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Alibaba Q1 Earnings: Taotian Monetization Rate Increasing, Enterprise AI Investment Remains Strong

AInvestFriday, Aug 16, 2024 5:23 am ET
1min read

Alibaba Released Q1 Earning Results. Here are some key points:

**China E-commerce:**

The current focus is on driving GMV (Gross Merchandise Volume) growth, which will increase customer service revenue. The "Full-Site Promotion" product, well-received by merchants, will take about a year to mature, potentially bringing significant incremental revenue. Starting in September, a 0.6% technical service fee will be charged to Taobao and Xianyu merchants (exact rate to be confirmed, based on confirmed GMV), with exemptions for smaller merchants below a certain GMV threshold. This is expected to gradually contribute to revenue after September.

Alibaba considers return experience crucial for consumer retention. Post-optimization, consumer metrics like retention rate, purchase frequency, and shopping experience have improved, with a positive trend in NPS (Net Promoter Score), especially among high-end users. Alibaba's return rate is slightly below the industry average, so there are no concerns about return rate increases affecting merchants' advertising willingness.

**Cloud Business & AI:**

Demand for Alibaba Cloud's AI products is very high, with severe supply shortages. External customer revenue is expected to achieve double-digit growth in the second half of the fiscal year. Traditional cloud computing growth is limited, with new IT demand focusing on AI-related products based on GPUs.

Recent quarters have shown strong returns on investment in cloud infrastructure, with new servers quickly reaching full capacity and low vacancy rates. This quarter's cloud growth is more than half attributable to AI.

Despite concerns that macro pressures may slow enterprise cloud adoption, Alibaba executives report increased AI budgets among enterprises, which cannot afford to lag behind. AI investment is expected to remain strong in the upcoming quarters.

Alibaba is the only Chinese company offering both open-source models and AI cloud services, with these strategies aligning well.

**Cross-Border E-commerce:**

Alibaba's international strategy combines experienced local teams with cross-border operations, adapting to different markets and local brands. Efforts are focused on upgrading business models and integrating Alibaba Group's supply, particularly from China.

Lazada achieved EBITDA profitability for the first time in July, while Choice AliExpress is in an earlier stage, with ongoing efforts to optimize operational efficiency and pursue healthy growth.

**Shareholder Returns:**

The company is actively pursuing Hong Kong as its primary listing location, with a dual primary listing in New York and Hong Kong expected to be completed by the end of August. Future inclusion in the Hong Kong Stock Connect will depend on related processes.

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