应该要能够给到用户最好的体验, 让消费者可以跨平台完成他所想要完成的事情。 那么阿里巴巴已经在做必要的准备, 在未来可以 实现这种互联互通。 Thank you. Operator, next question. Thank you. Our next question is from the line of Alex Yao of J.P. Morgan. Please go ahead.
spk05: Good evening, management, and thank you for taking my question. So during your prepared remark, you guys mentioned that the weak revenue momentum was due to both macro and the competition. And based on the e-commerce results tonight, you guys looked like underperforming the industry peers in this quarter. Can you help us understand to what extent is the revenue weakness due to macro and to what extent is due to competition? For competition, what are the areas that you see the most pressure and challenge and what are the strategies to regain competitiveness in those areas? Thank you.
spk06: Good evening, everyone. Thank you for accepting my question. In the draft that was just released, we can see that the company's income is getting weaker. There may be two reasons. It is because of the macroeconomic situation and the competitive pattern that makes the income weaker. We can also analyze the performance of core e-commerce in terms of the performance in this quarter. My first question is how much of this income is caused by the macro environment and how much of this is due to competition? Well, if you look at the landscape, actually today for e-commerce, for the definition of e-commerce actually is evolving.
spk12: So today in the market, there are multi-formats of e-commerce model. And as long as you have some traffic and you have a user with you, and based on the public available third-party payment solution and the logistics and delivery, fast delivery, express deliveries, anybody can try something on e-commerce. But we strongly believe that for Taobao, our advantage is that consumer mindset. And we are a purely a consumption destination for all the customers. So we will continue to develop multi-features and applications in our Taobao app, at the same time to segment our user group by different mobile apps for specific value propositions. And today, if you look at the market, I would say for all the players, actually they may address the customer's needs from one angle. But actually for Taobao, we are the only destination who can meet the customer's purpose from different, to meet the customer's different purposes. For someone who have very specific shopping purposes, Taobao to them is positioned as a mobile shopping search. And also Taobao has a lot of applications to facilitate people to enjoy the fun of discovery. And over years we've built our live streaming business as well as a short video business and a social content business. So we are a platform with multi-formats, I mean, consumer journeys for people with different purposes. I think we will continue to invest in this and to give people most comprehensive selections and most efficient and guaranteed consumer experiences.
spk06: to run e-commerce businesses. We strongly believe that one of the great advantages of Taobao is its user-centric nature. We are a place that only serves consumers. We have been developing and will continue to develop various functions within Taobao. uh uh We have a lot of functions that allow consumers to enjoy the pleasure of discovery. In addition, over the past few years, we have also been actively developing our Taobao live broadcasts, our short videos, and our social content. So our platform can provide a variety of consumer journeys to meet the needs and preferences of different consumers. And we will continue to firmly support As to your question about the slower GMV growth reasons, how much from macro conditions, how much from the competition, actually it's very difficult to quantify the impacts.
spk12: So that's why we believe that these two reasons are all the factors we should consider. Actually, because we are the market leader in the retail commerce, so that's why I think our performance to some extent will reflect the overall market conditions.
spk06: Yes, there is another question behind you. This is about the slow growth of GMB. To what extent is it due to the change in the macroeconomic environment? To what extent is it due to competition? In fact, these different influences are difficult to clarify. I should say that these two reasons are some factors that we should consider. Operator, next question. Thank you. Next question is from the line of Piyush Mubai of Goldman Sachs. Please go ahead.
spk01: Thank you for taking my question. Just looking ahead, your guidance seems to suggest you'll grow between 11 and 15, 16% in the second half of 2022, and that's a step down from the pace of growth you had in the first half. If we accept that pace as being a continuation of where we are today, so what are you seeing that gives you the conviction that this slow pace will be maintained through the second half of 2022 fiscal? And I wonder if you could look beyond that and give us what you think is a normalized pace of growth for your business and for China GMB in general. So really focusing on growth here, if you don't mind.
spk06: Okay, thank you very much. My question is about your future growth rate. From the guidance we received today, I would like to know if you have any reasons to believe that in the second half of 2020, we can continue to maintain such growth. In fact, what I would like to ask is, in the long term, how much do you think Alibaba and the entire Chinese retail GMV will grow in the long term?
spk04: Hi, Piyush. This is Maggie. Let me try to answer your question. Yes, if you look at our guidance and then try to derive the second half growth for our revenue, it indicates revenue growth at the teens. That assumption is mainly based on the GME growth expectation. and the impact on the revenue growth is nearly placed in the call commerce and China retail commerce. So, we do think if you look at the total China GDP and consumption, this quarter compared to previous quarter, it comes down significantly to a single digit. We see this may continue for the following quarters. And we, as the biggest player right now, we have approximately 8 trillion GMV versus 44, 45 of the total national GMV. So the impact will be largely on us. And if you look forward beyond this year and in the following years, how we see our revenue growth. I think, first of all, our revenue growth engine now is already beyond the China consumption, beyond the CMR. So, CMR, if you look at this quarter, it accounts for around 36 percent of total revenue, where it used to be over 50 percent several quarters ago. So this is because all of these cloud computing and international businesses, local service, they all start contributing and increases contribution to our total revenue. So this is where we talk about multi-engine growth and continue to expect to see growth in these areas. At the same time, within core commerce, So Daniel talked about our multi-app strategy and talks about if we look in the mid-term, long-term, we don't believe the monetization kind of really coming from these, you know, traffic and GMV growth, but more from this infrastructure capability we're building and to enable merchants. We don't have exact monetization plan to communicate at this stage. We'll share more later on. During Investor Day, we're also going to share with you how we measure the value creation. And then eventually, this is always our theme that once, you know, merchants stay, consumers stay, and retention rates here and they enjoy the service, we'll find out ways to monetize. So if you look at the investment we're making nowadays, we actually, this is our decision to invest and to move towards our target. First target is the user base of over 1 billion in China. I think in that aspect, we're pretty much on track. And then the multi-app strategy makes the engagement of these users being enhanced. And then the merchant side, we have a lot going on in terms of merchant service provision, which we'll also share next month. So the value creation and then eventually we believe the return will be there.
spk06: Thank you. The assumption we made is mainly about the expectation of GDP growth and the impact it has on our income growth. What I am talking about is mainly the core e-commerce and the Chinese retail market. If we look at China's overall GDP and overall consumption in this quarter, its growth rate has indeed dropped to We also think that this situation may continue for a few more seasons. And Alibaba is already the largest main body in the market. Our GMV is also basically in the body of 80,000 billion. So it's definitely the biggest impact on us. So from this year, this is going to the future. We have a very good income growth engine. This is a multi-engine model that is developing very successfully. You can also see from the ratio of CMR that the contribution of CMR to income in this quarter is 36%. In the past, it was often more than 50%. This is because our cloud computing, globalization, and vegetables, including our local life services, have all started to make a greater contribution to our income. So this is what we call a growth of multidimensional. At the same time, when it comes to our core business, Daniel has just introduced a strategy called many-app governance. In the long term, we are not going to use traffic to transform. We are going to use the ability to build infrastructure to create value. Currently, we do not have a specific transformation plan that we can share with you. However, when we are investing, We will introduce some of these aspects, some of our value creation ideas. So our overall idea is consistent with the past. That is, we want consumers and merchants to stay with us. Achieve a high enough flow rate. At this time, we will find a way to transform. So our decision is to uh, uh, uh, Operator, next question. Thank you. Our next question is from the line of Alicia Yap of Citigroup. Please go ahead. Hi. Good evening, management. Thanks for taking my questions.
spk03: I have a question related to CMR and GMV. So the slowdown of the CMR, is it more temporary and also a function of GMV? And has CMR actually experienced slower growth than GMV in the past couple quarters, given we have been providing many services to support merchants this year, especially given it's a tough macro? So if GMV re-accelerates later, could CMR re-accelerate even faster since we have been still under-monetized and the way that we can further create value for merchants, we can still add on to the entire value chain for the merchants. So any colors that you could help us on that would be great. And also in ways of GNV could re-accelerate when the macro is recovered, is there any way that we are preparing to help us capture when the macro recover, we can actually further boost our GMV, you know, faster than the macro recover? Thank you.
spk06: 好,非常感谢。我想提的问题是关于CMR和GMV的。 First of all, about the slow growth of CMR, this is a temporary phenomenon. It is due to the slow growth of GMB. Because in these few seasons, we have seen that the growth of CMR is slower than the growth of GMB. But in fact, we are also providing a lot of support and a lot of new services to the business. 那么如果说到一定时候GMV重新加速 那么这个时候有没有可能CMR 可以以更快的速度重新加速 就甚至比GMV更快 因为我们是一直为商家创造价值的 那么不知道这一方面能不能分享一些洞察 那么另外的话呢 就是如果说以后这个宏观环境 开始重新变好 加速发展 Thank you, Alicia. Yes, you're right. The CMR growth actually, to some extent, tied to the GMV growth in the past several quarters, we've seen that CMR growth is slower than the growth of GMV.
spk04: which is mainly due to our merchant support program. So if we add back those merchant support standings, then the CMR growth would have been pretty much in line with the GMV growth. So eventually, if China consumption growth recovers and GMV growth comes back and gets accelerated, we believe that CMR goals will also be consistent with the growth of GMV. But in our view, when we look at the future revenue component, we believe that all of these efforts we have been making, and not only the user-based expansion, but also these services, look at live streaming, all of these applications, you know, secondhand and luxury products and a lot of supplies and also user experience building exercise will bring value to consumers. We should have new revenue streams coming into the total group revenue pack. And so these will be the adding to our, you know, future revenue growth.
spk12: Maybe let me add a few words on... 好,那么确实这个CMR的增长是和GMV的增长有一个捆绑的关系。
spk06: In recent seasons, we have seen that the growth of GMR is slower than the growth of GMB. The main reason for this is because of the investment we made in the business support program. If we add the investment to the business, then the two are basically the same. In the future, if China's consumption growth recovers, and the growth of GMB also recovers and accelerates, then it is expected that we will also see that the growth of CMR and GMB are basically the same. But if we talk about the future, we think that our future income structure, It will be more diverse because it is not just our user base that is expanding. In addition, we are also promoting a lot of new services, including live broadcasts, including the expansion and enrichment of product supply, including the improvement of user experience, etc. In fact, they all bring value to consumers. Let me add a few words on the question. Actually, we always make ourselves ready for any new market opportunities. And even more, we are always trying to do something different
spk12: do anything we can to create new market opportunities. I think today, if you look at the landscape, the e-commerce actually account for like 20% to 25% of the total retail. But if you look at the penetration rate by categories, actually, it varies. So I think it's still a big room to first to digitalize the existing, I mean, total retail, but furthermore, it's to create a new demand by leveraging the power of technology to improve the efficiency of the supply and demand, and also create the digitalized retail formats, no matter it's online or offline or integrated, to give people superior experiences to unlock the potential of consumption. So we will always try to innovate and incubate new animals and to capture these new opportunities and even create new opportunities. Thank you.
spk06: Hello, I'm Daniel. I would like to add that Alibaba is always ready to welcome and capture new market opportunities. We can even say that we are doing our best to actively create new opportunities. So let's take a look at today's overall market pattern. In the overall sales of the whole society, e-commerce now accounts for about 20% to 25%. But in fact, according to different categories, its penetration rate is high and low, different. Therefore, there is still a very wide space. One is to continue to transform the overall sales of the whole society into digitalization. But the other is to create a lot of new needs. We can use the advantages of technology to improve the compatibility efficiency of supply and demand. At the same time,
spk08: Operator, next question.
spk09: Thank you. The next question is from the line of Yang Bai of CICC. Please go ahead.
spk10: On behalf of Bai Yang from CICC, thanks for taking our questions. Our question is, we have two questions. Our first question is regarding to the live streaming business. What's our current strategy in live streaming business? As we know that more traffic and GNV are concentrating to the top KOLs in Taobao. How should we think these trends going forward? Are we going to balance the scores and the traffic between the top two and the long tail KOLs? Any color would be very helpful. And the second question is regarding to the personal information protection law impact. Are we seeing any significant impact to our CMR business? How should this change in the future? Thank you.
spk06: 好,非常感谢。提两个问题,第一个是关于我们的直播战略,我们现在看到有越来越多的流量和GMV是集中在头部的这些KOL的身上,那么未来我们会不会做一些流量的更加平衡的分配来就是在头部KOL和长尾KOL之间实现更平衡的这种分配的局面? For your first question, for live streaming, actually for our Taobao live streaming today is a very, very important application in our mobile Taobao.
spk12: we observed that for a lot of fans and customers, they love this live streaming format. But we don't view this live streaming as an independent application, but part of the seller application to enable sellers to engage with the customers through themselves, through their own stores, or through the KOLs.
spk06: Thank you. Let me answer your first question about live streaming. Indeed, Taobao Live Streaming is a very important function on the Taobao mobile platform. We also see that many consumers really like this kind of interaction. But we don't think Taobao Live Streaming is an independent app. In fact, it is a function in Taobao app that can allow Yeah, if you look at the ecosystem in live streaming business, actually we do have some top players. They got a very good popularity among their friends. But at the same time, we have many KOLs, second tier, third tier, and many new KOLs.
spk12: And the very unique situation in Taobao mobile app, in Taobao live streaming, is the store live streaming, which initiated by the store operator, by the sellers, even by the staff and associated in a seller. So I think we provide a very dynamic ecosystem in this Taobao live streaming. And as a platform operator, we don't intend to so-called balance the traffic. Actually, we never do anything to balance the traffic or rebalance the traffic. I think we should keep the market open to the customers. It's their option to select which one to follow and which one they're in favor of. But for us, we always try to help and incubate more and more diversified KOLs and diversified young staff in the sellers to to become new generation stars.
spk06: In the live broadcast ecosystem, we do see some top KOLs. They are very popular. We also see a lot of so-called second and third KOLs, as well as some new KOLs. Then in Taobao, this mobile platform is a very unique place. This is our live broadcast. In addition to KOL, we also have shop live broadcasts. Then this may be a seller, it may also be a seller. As to your second question for the newly effective PIPL,
spk12: Actually, we did very necessary preparation for the law, which took effect on November 1st. And based on our preliminary assessment, we don't expect PIPL will have a material impact on our business. But because this is still a very short timeframe, we still need more time to assess. But so far, so good. Thank you.
spk06: The second question is about the newly implemented Personal Information Protection Act. In fact, we have done the necessary work to prepare for its implementation. The law was passed on November 1. So far, we have evaluated that we think the performance of the Personal Information Protection Act will not have a substantial impact on our business. Thank you. Our next question is from the line of Gary Yu of Morgan Stanley. Please go ahead. Hi. Thank you, management, for the opportunity to ask questions.
spk02: I have two questions. First one is on some of the kind of new growth business that you highlighted at the press release, including both the international business and also the cloud computing business. How should we look at the growth outlook in the future? What kind of competitiveness are we seeing in overseas market? And particularly on cloud, is the kind of headwind from major customer laws already behind, and therefore we should continue to see acceleration in growth going forward? My second question is related to strategic investment. How should we look at the level of investment going into fiscal 2023, given we have already achieved some, you know, early success? Should we expect to continue to step up investment in top-up deals and marketplace, community marketplace going into fiscal 2023? Thank you. Okay, thank you.
spk06: I have two questions. uh uh Thank you. For the first question,
spk12: Today, as we said, we are taking a multi-engine growth approach to grow our business. So today you see that both cloud and international business show a very robust growth. The revenue, the cloud this quarter resumed its growth to 33% young year. And for international wholesale and retail business as a whole, reach the young year growth rate of 34%. So I think for both businesses today, both of them are in an early stage of development, early stage of growth. We still try to do the right thing to build the right infrastructure to make sure we capture the long-term opportunities and to maintain a sustainable growth. For example, like for cloud today, we enhance our investment in technologies and products. And as I shared in my script, we announced a couple of very important technology and product upgradings in our Opus Rara conference this September. And this is a reflection of our continuous efforts in cloud-relevant technologies and products. And we... Going forward, we will continue to do so, and we believe that for cloud opportunities in China and in the world, it's not only a replacement of the existing IT infra, but instead, actually, because of cloud, you get new opportunities in intelligence services. You have got new opportunities in 5Gs for not only for cloud, but also for network and terminal and edge. So we will get ourselves ready for all these new opportunities. And I think this is relevant to all the industry, all the sectors in the economy, and not only in China but also in many other markets in the world. And as to the international business, today we reported that our AAC for international market reached $285 million. I think we witness a very healthy growth and very rapid growth. And if you look at the penetration of e-commerce in many other markets outside China, I think still in a very early stage, we strongly believe that with our perpetual technology and experiences in this sector, we are in a good position to capture this opportunity in many other markets. But as we always said, we focus on growth, but we focus on quality as well. So we focus on a sustainable growth in capturing these new opportunities. But long-term-wise, we are very confident about this multi-engine growth strategy. Thank you.
spk06: Okay, about the first question you asked, as we have introduced, we are advancing a multidimensional growth strategy. So today, our cloud business, including our globalized business, has achieved very healthy development. Our cloud income achieved 33% growth in this quarter. If global businesses combine wholesale and retail, this quarter has achieved a 34% year-on-year growth. And these two businesses are actually in the early stages of development and growth. So our current focus is on building the right and appropriate infrastructure, so that we can capture long-term opportunities to achieve sustainable future growth. Speaking of cloud, we have also been investing in our own technology and products. In the previous speech, I also introduced that in September, at our cloud conference, We have released some very important new technologies and products. These all reflect our continuous efforts to invest in cloud-related technologies and products. In the future, we will continue to make efforts in this regard. In China and overseas, cloud-related opportunities are not limited to and IT facilities. Instead, there are many new opportunities around digital intelligence, including many opportunities brought by the five-level era, including network, middle, and edge computing, etc. We will do our best uh, uh, Right, regarding your second question on whether we will continue to invest and to what level our investment is,
spk04: would be in the future. I think, first of all, that we, for sure, will continue to invest while monitoring the business progress in this strategic initiative areas. So, when you look at where we invest nowadays is user base, right, through our Taobao deal, Tao Cai Cai, et cetera. And also, the services provide more services to our user base, like local service segment. There's still quite a lot of potential there. And also, globalization, Lazada, and Trendio, et cetera. These areas, I think, it's not a one-year investment kind of a period. It's several years. But there might be some adjustment in terms of the mix of the investment. For example, we expect to achieve a billion annual active consumer in the following two quarters. And then by the time we achieve that, we're going to focus more on the engagement and those multi-app user growth. So you asked about 23 physical years investment outlook I think we will start our business planning and budgeting session soon so that we will provide more color and guidance later on. 好,关于您提的第二个问题,就是我们还会不会继续投资,未来的投资水平将会大概在什么样?
spk06: Of course, we will continue to invest in our strategic new business areas and monitor the business progress in these areas at the same time. This is reflected in several aspects. One is user base, including our Taote and Taocaicai. We will expand our user base and invest in more and more rich services. For example, in our local life service section, there are a lot of service potentials that can be dug up. In globalization, with Lazada and Trendio, these investments should not be a one-year investment deadline. It should be a one-year investment deadline. But with our progress, we may make some adjustments to the structure of investment. For example, we now expect to reach 1 billion AACs in two quarters. After reaching this 1 billion, our focus may be on deepening interaction. You also asked about the outlook of our investment in fiscal year 2023. 那么我们近期内将会启动我们的规划和预算编制的工作, 那么在那之后我们可能能够跟你们分享更多的信息。 Hi everyone, this is Rob. I just want to make two comments from our earnings call today. First, I just want to make a slight error change in our script.
spk08: We said W11 GMV was $54.03 billion. It was actually $540.3 billion. That's the first note. The second, we are having our investor day on December 16th and 17th. We look forward to hosting you. I'm sure there are a lot of questions you may still have, and we look forward to addressing all those questions on the two-day event.
spk06: Hello everyone, I am Rob. I would like to add two points here. The first point is that there is a wrong information that needs to be corrected here. In the pre-prepared speech draft, we reported that this year's double 11 GMV is 54.03 billion. The correct number should be 5,403 billion. 5,403 billion is correct. Thank you. And this is the end of our call today. We'll pass back to the operator. Thank you. This concludes today's conference call, and thank you for participating. You may now disconnect.
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