Alibaba Beats Revenue Estimates for Third Quarter

Alibaba Group Holding Limited (NYSE: BABA) reported its third-quarter financial results on February 20, 2025, beating analysts' revenue estimates. The company's revenue grew by 5% year-over-year to $33.7 billion, while net income increased by 63% to $6.2 billion. Alibaba's Cloud Intelligence Group saw a 7% increase in revenue, with triple-digit growth in AI-related product revenue for the fifth consecutive quarter. The company also repurchased $4.1 billion of shares, achieving a net 2.1% reduction in total shares outstanding.



Alibaba's revenue growth was driven by several key factors:

1. Improving Monetization of Taobao and Tmall Group: Alibaba implemented a software service fee based on the GMV of completed transactions on its platform, aligning with industry practices. This change, along with the cancellation of the annual service fee for Tmall merchants and software service fee rebates, contributed to improved monetization.
2. Growth in Cloud Business: The Cloud Intelligence Group saw a 7% revenue growth, with revenues from public cloud products growing in double digits and AI-related product revenue delivering triple-digit growth. This acceleration in growth is a positive trend, indicating the potential for continued expansion in the cloud business.
3. International Commerce Growth: Alibaba's International Commerce segment grew by 29% year-over-year. This growth was driven by increasing demand for lower-priced goods from China, indicating a sustainable trend as long as the demand for affordable products remains strong.
4. Investment in Core Businesses: Alibaba continued to invest in its core businesses, such as user experience, product offerings, and strategic initiatives like price-competitive products and customer service. These investments aim to enhance user experience and drive long-term growth.



Alibaba's strategic shift towards GMV-based service fees and AI investments has had both positive and negative impacts on its financial performance and competitive position. While the company has seen revenue and net income growth, the decline in free cash flow raises concerns about the sustainability of its financial performance. However, Alibaba's aggressive AI investments and strategic collaborations have strengthened its competitive position in the global AI ecosystem and e-commerce market.

In conclusion, Alibaba's third-quarter results demonstrate the company's ability to adapt to changing market conditions and maintain revenue growth. The company's strategic focus on core businesses, investments in technology, and expansion into international markets position it well for long-term growth. However, investors should remain vigilant about the potential risks and challenges facing the company in the near term, such as slowing consumer spending in China, intense competition, and regulatory uncertainty.