VALUATION HIGHLIGHTS

1. China Retail constitutes 31% of the Trefis price estimate for Alibaba Group's stock.
2. China Wholesale & Other constitutes 8% of the Trefis price estimate for Alibaba Group's stock.
3. Cloud Computing constitutes 4% of the Trefis price estimate for Alibaba Group's stock.

WHAT HAS CHANGED?

1. Latest Earnings

Alibaba posted a better-than-expected set of Q3 FY'24 results. While revenue grew by 5% year-over-year to $36.67 billion, earnings came in at $2.67 per American Depository share. All the company's key business segments grew year-over-year.

Note: Alibaba's Q3 FY'24 ended on December 31, 2023. FY'23 ended on March 31, 2023.

2. Alibaba scraps spin-off of the cloud business

In November 2023, Alibaba announced that it would be scrapping its plans to spin off its cloud unit, citing that the recent expansion of U.S. restrictions on the export of advanced semiconductor chips was hurting the business. The spin-off was intended to unlock value for investors given that the Cloud segment included the cloud computing and artificial intelligence business, two high-profile and growing businesses. Moreover, the cloud spinoff was seen as a significant step toward Alibaba’s plans of restructuring itself into a holding company via IPOs for its business groups (including e-commerce, media, and food delivery, logistics), in a move that could unlock value. Now the U-turn on the cloud spin-off indicates that things may not be going as expected.

BUSINESS SUMMARY

Alibaba is a Chinese technology company focusing on e-commerce, logistics, cloud computing, digital media, and other subscription software. While the company reports its business in four segments, we have reworked its structure into five segments that better capture Alibaba's business based on its operations. The China Commerce segment revenues are derived from retail e-commerce and associated marketing services in China. Digital Media & Innovation Initiatives segment revenues are derived from content subscription, software subscription, and merchant advertising offerings. China Wholesale & Other revenues are derived from wholesale commerce and logistics services, primarily driven by Chinese consumption. International Commerce segment revenues are derived from retail and wholesale operations and advertising services outside China. Cloud Computing segment revenues are derived based on customers' duration and usage of Alibaba's service.