VALUATION HIGHLIGHTS

1. China Retail constitutes 41% of the Trefis price estimate for Alibaba Group's stock.
2. China Wholesale & Other constitutes 9% of the Trefis price estimate for Alibaba Group's stock.
3. Cloud Computing constitutes 6% of the Trefis price estimate for Alibaba Group's stock.

WHAT HAS CHANGED?

1. Latest Earnings

For Q4 FY'23, Alibaba saw revenue rise by about 2% year on year to RMB 208.2 billion (about $29.3 billion), with adjusted diluted earnings coming in at RMB 1.34 ($0.19) per share, up 35% year on year. While the domestic e-commerce business saw sales decline by 3% as consumer spending remained lackluster despite the Covid-19 re-opening. Moreover, Alibaba's cloud operations also saw sales decline by 2% versus the last year. This was due to the delayed delivery of some hybrid cloud projects as well as a top overseas customer phasing out the use of Alibaba’s cloud services.

Note: Alibaba's Q4 and FY'23 ended on March 31, 2023.

2. Alibaba plans to spin off cloud business

Alibaba is planning to spin off its cloud division into a separate publicly traded company via a dividend distribution. The move could unlock considerable value for shareholders as the unit - which also includes Alibaba's artificial intelligence operations - would become one of the only pure-play bets on the trends of cloud computing and generative artificial intelligence.

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.