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spk08: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's December quarter 2021 results conference call. At this time, all participants are on listen-only mode. And 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.
spk05: Good day, everyone, and welcome to Alibaba Group's December quarter 2021 results conference call. With us on the line today are Daniel Zhang, Chairman and CEO, Joe Tsai, Executive Vice Chairman, Maggie Wu, Chief Financial Officer, Toby Xu, Deputy 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 through 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 discussions of the risks and uncertainties, Please refer to our latest annual report on Form 20-F and other documents filed with the U.S. SEC or announced on the website of the Hong Kong Stock Exchange. Any forward-looking statements that we make on this call are based on assumptions as of today, 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, non-GAAP net income, non-GAAP diluted earnings per share 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 per share lease. Unless otherwise stated, growth rate of all the 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 prepared remarks in English. A third-party translator will provide simultaneous Chinese translation 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 purposes only. In the case of any discrepancy, management's statement in the original language will prevail. With that, I will now turn the call to Daniel.
spk11: Thank you, Rob. Hello, everyone. Thank you for joining our earnings call today. This quarter, Alibaba Group's business continued to make steady progress. We remain focused on building long-term capabilities centered around customer value creation despite the resurgence of COVID, China's market economy slowdown, and increasing competition. In the fourth quarter of 2021, China's GDP grew 4%, while total retail sales rose 3% year over year. Both decelerated from the previous quarter due to the confluence of COVID, price increase of raw materials, and other factors. At the same time, the overall trend of digitalization across both consumption and the industrial sectors became increasingly apparent and accelerated. Large internet companies in China have entered commerce through various ways, and digital consumption formats and user experiences have become increasingly diversified. Against this backdrop, we believe our most important proposition and biggest opportunity for healthy and sustainable long-term growth are, number one, the ability to continually create new consumption demand and offer innovative consumer experiences, and number two, support the industrialization of our customers. As of quarter end, our annual active consumers reached 1.28 billion globally, representing quarterly net ads of 43 million. In China, our AAC grew from $953 million to $979 million during the quarter, while AACs outside of China grow from $285 million to $301 million. We are fully on track to deliver the target of 1 billion China AACs by the end of this fiscal year. And Taobao Deals has been the major contributor to our new user acquisition. With one billion high-quality AACs, we believe we have substantially captured all consumers with purchasing power in China. We focus on shift from new user acquisition to user retention and output growth. Despite the impact from slowing retail sales and intensifying competition on our China commerce business, the next year retention rate of new AACs acquired in calendar year 2020 was 86% in 2021. This AAC retention rate held steady against our historical pattern, indicating healthy user stiffness on our platforms. Our overall ARPU, or the average annual spend per AAC, decreased by a low single-digit percentage year-over-year in 2021 due to increased contribution of new users from less developed areas. But I want to highlight that our pool of our AACs with over 10,000 RMB annual spend on our platform continued to increase year over year. Looking ahead, we aim to further strengthen user engagement and time spent through a greater variety of consumption use case offerings. We want to enhance our influence on the consumer decision-making journey and tailor it to reflect unique considerations of each product category. We will shift our focus from spending the total number of AACs in China to driving deeper AAC penetration across product categories. This will ultimately help us capture a more significant consumer water share. Over the past year, we invested heavily in Taobao Deals and Tao Caicai. We do not view these two businesses as standalone units, but integral parts of our China commerce business matrix. The unique value contribution of these two new businesses gradually became clear following several quarters of development. Taobao Deal has been a powerhouse in new user acquisition for China Commerce, attracting 280 million AACs within a quarterly net add of 39 million. Paid orders during the quarter grow over 100% year-over-year. Taobao Deals and the Taobao APP have highly complementary user base, with a higher proportion of price-sensitive consumers on Taobao Deals. there are many ways for us to realize the commercial value of these users. One example is improving supply chain efficiency by connecting manufacturers directly with consumers. As for Tao Cai Cai, it has been a successful use case extension into the grocery and fresh produce category for price sensitive consumers. More than 50% of Tao Cai Cai's AACs were first-time fresh-produced buyers on our platforms. Now that Taobao Deal and Tao Tai Tai have established market presence, we will shift our focus towards quality growth. Through optimizing efficiency, we expect to gradually narrow the operating losses in these two businesses in the next few quarters. In local consumer business, In local consumer services, the combined AACs of our to-home and to-designation business have reached $372 million, reflecting a quarterly net add of $70 million. Total order volume grew 22% year-over-year. On the to-home side, we made meaningful progress in improving unit economics for Ulema through a city strategy with more disciplined user acquisition spending and improved delivery cost. On the two destination side, AMAP reached a recall high of over 200 million DAUs during the National Day holiday in China, while transacting users continued to grow during the quarter. We believe the picture of AMAP transforming from a map navigation tool to a lifestyle services platform centering around destination is becoming more and more clear. For our international commerce business, AACs reached $301 million by December, with a quarterly net add of $16 million. Overall order growth continued to maintain healthy momentum at 25% year-over-year, with Lazada and Trendio growing 52% and 49%, respectively. Aliexpress was negatively impacted by change in European Union's VAT exemptions. We believe the future of development of international commerce markets will be based on the combined combination of local supply and cross-border supply. Our long-term focus is a balance of both. to fully leverage China's advantage in cross-border supply while organizing local supply effectively. Meanwhile, logistics network development is a priority in our globalization strategy, as logistics is a fundamental infrastructure supporting a high-quality consumer experience based on integrated product supply from cross-border and locally. Tainiao has been developing local logistics network in Southeast Asia and Europe, leveraging the commerce use cases presented by Lazada, Aliexpress, and Trendio. We will continue to invest in Tanyo's global logistics network as a cornerstone of our globalization strategy. Additionally, global coverage and capacity in cloud is another essential piece supporting our globalization strategy. This quarter, AliCloud continues to invest in expanding its international infrastructure. We added two data centers in Asia Pacific, one in Korea and one in Thailand. AliCloud now provides cloud computing services in 25 regions globally. Our cloud revenue grew 20% year-over-year this quarter. We saw very strong growth in demand from financial services and the telecom sectors, which partially offset slowing demand from some customers in internet sector. China's cloud market will be a trillion RMB opportunity by 2025, and industrial digitalization today is still in a very early stage. Alibaba Cloud is committed to serving the real economy for the long term, and the digitalization of all industries. Recently, we helped the International Olympic Committee migrate 100% of their core systems onto Alibaba Cloud during the Beijing Winter Olympics. This is the first time in the history of Olympic Games that cloud computing has replaced traditional IT infrastructure to support the planning and operations of the Games. In the past, Each Olympic host city would have to build extensive IT infrastructure and dismantle it after the end of the Games. By replacing the physical infrastructure with cloud-based services, hardware costs will be significantly reduced, while application development and deployment will be much more efficient. We see similar opportunities and advantages for digitalization in many industries in the future. such as new energy vehicles, financial services, and health care. These industries have high potential with massive demand for cloud computing and digital intelligence. We will leverage Alibaba Cloud's proprietary technology and products to deliver tailored industry solutions. As China continues to advance toward its carbon peak and neutrality goals, We foresee increasing demand for more reliable and sustainable technology infrastructure as digital transformation deepens across industries. We aim to leverage Alibaba Cloud's product and technology innovations to help our customers find a greater energy efficiency. For example, our data centers equipped by liquid cooling technology achieve industry-leading energy efficiency level with a PoE of as low as 1.09. Moreover, our facilities can deliver high performance with lower power consumption, leveraging our proprietary product and technologies. During our investor day this past December, we announced Alibaba's carbon neutrality pledge. By 2030, we committed to achieving scope one, two, and three carbon neutrality for Alibaba Cloud, scope one and two carbon neutrality in the operation of Alibaba Group, and reducing scope three carbon intensity by half. Additionally, we introduced a concept of scope three plus to facilitate 1.5 gigatons of decarburization across Alibaba's ecosystem participants by 2035. Since Q4 last year, China's regulators have issued multiple important statements about the digital economy. They emphasize the need to strengthen China's digital economy, improve its quality, and grow its scale. They also promote healthy and sustainable development of the platform economy based on robust platform governance. These principles are highly consistent with Alibaba's own business philosophy and commitment to social responsibility. Looking ahead, we remain focused on healthy and sustainable development by serving our customers, especially SMEs, supporting the digital transformation of industries, serving the real economy, and supporting our community. Thank you, everyone, for your time. Now I will turn it to Toby, who will walk you through the details of financial results.
spk12: Thank you, Daniel. Good morning and good evening, everyone. This quarter, revenue was around $242.6 billion, up 10% year over year. Our top three revenue contributing segments were China Commerce, Cloud, and International Commerce, which grew by 7%. 20%, and 18% year-over-year, respectively. While our China commerce segment may be impacted by slowing macro and increased competition, our cloud and international commerce segments maintain solid growth and are expected to become increasingly important growth drivers in the future. These two segments will continue to contribute to diversification of our revenue base. Income from operations decreased by RMB $42 billion to RMB $7 billion, which included a RMB $25 billion impairment of goodwill in relation to the digital media and entertainment segment. Excluding this impact, the income from operations would have been RMB $32 billion, a decrease of 34%. Adjusted EBITDA decreased by 27% year-over-year to RMB $45 billion. The decrease was primarily due to our increased investments in growth initiatives such as Taobao Deal, Tao Caicai, Lazada, and Ulema, as well as our increased spending for user growth. Many of these growth initiatives saw strong growth momentum, as highlighted by Daniel. Additionally, we have increased the merchant support through incentives to drive merchant adoption of new value-added services, as well as strategic reductions in selected service fees to lower merchants' operational expenses in a slowing consumption environment. We believe this near-term spending builds goodwill with our customers, and supports sustainable long-term growth for our China commerce businesses. Now on cost trends for the quarter. Excluding SBC as a percentage of revenue, cost of revenue ratio increased to 60% during the quarter. The increase was primarily attributable to, first, the higher proportion of our direct sales businesses, such as Sunnut, Tmall Supermarket, and Fresh Apple. And second, strong growth of Tao Cai Cai, Fresh Apple, and Tmall Supermarket that led to an increase in logistics costs as a percentage of revenue. Sales and marketing ratio increased to 15% during the quarter. They increased was due to higher marketing and promotional spending for user acquisition and engagement for our mobile commerce apps, such as Taobao Deals, Taobao, Lazada, and Erlang. Ratios for product development and the general administrative expenses were steady year over year during the quarter. Now let's review net income and cash flow for the quarter. Our December quarter net income declined by RMB 58.8 billion to RMB 19.2 billion, which was primarily driven by, firstly, RMB 25 billion in goodwill impairment related to our digital media and entertainment segment, as previously mentioned. And secondly, RMB 21.7 billion decrease in interest and investment income net to RMB 18.4 billion, primarily due to lower net gains from fair value changes of our equity investment. Our non-GAAP net income declined RMB 14.6 billion, primarily due to decrease of RMB 16.4 billion in adjusted EBITDA. As of December 2021, we continue to maintain and enjoy a strong net cash position of RMB 379 billion or US dollar 59.5 billion. Our strong net cash position is supported by healthy cash generation. Net cash flow from operation and free cash flow for the quarter were RMB 60.4 billion and RMB $71 billion, respectively. The difference of approximately RMB $9.4 billion reflected operating CapEx spending, majority of which is for our cloud business and logistics fulfillment infrastructure. We continue to focus on adding value to shareholders through share repurchases. During the quarter, we repurchased approximately 10.1 million of our ADSs for approximately US dollar 1.4 billion under our share repurchase program. For the nine months ended December 2021, we repurchased approximately 42.2 million of our ADSs for about US dollar 7.7 billion, representing 51% of our US dollar 15 billion share repurchase program. Our current share price does not fairly reflect the value of the company. At current price levels, we plan on continuing our share repurchases. At the same time, we will maintain a strong cash position that gives us the financial flexibility for future investments. Now to our segment results. As mentioned during our Invest Day, we are providing more granular reporting of our commerce segments by further subdividing it into four segments, including China commerce, international commerce, local consumer services, and . Our cloud, digital media and attainment, and innovation initiatives and other segments remain unchanged. Revenue from our China commerce segment in the quarter increased 7% year-over-year to RMB 172 billion. Custom management revenue slightly declined by 1%, primarily due to, firstly, slowing market conditions and competition in the China e-commerce market that resulted in single-digit physical goods paid GMV growth for Taobao and Tmall. Then by categories, year-over-year GMV growth in the FMCG and home furnishing categories were faster than overall average. GMV of apparel and accessories and consumer electronics categories grew at a slower pace than overall average. Additionally, as previously explained, we have increased merchant support through incentives to drive merchant adoption of new value-added services. We have also made strategic reductions in selected service fees to lower merchants' operational expenses in a slowing consumption environment. The increased merchant support resulted in customer management revenue growing slower than GMV growth. We believe a step up in near-term spending builds goodwill with our customers and supports sustainable growth for our China commerce businesses over the long run. Direct sales and others' revenue grew 21% year over year, primarily due to revenue contributed by Sunnut, Freshable, and Tmall Supermarket. Growth deceleration was primarily due to reduced impact of Sunnut consolidation as it was fully lapsed in this quarter. China Commerce adjusted EBITDA decreased by RMB 14 billion to RMB 58 billion. This decrease reflected our increased investments in growth initiatives such as Taobao Deal and Tao Caicai, as well as our increased spending for user growth and support to merchants. It's important to know that our investments in Taobao Deal and Tao Caicai have not only generated robust transaction growth and built capabilities, but have also been more disciplined with improving unit economics. Taobao Deal's paid orders grew over 100% year-over-year. At the same time, it successfully executed several initiatives to optimize logistic costs and improve delivery experience for consumers. Taozai's GMV grew 30% quarter-over-quarter. At the same time, its UE per order continues to improve, benefiting from higher regional order density and improving gross margin from enhanced supply chain capabilities. As Daniel mentioned, Taobao deal and Taocaicai are strategic to our China commerce segment, contributing to new consumer acquisition and expansion of product offering. Given their established presence, we will shift our focus towards quality of growth. We expect Taobao Deal and Tao Caicai to gradually narrow operating losses in the next few quarters. Revenue of international commerce continues to exhibit strong growth of 18%, primarily driven by solid transaction growth by Lazada and Alibaba.com businesses. Order growth of Lazada was up 52%. Transaction value completed in Alibaba.com grew approximately 50%. The slower year-over-year revenue growth compared to last quarter was mainly due to, first, single-digit revenue growth of AliExpress. This was primarily due to a year-over-year decrease in number of orders for AliExpress. as a result of the value-added tax levied on cross-border parcels below €22 in value in Europe. And second, significant depreciation of Turkish lira against RMB that negatively impacted Trendio's revenue. Constant currency revenue growth for Trendio was 60% year-over-year during the quarter, supported by robust order growth of 49%. Adjusted EBITDA loss widened by RMB 1.5 billion to RMB 3 billion, primarily attributable to the increase in Lazada's marketing and promotion of spending for user acquisition and engagement, partially offset by steady profit growth of our international wholesale commerce business. Revenue of local consumer service business generated strong growth of 27% due to growth in order volume of 22%, as well as more efficient use of subsidies that was counter-revenue. Adjusted EBITDA loss increased RMB 0.7 billion to around RMB 5 billion, primarily due to the increased losses of our two destination businesses, including AMAC, Losses of our two home businesses, including Erlema, slightly increased year-over-year, but narrowed quarter-over-quarter, driven by our disciplined user acquisition spending and reduced delivery costs. Revenue from Tanya before installment elimination grew 23% to RMB $19.6 billion, which was primarily driven by the growth of fulfillment solutions and value-added services provided to our China commerce retail businesses, as well as the increase in revenue from third-party merchants in our cross-border and international businesses. During the quarter, 67 percent of total revenue was generated from external customers. Adjusted EBITDA laws improved to a slight loss of RMB $92 million given the economies of scale of its businesses and improving gross margin of its cross-border and international businesses. Revenue from our cloud business after inter-segment elimination grew RMB $3.3 billion to RMB $19.5 billion. The solid 20% year-over-year growth reflected robust growth from financial and telecommunication industries, partially offset by the continuing impact of a top cloud customer's decision to stop using our overseas cloud services for its international business due to non-product-related requirements, and the slowing demand from customers in the internet industry, such as online entertainment and education. Excluding the impact of the top customer from the internet industry, Alibaba Cloud's revenue after intersegment elimination would have grown by 29% year-over-year. Alibaba Cloud's revenue is becoming more diversified with revenue contribution from non-internet industries steadily increasing. Revenue from non-internet industries accounted for 52% of its revenue after inter-segment elimination during the quarter. Adjusted EBITDA was RMB $134 million, primarily due to economies of scale of its profitable core cloud computing businesses partially offset by increasing investments in DingDoc. DingDoc offers solutions to enterprises to facilitate their digital transformation, enhance the work collaboration, and ease access to Alibaba Cloud's big data analytics and AI capabilities. Since integrating DingTalk into our cloud business in 2021, we have identified new opportunities and growth initiatives for our overall cloud business, giving us confidence that increased investments in DingTalk will create long-term value for Alibaba Cloud. Our digital media and entertainment revenue during the quarter was RMB 8 billion. Losses slightly narrowed year over year during the quarter. Now let me wrap up with some concluding thoughts. Our China businesses will be focusing on quality growth, adding value to our customers, and building capabilities. In terms of near-term outlook, despite a challenging macro environment in a high comparison base year-over-year, our China Commerce GNV growth remains resilient. We expect revenue diversification to continue with cloud and international commerce segments exhibiting strong growth. Our various growth initiatives, such as Taobao Deals and Tao Caicai, have established sizable market presence and are delivering tangible results with robust AAC and order growth. We expect these two businesses to narrow losses in the coming quarters. Lastly, we will continue to build cloud and logistics infrastructure in both China and internationally. Now let's open the floor for Q&A.
spk05: by consecutive interpretation for the Q&A session, and 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, our management statement in the original language will prevail. So operator, please connect speaker and SI conference lines now and start the Q&A session when ready. Thank you. Thank you.
spk08: As a reminder, to ask a question, you will need to press star and the number one on your telephone. And to withdraw your question, please press the pound or hash key. 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 one for your question. The first question comes from the line of Piyush Mubai of Goldman Sachs. Please go ahead. The line is open.
spk07: Thank you for the opportunity. Thank you, Daniel, Toby, for the presentation. My one question surrounds the growth rates for the business and particularly the core business. Given what parcel numbers are looking like for the month of January, and I don't want to read too much into that number, and the exit run rate we saw for NBS data for the month of December, I wonder if you could, one, talk us through the exit run rate for the third quarter, for the December quarter, for GMV growth as well as CMR growth rate. And also, if you could broadly guide us to what you think the growth rates we could be expecting in the first quarter of calendar 2022. Thank you.
spk09: Thank you very much. And thank you, Daniel and Toby, for your comments just now. Actually, my main question is about the growth rate of our business, especially the growth rate of the core business. We saw the numbers in January. We also saw the numbers of the exit run rate in December. Okay, thank you very much for this question. You know, as I explained in my script, in the last quarter, actually, the overall macro condition, if you look at the
spk12: NBS data, the retail serve like the growth rate for December for NBS is only like 3%, you know, and our business, as I explained, also impacted by the macro condition as well as competition, so which give us a also like a one single digit growth. That's for the December quarter. Then for You know, the new 2020, the first quarter, you know, as I explained, you know, currently our growth rate, we still have a relatively resilient growth in our GMV. And, of course, the market condition is also at this stage is quite, you know, we still don't see the January number, but, you know, we probably be waiting for the number to out. But at this stage, I think our growth rate is still resilient.
spk07: Toby, what I meant by exit run rate was for the month of December itself.
spk09: Thank you. In December, the total sales growth was only 3%. So our business was affected by the red line and competition. So in December, we saw a growth in unit numbers. As for the number of growth in the first quarter, we think our growth is still high. Next question.
spk08: Thank you. Our next question comes from the line of Thomas Chong of Jefferies. Yes, the next question comes from the line of Thomas Chong of Jefferies. Please go ahead. The line is open.
spk06: 晚上好,谢谢管理层接受我的提问。 我的问题主要是想问一下关于在不同品类的在未来几个季度我们的看法, 比方说FMCG。 Apparel and electronics, what will be the trend in the future? And I also want to see if the management can share a time table for the entire consumption. Is it June quarter or September quarter? Will the momentum pick up again? 我第二个问题主要是想问一下关于 competition 这个方面,尤其是在直播电商方面对我们未来的一个影响,然后我们在这个方面的一个战略,谢谢。 Good evening, management, and thank you for taking my questions.
spk09: My first question has to do with your outlook for the performance of different categories in the next few quarters going forward, including FMCG, apparel and electronics. Can you share with us your forecast on growth and trends in those different categories? Secondly, I'd like to hear from management as to when you think we'll see a turnaround in the consumption slowdown. Do you think that we'll see a pickup in momentum by, say, the June quarter or the September quarter? And finally, I'd like to hear from management, please, on competition. What will be the future impact of increased competition in the e-commerce space, and what is your strategy to deal with it? Thank you.
spk11: 谢谢,我来回答一下。 第一个,我们一贯对这个,特别是这个季度的这个GNV, 这个整体的GNV也好,这个按照品类的GNV, 我们是不给guidance的。 我就按照整体的一个情况给大家做一个介绍。
spk09: Thank you. This is Daniel, and I'll be happy to take this question. First of all, when it comes to GMV, either by category or overall GMV, it is our consistent policy not to give guidance. But I can answer your question in overall terms in the following way.
spk11: Right.
spk09: 在整个社会零数当中这个品位的绝对值的大小。 第二个就是现在的电商的渗透率。 So we can look at the macro environment and the e-commerce penetration in different categories from a number of angles. First of all, we can look at the share of different categories in total retail sales, and then we can look at the current e-commerce penetration rate of those same categories. 那如果从这两个方面来看的话,现在... 对于服装和消费电子来讲, 在过去十几年的电商发展当中, 其实这个渗透率已经到了一个 相对高的一个水平,三四十的水平。 So if we look at those two categories you singled out, apparel and electronics, due to the rapid development of e-commerce over these past years, penetration in those categories is now relatively high. We're looking at something like 30% or 40%. 对,但是对于像这个
spk11: This is also what I said at the investment meeting last December. In terms of the value of the users, for example, high, middle, and low, we have He Ma, Da Ren Fa, and the online integrated design of the scene of the scene, including our third-party platform, Elema. This is also a local commerce. At the same time, there is also Tianmao Supermarket, including Tao Caicai. There is a way to combine the original scene with the distant scene.
spk09: However, if you look at the other categories you mentioned, like FMCG and foods, especially fresh foods and groceries, the overall size of the market in those categories is very large, yet e-commerce penetration still remains relatively low. And you'll recall that I talked about this in the presentation I gave at Investor Day back in December. We see very good opportunities for driving online conversion deeper in those categories. Now, of course, in order to do that and in order to ensure a good user experience, we need to have highly integrated fulfillment systems and a range of different offerings that cater to different kinds of demand. And that's precisely what Alibaba does. has put in place with a matrix that includes Huama, RT Mart, with integrated online and offline operations, our third-party delivery platform, Ulema, as well as Tmall Supermarket. So we're organizing... supply both from nearby and from nationwide in different consumption scenarios catering to different kinds of users from the highly affluent through to the more price sensitive. And by pursuing this matrix strategy, we expect to be able to deepen our penetration in these categories substantially.
spk11: This is a way of user experience and a way of product promotion. This is for Ali. We put this Taobao live broadcast such a live broadcast platform to be seen as a component of our retail digital business factory. It and our other factories are highly complementary. We come together to serve the consumer. We feel that the shape of this product and the nature of the product On your second question,
spk09: I would say that live streaming certainly has become a very important part of the digital commerce ecosystem. It's an important means of enriching the user experience and marketing in particular certain kinds of categories. And the Taobao live stream ecosystem, therefore, is an important part and highly integrated into our overall ecosystem as a complementary part of a larger offering. However, different categories and different products are best marketed to consumers in different ways with different kinds of interaction. So live streaming is indeed good, but it's certainly not the only means of getting there, and we do need a multifaceted and rich matrix of services through which to reach users and market products.
spk08: Thank you.
spk12: Next question, please.
spk08: Thank you. Yes, our next question comes from the line of Jeremy Lim of UBS. Please go ahead.
spk13: Thank you, Mr. Guan. This is my question. I would like to ask Mr. Tao and Mrs. Tao. What we mentioned before is that there may be a decrease in the number of victims in the following weeks. I believe investors are still more concerned about this data. Sorry. First of all, I'd like to know what changes we've seen in the UEE in terms of competition and policy, or what we can share in terms of our own business. Secondly, if there is such a decision in the UEE, is it because of our overall loss? Thank you for taking my question, management. My question has to do with Taobao Deals and Tao Caicai and where you see them going over the next few quarters in terms of UE.
spk09: and further narrowing of losses. If you could talk to us, please, about how UE has been evolving in the face of competition and market developments there, and whether that has been improved also by the scaling up of the businesses with larger order numbers. Thank you.
spk12: Okay, thank you for your question. For Taobao, Taote and Taotai, these two businesses, actually, from the beginning of 2021, these two businesses, just now, actually, in Daniel's entire presentation, he mentioned that for these two businesses, we see them as two very important businesses in our overall Chinese business. So they bear different responsibilities. From the perspective of Taote, actually, in the past year, Thank you for your question. Regarding these two businesses, Taobao Deals and Tao Caicai,
spk09: that were both launched in 2021. I think Daniel already spoke to this in his earlier presentation. We certainly see them as two very important businesses within the context of our China Commerce segment. The two businesses do play different roles. As was presented earlier, Taobao Deals has been very important over the past year in terms of allowing us to drive user acquisition, very significant user acquisition in the lower tier cities. And the two combined, Taobao Deals and Tao Caicai, have allowed us over the past year to make great progress in terms of developing the ability to serve consumers in these lower tier cities, not only with supply, but also with excellent fulfillment capabilities.
spk12: Uh,
spk09: With respect to both of these two businesses then, while working hard to grow them in terms of scale, we're also looking at ways to drive efficiency. Some efficiency improvements are being driven, as you said, by growth in scale, but other parts of that efficiency improvement are coming about of particular initiatives that we're taking to enhance efficiency. So certainly in Tao Cai Cai, as order density has increased, we're seeing improvement in in unit economics, and we're also seeing efficiency enhancement in top-out deals as well.
spk12: 对于这个业务往前,我想从竞争的角度来讲, 我们更多的我想是作为我们整个中国商业的一部分来看, 那当然我们会看我们的竞争对手, 但更多我们会看我们自己。 随着这个往未来看的话,刚才Daniel也说了, So in terms of where these businesses are heading in the face of competition going forward, we would certainly look at them as part of our overall China commerce business segment.
spk09: And, of course, we do look at our competitors, but more importantly, we look at ourselves. And as Daniel said, we're fully confident that we can continue to grow these businesses and enhance their efficiency going forward, and we fully expect to see their losses narrowing over the next few quarters.
spk05: Next question.
spk08: Thank you. The next question is from the line of Alex Xiao of JP Morgan. Please go ahead.
spk02: 谢谢管理层,晚上好。 我想问一个关于我们现在中国零售这边GMV的问题, 这个其实和整个市场的消费力是息息相关的。 那我们对于现在这样一个比较低迷的消费的情况, 能够持续多久,有一个初步判断吗? 或者进一步说, We think that this year's consumption will have a V-shaped trend, or an L-shaped trend, or even only the first half of the V-shaped trend. So the last one, what kind of changes do we think need to happen to make the current consumption more prosperous? For example, do we need to政府出很多的自己经济的政策,还是说比如说疫情管控的放松,还是一些其他的一些因素的变化?谢谢。
spk09: Thank you, management. My question has to do with the outlook for growth in China retail, China Commerce, GMV. And indeed, this is related to the performance of the overall retail market in China as a whole. How long do you think that this current slump in consumption generally in China will last? When do you think the turnaround will come and consumption will pick up? Do you think it'll be like a V-shaped curve or an L-shaped curve? Or are we talking about seeing the first half of a V-shaped curve? And what needs to change to bring about that pickup and consumption? Would it require stimulus from the government, a relaxation of COVID control policies, or something further?
spk11: Okay, thank you, Alex. Regarding V-shaped or U-shaped, we would like to know as well as you. But I think from the behavior data of the users seen on our platform, including the Thank you for your question, Alex. Whether it's going to be a V-shape or a U-shape,
spk09: recovery is a good question and like you I'd be very keen to know the answer to that all I can say is looking at user data on our platform and also looking at data on the current macro environment I think yes both of those things you identified certainly would be helpful in stimulating recovery of consumption so if the impact of COVID could be lessened or if there could be stimulus policy from the government put in place to stimulate consumption those would be positive developments yes
spk11: But what I would like to emphasize in answering this question apart from the macro picture
spk09: And this is true for us, true for everybody in the retail and commerce space. I think what really matters is your ability to innovate, to be innovative in terms of supply and leverage that to create new demand.
spk11: not only achieved the goal of 300 million people on ice and snow, but also the ice and snow economy has become a very common consumer theme. I think this is a very good example to prove the importance of this demand creation. The most important thing is to be able to create such a scene of demand, create the new generation of supply for this demand. I think this is the real way to make this consumption develop better.
spk09: I think a very good example of this kind of opportunity was the recently concluded Winter Olympic Games held in Beijing. It was a great opportunity to stimulate new kinds of demand for participation in winter sport activities and the whole winter sport economy in China. I think that's a great example, but indeed just one example of the way in which new demand can be created and new supply can be created to meet that kind of demand.
spk12: Next question, please.
spk08: Thank you. Next question is from the line of John Hsiao of Barclays. Please go ahead.
spk03: Thank you, Ms. Guan, for answering my question. When Toby mentioned that we are buying back shares, we have 70 billion cash on the balance sheet to create value. Another way to create value is to spin off some hidden assets. In December, our analyst meeting also mentioned that we are giving trend deals and financing Recently, there have been some media reports that we are financing Lazada. I would like to ask the management team again, that is, those of us in the same industry are spinning off a lot of subsidiaries to create shareholder value. What are our current ideas in this regard? Especially our cloud business, especially our carbon business. Thank you.
spk09: Thank you, management. Toby mentioned in his earlier presentation that the group is carrying out a share repurchase program. You're rebuying shares. You also have some $70 billion in cash on your books, which could be used to create shareholder value. And there's also the possibility, in addition to that, of spinning off certain hidden assets to create shareholder value. We heard back in December at your analyst event the trend deal was in the process of raising funds. We've also more recently seen from the media that Lazada may be in a process of raising funds. We know that competitors are spinning off some of their subsidiaries to create shareholder value. So I'm wondering if you could tell us about those kinds of opportunities, your plans in those spaces, especially around cloud and also around China Commerce. Thank you.
spk11: Okay, let me answer this question. Thank you. This is Daniel. I'll be pleased to take that question.
spk09: If you look at where Alibaba Group is today as a business, we're very much being driven by a multi-engine strategy. The group has expanded into multiple different business areas that are mutually complementary, but each has unique user value and a unique user community.
spk11: We also believe that the current market We believe that the market has not placed sufficient value on Alibaba's business in terms of how it's being driven by a multi-engine strategy. The full value of each of these businesses together
spk09: is not being reflected in where we're at today. And this is a big part of the reason why we're pursuing a share buyback strategy.
spk11: 在现在的各个业务当中,我们像菜鸟也好,包括我们这个本地生活公司,就是Elema的这个载体也好,包括我们的Lazada和刚才提到的Trendio这些,其实都是一个已经并不是一个内部的事业部的编制,而是一个独立的公司的运营方式。 In the future, we will also promote more business that can be designed and promoted to be company-oriented. In the middle, we will also have an open attitude. When needed, we can introduce more diversified investment to promote the market process as we have done.
spk09: So each of these different businesses, including Cai Niao, including our local services offering, in particular Ulema, but also Lazada, Trendial, which you mentioned, are no longer simply internal business units, internal divisions of Alibaba Group. They're operating as independent companies. So certainly going forward, where we have these businesses that can create a closed loop and operate independently, as standalone entities, you know, we will maintain an open attitude to do as we have indeed done in the past, deals that bring in more diverse investor bases and help these companies grow as independent entities. 对,从长期来讲,我们肯定会去尝试各种对创造长期的股东价值,客户价值有帮助的事情,谢谢。 In sum, in the long term, we will certainly pursue strategies that are conducive to the creation of long-term shareholder value and customer value. Thank you.
spk03: Thanks, Daniel. Thanks, Rob.
spk08: Thank you. The next question is from the line of Eddie Leon of Bank of America. Please go ahead.
spk10: Good evening. One is that we see that a lot of categories have started to introduce a very popular trend. For example, some supermarkets now seem to be making some electronic products. So I would like to hear your thoughts on this. I also want to hear how you and our business may have a potential potential competition. We also saw that the number of users on the whole platform is actually increasing. There are also a lot of new users. Thank you, management. Good evening. Two questions if I might. First of all,
spk09: has to do with the impact of the growth of the 1P model in certain parts of your business. I'm wondering if the greater share of your business being 1P may lead to a situation where you're competing with merchants on the platform. And then secondly, tying into the previous conversation we had about certain BU's growing fast, driving a lot of user acquisition, and we're seeing a lot of these new users that have joined the Alibaba digital economy coming from a couple of these new BUs. But I'm wondering if some of these BUs become more independent, how can we make sure that there'll be good synergy between them and the other businesses and the new users they're bringing on board will also contribute to the overall Alibaba economy? Thank you.
spk11: Thank you, Eddie. These are two very good questions. First, I'll talk about the model of support and platform. On this issue, Alibaba has no bias. We... Thank you. This is Daniel. I'll be happy to take that. As to your first question regarding the two different business models, the 1P model versus the platform model,
spk09: Alibaba really takes no side and has no preference. To us, it all boils down to which model can best serve the consumer. We put the consumer's interests first.
spk11: to establish and connect users, especially to create conditions on the data of good customers. So in this sense, the guidance we do is definitely not traditionally a strong guidance between suppliers and consumers, but it can really help them to deliver goods to consumers in a more efficient way, including through more flexible pricing and combination to sell to consumers.
spk09: Secondly, when it comes to how we engage with merchants, be it in the 1P model or the platform model, it's fundamentally our concern to find ways to help merchants better serve consumers, not just in terms of helping merchants to sell products to consumers, but helping them to develop their brands and to leverage consumer data to engage consumers and to grow their businesses. So the 1P model for us is absolutely not about erecting a wall between merchants and consumers. It's really about helping to get goods to the consumer more efficiently with more flexible pricing, but at the same time allowing for consumers to be engaged by merchants. And we always hope for consumers to remain in touch with the merchants and for the merchants to be able to leverage data to better manage and grow their businesses. So these several aspects are all integrated.
spk11: So from this point of view, Alibaba is now providing merchants with a cross-business, multi-scenario, cross-business, including branch-based businesses and original platform-based businesses, multi-business scenarios, including in-house and in-house. In the in-house, there are many types of business. Brand branch or channel branch. Through various methods, we can help them to serve the consumers.
spk09: So what Alibaba is offering to merchants is a highly integrated portfolio of different possibilities, including the 1P model, including the platform model, so different business models, but also multiple scenarios, including hyper-local commerce and nationwide commerce, So with this complete basket of different offerings, it's possible to better engage consumers and possible for merchants to build their brands and grow a healthy business.
spk11: On to your second question, which had to do with how to ensure good consumer engagement across all different businesses as they develop.
spk09: You know, we fundamentally believe that we must adopt the consumer, the user point of view, and looking at how we organize and how we run our businesses, because at the end of the day, all of our businesses are built on serving the consumer well, and we need to be able to do that across all of them.
spk11: Because Alibaba is already close to 1 billion AACs in China. But how to differentiate the definition of target users, provide differentiated value for specific target users, so that we can really form a direction for China's 1 billion consumers' consumption business. This consumer business matrix is what we work hard to build every day.
spk09: So something we're working on very, very hard is segmenting the different consumers that we have in China with closing in on 1 billion AACs in China today. It's very important that we segment them and with our different offerings provide differentiated value to these different segments of consumers. So this is something that's of fundamental importance to us. We're working hard on it every day, segmenting the 1 billion consumers and presenting to them a comprehensive consumer business matrix that satisfies their differentiated demand.
spk10: Thank you.
spk08: Yes, the next question is from the line of James Lee of Mizuho. Please go ahead.
spk04: Great. Thanks for taking my questions. My question is mainly on cloud. Now, given the slowdown we're seeing in the Internet industry, I'm just curious, what is your plan to diversify the revenue base? It seems like that's your business plan. And maybe help us understand which verticals are logical for your business expansion and why. And lastly, along with that line of investment in cloud, what kind of investment do you need to make to expand not only your vertical exposure, and also from a product and sales perspective. Thank you.
spk09: Well, actually, after years of effort, we've already built a very diversified customer portfolio in our cloud business. And as we shared in our earnings,
spk11: This quarter, 52% of our cloud revenue are from online Internet customers. I think actually this percentage, actually if you look at the past few years' track record, it's going up. So over time, we will continue to diversify this portfolio.
spk09: Okay. I'm Daniel. I'll answer this question. Actually, through years of hard work, our cloud business has achieved a highly diversified development of the customer group. In the performance just now, you can see that 52% of our cloud business income is from non-internet customers. As I shared in my remarks, actually today we are still in the early stage of industrial digitalization in China. So for all the industries, they are going to be a data-driven company, and they need a
spk11: new generation of tech infra to support this digital transformation. So I think in this regard, we see a huge opportunity in the coming years. This definitely will be a trillion RMB market.
spk09: Well, in terms of the industries, as I said before, we keep close eyes on the new industries, I mean, which
spk11: will generate massive amount of data and which will consume the computing volume, high computing power. So I think and also need a more intelligence, data intelligence technology. So I think for those industries, we definitely think it will drive the growth of the cloud business and also with the mutual collaboration also very good to build the ecosystem, which is also relevant to your second question.
spk09: So this is also related to the second question that you mentioned.
spk11: Yeah, our investment strategy for the cloud computing is to, first, to enhance our proprietary technologies. And second will be to enhance the power of the ecosystem, to have more strategic partners in the cloud ecosystem.
spk09: So to answer your second question, in the future, we will not invest in the cloud. Let's take the last question. Yes, thank you. Our last question is from the line of Alicia Yap of Citigroup. Please go ahead.
spk01: Thank you for accepting my question. I would like to follow up on the cloud business. The Internet company's overseas service has affected us for about a year, in March. Will the cloud revenue increase again in March this year? Thank you.
spk09: Thank you, management. Some quick follow-up questions on cloud. We understand that the impact of that one internet company stopping the use of Alibaba cloud services around a year ago from the March quarter has been ongoing. But do we expect to see international revenue for cloud re-accelerating starting from, would you say, the March quarter? And how do you view competition and price trends in the cloud space? And in a more macro sense, do you think that there are perhaps many companies out there that need to get on the cloud, but they're perhaps delaying that decision in the current macroeconomic environment for the time being? And then quickly turning just to Chaniao, we saw that growth of Chaniao China's business outside of the Alibaba ecosystem was only 15%. I'm wondering if you could talk to us about how you see China's revenue growing going forward with respect to serving external customers.
spk11: For the future, we see that the impact of each quarter will gradually be eliminated as time goes by, because it will enter a new cycle. But we are very focused on the dispersal of the entire large client. So today, we look at our more than 2% of single customers. In fact, it is very
spk09: Thank you. So starting with the first part of your question about the impact of that large cloud customer not making use of Alibaba cloud services overseas over the past several quarters, indeed, we've seen the impact of that reducing progressively quarter by quarter, and we're now entering a new cycle. But I think the key point to be made is that we now have a much more diversified customer base, especially if you look at the number of large customers. There are now very few, a small number of large customers that account for more than 2% of revenues. So we're highly diversified, and that positions us well for the future.
spk11: China China China China China China China China China China China This is a new requirement for computing. In a sense, they are a new generation of data companies, a data intelligence company. So from this perspective, we still need to correctly define the future of the cloud market. It is not only a traditional replacement for the IT market, but more importantly, it is a combination of computing and especially intelligence. From this perspective,
spk09: Regarding the next part of your question as to the impact of the overall macro environment on the current growth pace of the cloud business, I think you have to look at different sectors differently. There's this broad process of industrial digitalization that's unfolding. But this digitalization is needed both by companies in traditional sectors, but also by other companies in new and emerging sectors. We've talked about things like new energy, indeed new energy vehicles, healthcare, and other sectors. And these are all sectors that on the one hand, require massive amounts of computing power, and secondly, need to leverage very powerful data intelligence capabilities. So I think we do need to take a sector-by-sector approach to define the strategy and look in particular at those sectors that have those kinds of needs for massive computing power and for data intelligence. And it's really important to understand that that really is what the cloud is about. The cloud is not simply about replacing traditional technologies IT infrastructure. China is just getting started in this process.
spk11: 关于第三个菜鸟的问题,其实菜鸟我们今天随着多年的发展以后, 菜鸟本身已经形成了一个多元的业务矩阵, 它既有末端的业务,像我们的驿站,包括我们的果果, 这个是关系到消费者的last mile和first mile, At the same time, there is also our 2B service, including our supply chain service, especially with the development of Taote, which is a comprehensive service that provides consumers with land. With our overseas development, we have formed an overseas cross-border, from a package network to a supply chain network. In the future, there may be more that can be introduced. With the development of our B2B business, as you can see, our B2B business especially the export business, is very strong. Behind this, there is also the construction of our entire goods transportation, cross-border goods transportation business, goods transportation network. So from the perspective of this development, the potential is very big. Of course, as a member of the Alibaba family, we also work hard to hope that this, whether it is to serve a business within Alibaba, or to serve this, this, our entire family of customers in a certain business, we all hope to be able to Thirdly, on Cai Niao, following many years of investment and development,
spk09: Chai Niao itself today also enjoys a multi-engine growth strategy. There are many pieces to its business. It has Chai Niao posts. It has first and last mile delivery capabilities. It has 2B, has supply chain services. And now with the growth of Taobao Deals, it's supporting the manufacturer to consumer, the M2C business model. Overseas, it's built a very large cross-border parcel service and now a supply chain network as well. And going forward with further development in B2B, I think we can expect to see the export side also to be very robust. And all of that is underpinned by the international cargo network that Tsai Niao has built up. So I think there's this huge potential for Tsai Niao given this opportunity. diversified business matrix and as a member of the Alibaba family you know we want Sinao to be well positioned to serve the different parts of Alibaba's businesses internally with an integrated design providing a logistics underpinning as well as to be able to service other customers and we can find ways to create further growth for it with incremental growth in our different businesses
spk05: Okay. Thank you, everyone. That was the end of our Q&A session. If you have any questions, further questions, please reach out to our team and myself. And thank you for the participation.
spk08: Thank you. And this concludes today's conference call. And thank you for participating.
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