Alibaba Group Holding Limited

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's June quarter 2024 results conference call. At this time, all participants are on listen-only mode. After management's prepared remarks, there will be a Q&A session. I would now like to turn the call over to Rob Lin, Head of Investor Relations of Alibaba Group. Please go ahead.

Good day, everyone, and welcome to Alibaba Group's June quarter 2024 results conference call. With us are Joe Tsai, Chairman, Eddie Wu, Chief Executive Officer, Toby Xu, Chief Financial Officer. We have also invited Jiang Fan, Co-Chairman and CEO of Alibaba International Digital Commerce Group, to join the call. This call is also being webcasted from the investor relations section of our corporate website. A replay of the call will be available on our website later today. Now, let me quickly cover the safe harbor. Today's discussion may contain forward-looking statements. including without limitation statements about our strategies and business plans, as well as our belief, expectation, and guidance about our business prospects, such as the future growth of our business, revenue, take rate, profitability, and return on investments and shared purchases. Forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our expected expectations. For detailed discussion of these risks and uncertainties, please refer to our latest annual report on Form 20F and other documents filed at USSEC 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 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 the 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 reconciliation of GAAP to non-GAAP measures can be found in our learnings press release. Unless otherwise stated, growth rates of all stated metrics mentioned during this call refers to year-over-year growth versus the same quarter last year. With that, I will turn over to Eddie.

Hello, everyone. In the new fiscal year, Our strategies of user-first and AI-driven are starting to bear fruit. This quarter's results reflect continued steady growth momentum. Taobao and Tmall Group achieved steady year-over-year growth in orders and in GMV. Alibaba International Digital Commerce revenue maintained strong growth. Alibaba Cloud's revenue excluding Alibaba consolidated subsidiaries, returned to positive growth, notably driven by core public cloud and AI products. And across other segments, we achieved better operational efficiency and monetization capabilities to varying degrees. This drove significant improvement in some loss-making businesses, Taobao and Tmall Group maintained its user-first strategy and continued to invest in key capabilities, aiming to deliver quality products and services at attractive prices across diverse shopping needs of consumers. This quarter saw steady growth in GMV and order volume, driven by a notable increase in purchase frequency. Internal and external data about e-commerce players' market share dynamics indicates a positive trend in our gradual market share stabilization. further validating the effectiveness of our investments in user experience. 88 VIP members reached 42 million by quarter end. We will continue to explore and improve program benefits, product offerings, and service experiences for this expanding premium member base. In TTG's operational strategy, we attach great importance to rich and diverse product offerings while focusing on investing and enhancing shopping experiences. We continuously improve the efficiency and matching of products with user traffic and ensure stable and sustainable growth. As orders and GMV continue to grow, we're advancing monetization step-by-step, including the launch of our new marketing tool, Xuan Zhan Tui. Through algorithm upgrades, we aim to enhance the efficiency of merchants' monetization while also improving the efficiency of traffic utilization and conversion of user traffic to purchases on our platforms. we expect CMR growth to gradually align with GMV growth over the coming quarters. In our cloud segment, we continue to pursue high-quality revenue and effectively execute our integrated cloud plus AI development strategy. This quarter, Alibaba's overall revenue, excluding Alibaba Consolidated subsidiaries, grew 6%, with public cloud revenue maintaining double-digit growth. AI-related product revenue sustained a triple-digit growth, continuing to increase its share of public cloud revenue. We're seeing more major customers choosing Alibaba Cloud as their compute infrastructure for AI development. At the same time, Alibaba's proprietary large language models are gaining wider adoption. This year, Alibaba Cloud served as a major cloud service provider for the Olympic Games, providing cloud computing and AI services to Olympic Broadcasting Services, OBS, At the Paris Olympics, cloud-based live broadcast powered by Alibaba Cloud overtook satellite signals as the primary means of broadcast for the first time in Olympic history. Two-thirds of broadcasters used live signals transmitted by Alibaba Cloud in real-time around the world, reaching billions of viewers. Additionally, Alibaba Cloud's AI technology saw its first widespread application at the Paris Olympics, including 360-degree replays in real-time, bringing pleasant surprises to the audiences. Our long-term strategy for integrated cloud plus AI development comprises three key elements. One, we'll continue to optimize our cloud product offerings, focusing on competitive, sustainable gross margin and scalable public cloud products. This forms the foundation for Alibaba Cloud's sustainable high-quality growth. Two, we'll strengthen synergies between cloud and AI products, not only supporting existing customers and implementing new AI capabilities on Alibaba Cloud, but also enabling AI native enterprises to scale and succeed on our platform. We're committed to capitalizing on both opportunities. Three, we'll continue to invest in R&D and AI CapEx to ensure the growth of our AI-driven cloud business. Looking to the medium and long-term, we're confident that Alibaba Cloud's overall revenue, excluding Alibaba Consolidated subsidiaries, will return to double-digit growth in the second half of the fiscal year with gradual acceleration thereafter. Through intensive R&D investment, We aim to sustain profitable growth while establishing ourselves as a leading cloud service provider for AI with healthy profitability and market share leadership. In international e-commerce, AIDC delivered 32% revenue growth this quarter. Our international business segment comprises a diverse business matrix integrating both cross-border and local operations as well as B2B and B2C formats. This presents numerous opportunities in terms of both operational models and market expansion potential, and Xiangfan will provide a more detailed update momentarily. Beyond e-commerce and cloud, we've implemented strategic realignments across our key internet technology businesses through a thorough evaluation of their product capabilities and market competitiveness. While maintaining product competitiveness, most of these businesses will now place a higher priority on monetization. This quarter, we've already seen these businesses significantly improving profitability, And we expect this trend to continue in the coming quarters. We expect most of these businesses to break even within one to two years and gradually contribute to profitability at scale. This new fiscal year is a pivotal one for Alibaba as we set our strategic direction and realize the successes of our transformation. We are fully confident in Alibaba's sustained healthy development into the future. Hi, everybody. It's my pleasure to share with you AIDC's latest business progress. Over the past quarter, AIDC maintained its rapid growth momentum with overall revenue increasing 32% year-on-year, primarily driven by our cross-border business. In terms of the three drivers we consistently focus on, first, ongoing business model and supply chain upgrades, AliExpress maintained rapid year-on-year order growth with a percentage of AE Choice orders continuing to be high and gradually stabilizing. and enhancing the certainty and consistency of user experience. AliExpress and Zainal continue to jointly optimize logistics experience and significantly reduce the average delivery time quarter over quarter. We further optimized the organic balance of user experience, product richness and efficiency across our marketplace, semi-consignment and full-consignment models. The unit economics of the choice business improved by nearly 20% quarter over quarter. Second, product and technology innovation We advanced our AI and intelligent technologies across scenarios like AI customer service, cross-platform product placement, product description optimization, multilingual search, and precise recommendations, which boosted efficiency and user experience. These innovations were deployed across our platforms and have served around 500,000 merchants and covered 100 million SKUs. Third, sustained growth in key markets. Ongoing improvement in user experience bolsters AE's confidence to step up investments in key markets to expand user base and maintain leadership. As the exclusive e-commerce partner of the European Cup 2024, we effectively boosted AE and Trendyall's brand awareness. We're also exploring diverse localized business models. In Turkey, Trendyol increased monetization and profitability, solidifying its e-commerce leadership. It also enriched product offerings and marketing efficiency in the Gulf region while continuing end-user growth. In Southeast Asia, Lazada achieved single-month EBITDA profitability for the first time in July. This milestone reinforces our confidence to efficiently invest in the Southeast Asia market to consolidate our market share. In conclusion, our strategic focus is twofold, enhancing operational efficiency across all business segments, while, on the other hand, actively investing in key markets to drive quality growth and scale with the goal of achieving more substantial profitability at scale in the future. Thank you.