Q3 2022 Alibaba Group Holding Ltd Earnings Call (Chinese, English)
Good day, ladies and gentlemen.
Good day, ladies and gentlemen, thank you for standing by welcome to Alibaba Group's December quarter, 2021 results conference call.
At this time all parties.
Our long isn't only mode naphtha managements prepared remarks, there will be a question and answer session.
I'd like to turn the call over to Rob Lin head of Investor Relations of Alibaba.
Please go ahead.
Good day, everyone and welcome to Alibaba Group December quarter, 2021 results conference call.
With that underlying today are Daniel Zhang Chairman and CEO .
Joe Tsai Executive Vice Chairman.
Maggie.
Chief Financial Officer.
Kobe shoe Deputy Chief Financial Officer.
This call is also being webcast from the IR section of our corporate website, a replay of the call will be available on our website later today.
Now let me quickly go through the Safe Harbor.
Today's discussion may contain forward looking statements.
Looking statements involve inherent risks and uncertainties that may cause actual results to differ materially.
Current expectations for detailed discussions of the risks and uncertainties. Please refer to our latest annual report on form 20-F, and other documents filed with the U S. SEC.
The Hong Kong stock exchange any forward looking statements that we make on this call are based on assumptions as of today and we can.
We do not undertake any obligation to update these statements except as.
As required under applicable law.
Please note that certain financial measures that we use on this call such as adjusted EBITDA adjusted EBITDA margin adjusted EBITA adjusted EBITA margin non-GAAP net income non-GAAP diluted earnings per share.
Free cash flow.
On a non-GAAP basis, our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release.
Unless otherwise stated growth rate of.
All of the stated metrics mentioned during the call refers to year over year growth versus the same quarter last year.
In addition, during today's call management will give prepared remarks in English as third party translator will provide simultaneous chess Chinese translation on another conference line.
Please refer to our press release for details during the Q&A session. We will take questions in both English and Chinese and third party translator will provide consecutive translation.
Translation.
Its purpose only in the case of any discrepancy managers stemming the origin.
Orajel language will prevail with that I will now turn the call to Daniel.
Thank you Raul Hello, everyone. Thank.
Thank you for joining our earnings call today.
This quarter.
All of our groups business continued to make steady progress.
We remain focused on building long term capabilities centered around customer value creation, despite the resurgence of Kobe.
China's market hardness slowdown and increasing competition.
In the fourth quarter of 2021, China's GDP growth, 4%, while total retail sales rose 3% year over year.
Both decelerated from the previous quarter due to the confluence of Colby.
This increase of raw materials and other factors.
At the same time, the overall trend of digitalization.
Across both consumption and the industrial sectors became increasingly apparent and accelerated.
Large internet companies in China have entered Congress through various ways.
Digital consumption formats, and the user experience has become increasingly diversified.
Against this backdrop, we believe our most important proposition and biggest opportunity for health healthy and sustainable long term growth.
Number one.
Ability to continually create new consumption demand and offer innovative consumer experiences and number to support the industrial digitization of our customers.
As of quarter end.
Our annual active consumers reached 1.28 billion globally.
Representing quarterly net add of 43 minutes.
In China our.
AAC grow from 953 million to 979 million during the quarter, while aac's outside of China grow from $2 85 million to three old London.
We are fully on track to deliver target of wondering China six by the end of this fiscal year.
And Paul about deals has been the major contributor to our new user acquisition.
With one building high quality Aac's liquidity, we have substantially capture all consumers with purchasing power in China.
We focus on shift from new user acquisition to user retention and ARPA growth.
Despite the impact from slowing.
Retail sales and intensifying competition, all electronic commerce business.
So next year retention rate of new Aac's acquired in calendar year 2020 was 86% in 2021.
This is your retention rate how to study how to steady against our historical pattern.
Indicating healthy user stickiness platforms.
Our overall op pool or the average annual spend per AC.
Decreased by a low single digit percentage year over year in 2021 due to increased contribution of new users from less developed areas.
But I want to highlight that all of our agencies with over 10000 RMB annual spend all platform contributed to continued.
Increased year over year.
Looking ahead, we aim to further strengthen user engagement and time spent a greater variety of consumption use case offerings.
We want to enhance our influence on the consumer decision, making journey.
Hey, Lloyd to reflect unique considerations of each product category.
We will shift our focus from spending the total number of Acs in China to driving deep deeper ADC penetration across product categories.
This will ultimately help us capture a more significant consumer water Shea.
Over the past year, we invested heavily in combo deals and <unk>.
We do not view these two businesses as Standalone units.
But integral parts of our China Commerce business metrics.
The unique value contribution of these two new businesses gradually.
Became clear following several quarters of development.
Cobalt deal has been a powerhouse in user acquisition for China Commerce.
Attracting 280 million aac's within a quarterly net add of 39 million.
Paid orders during the quarter grew over 100% year over year.
How about deals and <unk> have highly complementary user base.
With a higher proportion of price sensitive consumers on cobalt deals.
There are many ways for us to realize the commercial value of these users.
One example is improving supply chain efficiency by connecting manufacturers directly with consumers.
As for <unk> it.
It has been a successful use case extension into the grocery and fresh produce category for price sensitive consumers.
More than 50% of <unk>.
Our first time fresh produce buyers on our platforms.
Now how about deal and <unk>.
Tablet market presence.
We'll shift our focus towards quality growth.
Through optimizing efficiency, we expect to gradually narrow the operating losses in these two businesses in the next few quarters.
In local consumer businesses.
In local consumer services, the combined <unk> of our two home and to destination business have reached.
<unk> 72 minutes.
Reflecting a quarterly net add of $17 million.
Total order volume grew 22% year over year.
On the two home side we.
Made meaningful progress in improving unit economics for <unk>.
So a city strategy with more disciplined user acquisition spending and the improved delivery cost.
On the two destination site.
<unk> reached a record high of over 200 million to us during the National day holiday in China.
While transacting users continued to grow during the quarter.
We believe the picture of a map transforming from navigation tool to eight lifestyle services platform centering around destination is becoming more and more clear.
Yeah.
For our international Commerce business.
<unk> reached $3 1 billion.
By December with a quarterly net loss of $16 million.
Overall order growth continued to maintain healthy momentum at 25% year over year.
Other than the trend deal growing 52% and 49% respectively.
How do you express was negatively impacted by changes in European Union VIP assumptions.
We believe the future of development of International Commerce markets will be placed on the combined combination of local supply and cross border supply.
Our long term focus is a balance of both.
To fully leverage China's advantage in cross border supply, while organizing local supply effectively.
Meanwhile, logistic network development.
Alrighty in our globalization strategy.
Logistics is a fundamental infrastructure supporting a high quality consumer experience based on integrated projects supply from cross border and locally.
<unk> has been developing look let's just in network in southeast Asia, and Europe , leveraging the commerce use cases presented by Masada at express and we're trying to do.
We will continue to invest in Tonya's global logistic network.
Cornerstone.
Of our globalization strategy.
Additionally.
Global coverage and capacity in cloud is another essential piece supporting our globalization strategy.
This quarter Ali cloud continue to invest in expanding its international infrastructure.
We added two data centers in Asia Pacific.
In Korea, and Hawaii Island.
Ali Cloud now provide cloud computing services in 25 regions globally.
Sure.
Our cloud revenue grew 20% year over year this quarter.
We saw very strong growth in demand from financial services and telecom sectors.
Which partially offset slowing demand from some customers in internet sector.
China's called loyalty will be I couldn't RMB opportunity by 2025.
In industrial Digitalization to date is still in a very early stage.
Alibaba cloud is committed to serving the real economy for the long term and the Digitization of all industries.
Recently, we helped the international Olympic Committee migrate 100% of their core systems onto Alibaba cloud during the Beijing Winter Olympics.
This is the first time in the history of Olympic games that cloud computing has replace traditional.
Infrastructure to support the planning and operations of the games.
In the past.
Each Olympic host city would have to build extensive infrastructure.
Infrastructure and then dismantle just after the end of the games.
By replacing the physical infrastructure with cloud based services.
Hardware costs will be significantly reduced while application development and deployment will be much more efficient.
We see similar opportunities and advantages for digitalization in many industries in the future.
Such as new energy vehicles financial services and healthcare.
These industries have high potential with massive demand for cloud computing.
And digital intelligence.
We will lavish Alibaba cloud proprietary technology and products to deliver tailored industry solutions.
As China continues to invest towards is carbon peak and then you try to take goes.
We foresee increasing demand for more reliable and sustainable technology infrastructure.
Digital transformation depots across industries.
We aim to languish, Alibaba cloud product and technology innovations to help our customers find greater energy efficiency.
For example, our data centers equipped by liquid coating technology achieved industry, leading energy efficiency level with appeal of as low as 109.
Moreover.
Our facilities can deliver high performance with lower power consumption, leveraging our perpetuate product and technology.
Yes.
Yes.
During our Investor day this past December .
We announced <unk>.
<unk> carbon neutrality pledge.
By 2030.
We are committed to achieving scope, one two and three carbon neutrality for Alibaba cloud.
Scope, one and two carbon neutrality in the operation of Alibaba group, and reducing scope scope three carbon intensity.
Intensity by half.
Additionally, we introduced a concept of scope three plus to facilitate one five giga tonnes of decoupling nation across Alibaba ecosystem participants fight.
<unk> 35.
Since Q4 last year.
China's regulators have issued multiple important statements about the digital economy.
The emphasize the need to strengthen.
China's digital economy.
Improved quality and grow at scale.
They also promote healthy and sustainable development of the platform economy based on robust platform governance.
These principles are highly consistent with Alibaba as a business philosophy and commitment to social responsibility.
Looking ahead.
We remain focused on healthy and sustainable development by serving our customers, especially Smes.
Importantly, the digital transformation of industries sort of in the real economy and supporting our community.
Thank you everyone for your time now I will turn it to Toby who will walk you through the details of our financial results.
Thank you Daniel.
And good evening everyone.
This quarter revenue was around $242 6 billion up 10% year over year.
Our top three revenue contributing segments, where China, commerce cloud and international Commerce, which grew by 7%, 20% and 18% year over year, respectively.
While our China Commerce statement may be impacted by slowing macro and increased competition.
Our cloud and international Commerce segments maintained solid growth and are expected to become increasingly important growth drivers in the future.
These two segments will continue to contribute to diversification of our revenue base.
Income from operations decreased by RMB 42 billion to RMB 7 billion, which included a RMB 25 billion impairment of goodwill in relation to the digital media and entertainment segment.
Excluding this impact the income from operations would have been RMB 32 billion a decrease of 34%.
Adjusted EBIDTA decreased by 27% yet over year to RMB 45 billion.
The decrease was primarily due to our increased investments in growth initiatives, such as top out deals Palletize, hi, levada and earn them as well as our increased spending for user growth.
Many of these growth initiatives saw strong growth momentum as highlighted by Daniel.
Additionally, we have increased the merchant support through incentives to drive merchant adoption of new value added services as well as strategic reductions in select service fees to lower merchants' operational expenses in a slowing consumption in <unk>.
From it.
We believe this near term spending beauty goodwill with our customers and support sustainable long term growth.
Our China Commerce businesses.
Now on cost trends for the quarter.
Excluding SBC as a percentage of revenue.
Cost of revenue ratio increased to 60% during the quarter.
The increase was primarily attributed to about two <unk>.
First the higher proportion of our direct sales businesses, such as sudden not tmall supermarket and fresh it Paul.
And second strong growth of Tau Titi fresh Apple and Tmall supermarket that led to an increase in logistics costs as a percentage of revenue.
Sales and marketing ratio increased to 15% during the quarter. The increase was due to higher marketing and promotional spending for user acquisition and engagement for our mobile commerce apps, such as top of our deals.
About <unk> and all of them.
Ratios full product development and the general and administrative expenses were steady year over year during the quarter.
Now, let's review net income and cash flow for the quarter.
Our December quarter net income declined by RMB $58 8 billion to RMB 19, 2 billion, which was primarily driven by firstly RMB $25 billion in goodwill impairment related to our digital media and entertainment.
Segment as previously mentioned.
Secondly, RMB 21, 7 billion decrease in interest and income and investment income net to RMB 18, 4 billion, primarily due to lower net gains from fair value changes of our equity investments.
I wanted to GAAP net income declined RMB 14, 6 billion, primarily due to a decrease of RMB 16 4 billion.
Adjusted EBIDTA.
As of December 2021, we continue to maintain and enjoy a strong net cash position of RMB 317, 9 billion. All U S. Dollar 59 5 billion.
Our strong net cash position is supported by healthy cash generation.
Net cash flow from operation and free cash flow for the quarter were RMB 64 billion and RMB 70, 171 billion respectively.
The difference of approximately RMB nine 4 billion reflected operating Capex spending majority of which is for our cloud business and logistics fulfillment infrastructure.
We continue to focus on adding value to shareholders through share repurchases.
During the quarter, we repurchased approximately $10 1 million of our Ats for approximately USD, one 4 billion.
Under our share repurchase program.
For the nine months ended December 2021, we repurchased approximately $42 2 million of our Etfs for about USD seven 7 billion.
Representing 51% of our U S dollar 15 billion share repurchase program.
Our current share price does not fairly reflect the value of the company at current price levels, we plan on continuing our share repurchases.
At the same time, we will maintain a strong cash position that gives us the financial flexibility for future investments.
Now to our segment results.
As mentioned during our Investor day, we are providing more granular reporting of our commerce segment by further subdividing it into four segments, including China Commerce International Commerce local consumer services in China.
Our cloud digital media and entertainment.
And innovation initiatives and other segments remain unchanged.
Revenue from our China Commerce segment in the quarter increased 7% year over year to RMB 172 billion.
Custom manual revenue slightly declined by 1% primarily due to.
Firstly slow moving conditions of slow market slowing market conditions and competition in the China E Commerce market that resulted in single digit physical goods paid the GMB growth for Taobao and Tmall.
Then by categories year over year GMB growth in the F. M C G and home furnishing categories were faster than overall average tier.
T N V of apparel and accessories and consumer electronic.
Categories grew at a slower pace than overall average.
Additionally, as previously explained we have increased merchant support through incentives to drive merchant adoption of new value added services. We have also made a strategic reductions in select service fees to lower merchants' operational.
Benches in a slowing consumption environment.
The increased merchant support resulted in customer management revenue growing slower than GSV growth.
We believe a step up in near term spending build goodwill with our customers and support sustainable growth for our China commerce businesses over the long run.
Direct sales and other revenue grew 21% year over year, primarily due to revenue contributed by Sun not fresh a po and Tmall supermarket.
With the saturation was primarily due to reduced impact of sending a consolidation as it was fully lapsed in this quarter.
China Commerce adjusted EBIDTA decreased by RMB 14 billion to RMB 15 8 billion.
This decrease reflected our increased investments in growth initiatives, such as Tau about deals and Pallas high Tech as.
As well as our increased spending for user growth and support to merchants.
Important to know that our investments in Tau about deals and <unk> have not only generated robust transaction growth and beauty.
But have also been more disciplined with improving unit economics.
How 'bout deals paid orders grew over 100% year over year at the same time if successfully executed several.
Initiatives to optimize logistic costs and improve delivery experience for consumers.
Palatitis DNV grow 30% quarter over quarter at the same time <unk> per order continued to improve benefiting from higher regional order density and improving cross margin from enhanced supply chain capabilities.
As Daniel mentioned, how 'bout deal and <unk> Titi are strategic to our China Commerce segment contributing to new consumer acquisition and expansion of product offerings given their established presence, we will shift our focus towards quality of growth.
With <unk>, we expect top out deal and power tie tie to gradually narrow operating losses in the next few quarters.
Revenue of International Commerce continue to exhibit strong growth of 18%, primarily driven by solid transaction growth by Lossada and Alibaba Dot com businesses.
Order growth was up 52% Transat.
Transaction value competed in Alibaba Dot com grew approximately 50%.
The slower year over year revenue growth compared to last quarter was mainly due to first.
Single digit revenue growth of odd Express this was primarily due to a year over year decrease in number of orders for how to express as a result of the value added tax levied on cross border parcels below 22 euro in value in Europe .
And second <unk>.
Significant depreciation of Turkish lira against RMB that negatively impacted <unk> revenue.
Constant currency revenue growth for trend deal was 60% year over year during the quarter supported by robust orders growth of 49%.
Adjusted EBITDA loss widened by RMB, one 5 billion to RMB 3 billion, primarily attributable to the increase in Levant as marketing and promotion of spending for user acquisition and engagement, partially offset by steady profit growth of our international.
Wholesale e-commerce business.
Revenue of local consumer service businesses generated strong growth of 27% due to growth in order volume of 22% as well as more efficient use of subsidies that was contra revenue.
Adjusted EBIDTA loss increased.
0.7 billion to around RMB 5 billion, primarily due to the increased losses of our two destination businesses, including a map.
Losses of our two home businesses, including <unk> slightly increased year over year, but narrowed quarter over quarter, driven by our discipline, the user acquisition spending and reduce the delivery cost.
Revenue from tiny up before and secondly, elimination grew 23% to RMB 19, 6 billion, which was primarily driven by the growth of fulfillment solutions and value added services provided to our China commerce retail businesses as well as.
The increase in revenue from third party merchants.
Cross border and international businesses do.
During the quarter, 67% of total revenue was generated from external customers.
Adjusted EBITDA loss improved to.
A slight loss of RMB 92 million given the economies of scale of its businesses and improving cross margin of its cross border and international businesses.
Revenue from our cloud business.
Secondly, elimination grew RMB three 3 billion to RMB 19, 5 billion, the solid 20% year over year growth reflected robust growth from financial and telecommunications industries.
Partially offset by the continued impact of our top cloud customers decision to stop using our overseas cloud services for its international business due to non product related requirements.
Slowing demand from customers in the Internet industry, such as online entertainment and education.
Excluding the impact of the top customer from the Internet industry Alibaba cloud revenue off the intersegment elimination would have grown by 29% year over year.
Alibaba cloud revenue is becoming more diversified with revenue contribution from non Internet industries steadily increasing.
Revenue from non Internet industries accounted for 52% of its revenue after intersegment elimination during the quarter.
Adjusted EBIDTA was RMB $134 million, primarily due to economies of scale of its profitable call cloud computing businesses.
Partially offset by increasing investments in thing dock Deane.
Dean talk offer solutions to enterprises to facilitate their digital transformation enhance the work collaboration and easy access to Alibaba cloud big data analytics and AI capabilities since integrating Ding talk into a cloud business in 2021, we have identified.
New opportunities and growth initiatives for our overall cloud business.
Giving us confidence that increased investments in Ding talk will create long term value for Alibaba cloud.
Our digital media and entertainment revenue during the quarter was RMB 8 billion.
Losses slightly narrowed year over year during the quarter.
Now, let me wrap up with some concluding thoughts.
Our China businesses will be focusing on quality growth, adding value to our customers and building capabilities.
In terms of near term outlook, despite a challenging macro environment in a high comparison base year over year, our China Commerce G. N V growth remains resilient.
We expect revenue diversification to continue with cloud and international Commerce settlement exhibiting strong growth.
Our various growth initiatives, such as top out deals and <unk> have established sizable market presence and are delivering tangible results with robust.
AAC and order growth.
We expect these two businesses to narrow losses in the coming quarters.
Lastly, we will continue to build a cloud and logistics infrastructure in both China and internationally.
Now, let's open the floor for Q&A.
Yeah.
By consecutive interpretation for the Q&A session.
Address your question in the language you asked.
Please know that the translation is for convenience purpose only in the case of any discrepancy I imagine.
No language will prevail.
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So operator, please connect speaker and STI Conference line now and start our Q&A session when ready. Thank you.
Thank you as a reminder to ask a question you will need to press star and the number one on your telephone until the Doi a question. Please press the pound key.
Please standby, while we compile the Q&A roster.
And to give more people the opportunity to ask questions. Please keep yourself to no more than one question at a time.
Once again, please press star one for your question.
First question comes from the line of Piyush Mobile Goldman Sachs. Please go ahead line is open.
Thank you for the opportunity thank.
Thank you Daniel.
For the presentation and my one question surrounds the growth rates for the business and particularly the core business.
Given what parcel numbers are looking like for the month of January and I don't want to read too much into that number and the exit run rate. We saw four MBA data for the month of December I Wonder if you could one took us through the exit run rate for the third quarter, but the December quarter for GMB growth as well as CMI growth rate and also if you could.
Broadly guide us to what you think the growth rates, we could be expecting in the first quarter of calendar 2022.
Thank you.
Okay.
Gotcha Gotcha, Daniel I would hope you called our way towards the high end.
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Okay. Thank you very much for this question.
As I explained in my script.
In the last quarter actually the overall macro condition. If you look at the Mds data at the.
Our retail satellite at a growth rate for December .
For <unk>, it's only like 3%.
And our business as I explained also impacted by the macro condition as well as the competition, So which gave US say also like one thing a single digit growth that's that's for that.
The December quarter 10 four.
The new 2020 at the first quarter.
As I explained currently our growth rate, we still have a relatively resilient growth in our G. Envy and of course the market condition is also at this stage is quite weak.
We still don't see the January number, but we probably waiting for the number to out but at this stage I think our growth rate is still resilient.
Okay.
Toby what I meant by exit run rate for December itself.
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Next question.
Thank you. Our next question comes from the line of Thomas to next question. Please.
Yes. The next question comes from the line of Thomas Chong of Jefferies. Please.
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Hello.
Jacob I mean, but you got tightened it.
Good evening management and thank you for taking my questions.
My first question has to do with your outlook for the performance of different categories. In the next few quarters going forward, including F. M. C. G apparel and electronics can you share with us your forecast on growth and trends in.
Those different categories, secondly, I'd like to hear from management as to when you think we'll see a turnaround in the consumption slowdown.
Do you think that we'll see a pickup in momentum by say the June quarter or September quarter.
And finally I'd like to hear from management. Please on competition.
What would be the future impact of increased competition in the E Commerce space and what is your strategy to deal with it. Thank you.
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Thank you this is Daniel and I'll be happy to take this question first of all when it comes to G. M V either by category or overall G. M. V. It is our consistent policy not to give guidance, but I can answer your question in overall terms in the following way.
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So we can look at the macro environment and the e-commerce penetration in different categories from a number of angles first of all we can look at the share of different categories in total retail sales.
And then we can look at the current e-commerce penetration rate of those same categories.
We always want to see that certainly on a formula kind of well I shouldn't say do you for as long as I shall be it insulates you I'll check what she's sitting you know things off on a downhole she doesn't take the central each installed equal shelter called Eagles AP census at the J P.
So if we look at those two categories you you singled out.
Merrell and electronics.
Due to the rapid development of e-commerce over these past years penetration in those categories is now relatively high we're looking at something like 30 or 40%.
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Okay.
However, if you look at the other categories you mentioned like FMC G.
In food, especially fresh food and groceries.
The overall size of the market in most categories is very large yet e-commerce penetration still remains relatively low.
You'll recall that I talked about this in the presentation I gave at Investor day back in December .
December we see very good opportunities for.
Driving online conversion deeper in those categories.
No of course in order to do that and in order to ensure a good user experience we need to have highly integrated fulfillment systems.
A range of different offerings that cater to different kinds of demand and that's precisely what alibaba.
Has put in place with a matrix that includes Houma RT Mart.
With integrated online and offline operations, our third party delivery.
Delivery platform.
As well as a.
Tmall supermarket.
So we're organizing supply both from nearby and from nationwide and different consumption scenarios catering to different kinds of users from the highly affluent through to the more price sensitive and by pursuing this matrix strategy, we expect to be able to deepen our penetration in these categories.
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On your second question.
I would say that live streaming certainly has become a very important part of the digital commerce equal.
Ecosystem.
It's an important means of enriching the user experience and marketing.
In particular certain kinds of categories.
The tub all livestream ecosystem therefore.
As an important part and highly integrated into our overall ecosystem as a complementary part of a larger offering however different categories in different products.
Our best marketed to consumers in different ways with different kinds of interaction. So live streaming is indeed, good but it's certainly not the only means of getting there and we do need a multifaceted.
Rich.
Metrics of our services through which to reach users end market products.
Okay.
Next question please.
Yes. Our next question comes from the line of Jeremy limb of UBS. Please go ahead.
So you take one of these things.
So when the Q and it wasn't weak.
The total of the partnership.
<unk> I can see kind of who means you can achieve.
Raymond James.
Sandy.
What's important to me that you're pointing to the suite.
So what you see.
So you can kind of use them with you.
Chelsea.
Same thing I mean, it seems that for me.
Munich in something I see a woman TT when you from you on our thinking.
<unk> 2018.
I don't know did you ever do.
No.
From your utility.
Got it.
Some key that's increasing.
So maybe you could see to kind of where you can see what's happening.
And you mentioned obviously.
Once we know the Samsung Peter please.
Okay.
Thank you.
Thank you for taking my question, Matt is really my question has to do with turbo deals and types.
Where do you see them going over the next few quarters in terms of Ah.
U E.
And.
Further narrowing of losses, if you could talk to US. Please about how <unk> has been evolving in the face of competition and market developments there.
And whether that has been improved also by the scaling up of the businesses with a larger order numbers. Thank you.
How decision you know when do you.
Do you top out Tau took in shake.
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Contact you should say Jacob Daniel that younger presentation, you tight teeth out doing it along the year wound Hunton Tashi a woman Cheng Cheng.
Year downturn.
John Idol young good yeah.
Tomlinson done importantly, you've got to go get that phone call. It totally shocked like John Chiefs of coach the Union Johan dosing that you won't put it in sound woman tone quotes out and you talk to like like water. That's one type of Tau Pet CT.
Butch Indian tender I know, how the challenge Jacob shots in Tennessee that food shacks in CMC shelf HLA Xiang Gao Ponca city going down <unk> Chica, Kevin Chua fulfillment all deal with it.
You've got seven kilowatt block.
Thank you for your question well regarding these two businesses talk about deals until it's hard side.
They were both launched in 2021, I think Daniel already spoke to this in his earlier presentation, we certainly see them as two very important businesses within the context of our China Commerce segment.
The two businesses do play different roles.
As was presented earlier turbo deals as being very important over the past year in terms of allowing us to drive.
User acquisition very significant user acquisition in the lower tier cities.
And the two combined tableau deals in Tulsa.
Allowed us over the past year to make great progress in terms of developing the ability to.
To serve consumers in these lower tier cities.
Not only with <unk>.
Supply, but also with our excellent fulfillment capabilities.
You too long, but you wouldn't detection since I'm quoting some tech win with a twisted tea showing me a quick she all can throw that your content could have shelly bulk water take it down from a challenge with adoption.
With way more they shop, the yield that you couldn't do it at one three church entity that you can tell me so when mcgee kind of dull Jacobs. He is a woman that usually sees almost empty turndown do you Cook Jacob meet with assumption.
<unk>.
T cell Natasha woman something good.
Hi, Ted.
How 'bout type basically one Yankee candle down that.
Jake Saudi the T cell.
Okay.
With respect to both of these two businesses then while working hard to grow them in terms of scale. We're also looking at ways to drive efficiencies some efficiency improvements are being driven.
As you said by growth in scale, but other parts of that efficiency improvement are coming about a particular initiatives that we're taking to enhance our efficiencies. So certainly in Todd's heart side. As order density has increased we're seeing improvement in unit economics, and we're also seeing efficiency enhancement and Oh about deals as well.
Yeah.
Young Chan went down Jake.
Tung Kingston, they calculate young woman couldn't door counts it until a woman Kim sung.
That equals an iconic mcdonalds, we comb looking synthesis and couldn't do quick home so to say to take a long wait I kind of welcome Pat Daniel you surely know thinking to kill them, but yeah, well added 70 shall you're waiting for T cell <unk> that we'll have to wait till the Showtime.
So.
In terms of where these businesses are heading in the face of competition going forward, we would certainly look at them as part of our overall China Commerce.
Business segment.
Of course, we do look at our competitors, but more importantly, we look at ourselves and as Daniel said.
We are fully confident that we can continue to grow these businesses and enhance their efficiency going forward and we fully expect to see their losses narrowing over the next few quarters.
Next question.
Thank you. The next question is from the line of Alex Yao of Jpmorgan. Please go ahead.
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Brian what achieve who for some of you at the junior in the Judy Shoaf issue.
Can you Cook Houston.
And Hudson <unk> recently.
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Sure.
The $10 million.
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Distributions.
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204.
For each one.
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Yeah.
Thank you management My my question has to do with the outlook for growth in the China retail.
Trying to Congress G M B a.
And indeed this is related to the performance of the overall retail market in China as a whole.
How long do you think that this current slump in consumption generally in China will last when do you think the turnaround who will come and consumption will pick up but do you think it'll be like a V shaped curve or an L shaped curve or are we talking about seeing the first half of a V shaped curve.
And what needs to change to bring about that pickup in consumption would it require a stimulus from the government a relaxation of COVID-19 .
If a control policies or something further.
She has got I think a clear vision Hasnt Yoshi well me after China. They couldn't young adult insurance at all times. This whole account well, it's woman looking either let's say they'll conduct seamless socialize young bulk water.
How would you do.
Well, we wouldn't eat all the eating the lunch it.
Take a bulk will it take a take Uh huh.
It's like a Google or Yahoo.
Please go to the shelf with.
Any chance you need a sensor.
Would you look to continue to ease and Michelle for you to see that.
And to answer your bonds with them.
Thank you for your question Alex.
Whether it's going to be a V shape or U shape recovery is a good question and unlike you I I'd be very keen to know the answer to that all I can say is looking at user data on our platform and also looking at data on the current macro environment.
I think yes, both of those things you identified certainly would be helpful and stimulating recovery of consumption. So if the impact of Covid could.
Could be lessened if there could be stimulus policy from the government put in place to stimulate consumption would be positive developments, yes, not why shouldn't you under tolling down high school agenda. So let's see here I'm going to tell you what we're doing on soil. The woman couldn't take the so I'm going to show the Hanmi or go under 20 years old which aren't you saw him I'm, calling from the surgeon a ruling until two.
The tongue Chongqing Koji tons out of the future.
A lot of technical things and a lot of Chelsea.
But what I would like to emphasize in answering this question apart from the macro picture.
And this is true for us true for everybody in the retail and commerce space I think what really matters is your ability to innovate to be innovative in terms of supply.
Bridge that to create new demand.
They take a chunk of them yesterday, but you can always look at all Muslim called the reasons, you think switching G I, usually tell them to take.
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I thought that you can squeeze on holiday.
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The typical fees holistic cool can leave yourself into T. I wish I was listening hopefully somehow the lease also means it seems she chose homes off the toilet seat.
So it's basically all hasn't uncle tons I would say on the shoulder Tony It sounds like there's a few children. She can tell of course.
I wish them cigarettes hesitant in the nickel now see the shelf in nickel consolidated financials.
I think a very good opportunity a very good example of this kind of opportunity was the recently concluded a winter Olympic games held in Beijing.
It was a great opportunity to stimulate new kinds of demand.
For our participation in winter sports activities.
Our whole winter sport economy.
China.
I think that's a great example, but Andy just one example of the way in which new demand that can be created and new supply could be created to meet that kind of demand.
Yeah.
Next question please.
Thank you next question is from the line of John shall of Barclays. Please go ahead.
Glen E G.
<unk>.
<unk>.
Buy back shares.
<unk> excuse me of appealing the cash on the balance sheet.
To create value in them, but anyway go way to create value.
You can hopefully.
Spinoff fee share.
Hidden asset.
Surely if and when the analyst meeting.
Decade trend deal.
Don.
Two you sure May Tee ball at all when the decade Lazard Ireland.
No no as Sean said, Jean Jacques why any change.
So when the knee share.
Spinning off the shelf <unk> subsidiaries.
Creating shareholder value woman, that's it from me I'm sure you've seen that in Shanghai to similar Toby issued im going to cloud the business to be sure going to Pan out.
Acacia.
Thank you management.
Toby mentioned in his earlier presentation that the group is carrying out a share repurchase program you re buying shares you also have some 70 billion in cash on your books, which could be used to create shareholder value.
And there's also the possibility in addition to that of spinning off certain hidden assets to create shareholder value.
We heard back in December at your analyst about the trend you all are.
Was in the process of raising funds. We've also more recently seen from the media that Lazard out maybe in the process of raising funds.
We know that competitors are spinning off some of their subsidiaries to create shareholder value. So I'm wondering if you could tell us about those kinds of opportunities youre plans in those spaces, especially around the cloud and also around China Congress. Thank you.
Well, what I would actually have to go when do you all see the.
Chris looking at Alibaba audits in the year with a product you can see the chinks you don't the Eagle project.
So that's really been where most searches and Tokyo.
Hum.
So the team, who xiaomi or Columbia.
Particularly your corn shell, possibly yeah. So go to your free time to tell you, which adds a coaching cheetah telling me you.
So some people aren't.
Thank you this is Daniel and I'll be pleased to take that question.
If you look at where Alibaba group is today as a business, we're very much being driven by our multi engine strategy.
Group has expanded into multiple different business areas that are mutually complementary.
But each has unique user value.
Unique user community.
Well, it's two with me a chance you can take the.
Uh huh.
The audio tour, you're winning Ciena town doesn't make a year with the charts the teacher coaches as well.
Manille London.
I'll tell ya assortment, so I take the <unk>.
Well I mean does it go to share buyback I'm, telling you can program the only other thing.
We believe that the market has not placed sufficient value.
We bought this business in terms of how it's being driven by our multi engine strategy the full value of each of these businesses together.
Is not being reflected and where we're at today and this is a big part of the reason why we're pursuing a share buyback strategy.
So I shouldn't say the Coco you townsell, our Michelle Panyard Johan.
We'll then take the tick up and that's what we're going through a month or two the bulk of them. The lazard her contact you know the trend deals. This year. She said those equal you can too.
You can think listen you've been able to sample the Philippines, obviously, you've got the lead of course looking for as well.
Michelle with Ikea, we Couldnt tordella teaching telling them go changing P. One year with <unk>, who are teaching the lagging.
I think you can take a.
Of course of all the engine that's why don't you think.
So cliff on the title says she I'll just a whole lot because there's two shallow meeting. So there you see a young an uncle <unk>, who will take a take a couldn't do the pulling them harder towards like I think the tweaking this holiday season.
So each of these different businesses, including Sarnia, including our local services offering in particular.
But also looks at a trendy all which you mentioned.
There are no longer simply internal business units internal divisions of Alibaba group they are operating as independent companies.
So certainly going forward, where we have these businesses.
I can create a closed loop and operate as a standalone entities.
We will maintain an open attitude to do as we have indeed done in the past.
Deals that bring in more diverse investor bases and help these companies grow as independent entities.
So it sounds like you're almost continuously to Tulsa goods. All three trains at Huntsville don't judge the couple of charts on your bonds with a sushi cheez it.
And some are in the long term, we will certainly pursue strategies that are conducive to the creation of long term shareholder value and customer value. Thank you.
Thanks Daniel.
Thank you. The next question. Thank you your next question.
Yes, Sir the next question is from the line of Eddie Leung.
Bank of America. Please go ahead.
When you talk on.
Glen.
Thank you Lindsay.
Yeah. This is Jim <unk>.
You bet.
Sure.
Sure.
Hi, Tom Kennedy is houses in that way.
So.
So we think <unk> I'm, sorry, Jay Permian Challenge.
Yes on eight and Thats, a molten Linda sung Jong condos.
Eagle co announcements right.
Hi, Michelle.
She has got that comes high Guan Yu Min John .
<unk>, we like you and I guess.
Lee.
Well, Todd Jensen got pollute height.
Got it got it.
But what is it you just seen the.
You said the July call.
So based on what you are ruble Eli Youre like Adobe.
We don't want women, it's a more mature volatile how you see the Hudson waterfront downhole young <unk> <unk>.
Hi, Ty Ly.
Thank you Josh.
Yes.
Okay.
Thank you management good evening two questions. If I might first of all has to do with the impact of the growth of the one P model.
Certain parts of your business I'm wondering if.
The greater share of your business being one P may lead to a situation, where you're competing with merchants on the platform.
And then secondly.
Going into the previous conversation, we had about a certain b use growing fast.
Driving a lot of user acquisition and we're seeing a lot of these new users.
<unk> joins the Alibaba digital economy coming from a couple of these new be used but I'm wondering if some of these be used become more independent.
How can we make sure that there'll be good synergy between them and the other businesses and the new users, they're bringing on board will also contribute to the overall Alibaba economy. Thank you.
Oh she had a.
Wouldn't you say that the Eagle with Chinese acquainting.
Looking at the most the single one and he's on Alibaba happy meal chemical a woman take out when they're going to wait until each of them.
One of them was at an angle on shelf.
So you're a woman has it also on the shelf as the tea and the Joseph Op life changing to the cause.
That's where the most of the shut ins.
Thank you this is Daniel Oh, I'd be happy to take that.
As to your first question regarding the two different business models. The one P model versus the platform model Alibaba really takes no cider and has no preference to us it all boils down to which model can best serve the consumer we put the consumers' interest first.
A good chunk of it on someone else's home Sunjata, Sergio Cook with essential nature all of them really tight.
Typing animals. So this is a woman at those Shuang and gold week, some job articulate angle for how the shelf itself, putting so much time thinking about how the shelf as opposed to nickel take long underpinned by.
Think of it and then go journey because you don't put LNG Tobey is that you won't call kudos switching somebody talked about telling you see I'd say typically use a woman so let's see let's see where they put some triangles I'll take or are there. Some guys like it always is G suite autonomously I was just wasn't angle citizens chingola my cell phone common see whole bajo.
Colorado sponsored article Sundar, just solely a bowl court pinnacle. So you couldn't even quantity the thing childhood to hold I think what you'll do with helping the.
Does the woman and she wants shelby's of her songs out did you see oriented pincher sanjaya. So shooting the Columbia. So until you saw nice will take a while meeting she won't thought xena molson ankle contingent pinch it typically use I'll say.
You always have in the child, well Miss you won't see it sounds like you're going to take that.
Each quarter.
Okay.
Uh huh.
Secondly, when it comes to how we engage with merchants.
And the one P model or the platform model.
It's fundamentally are concern to find ways to help merchants better serve our consumers.
Not just in terms of helping merchants to sell products to consumers, but helping them to develop their brands.
And to leverage consumer data to engage consumers and to grow their business.
So the one P model for US is absolutely not about erecting a wall between merchants and consumers, it's really about helping to get goods to the consumer more efficiently.
More flexible pricing.
But at the same time, allowing for consumers.
To be engaged by merchants and we always hope for consumers to remain in touch with the merchants.
For the merchants to be able to leverage data to better manage and grow their businesses. So these several aspects are all integrated.
Okay. So it sounds like that you sound like Alibaba I shouldn't say through Sunshine cheap illnesses equal call you thought hunting quite your bulk water.
You and I can tell you that you're doing with LNG bulk of UN <unk> take a take a hyphen.
Hyphen total media wishing Pat <unk>.
She'd I'll say, let's see two more cosmopolitan Elon is it possible to have a life foolhardy shelf.
Because you obviously see an equal.
So that you can find.
So what Alibaba is offering to merchants is a highly integrated portfolio of different possibilities.
Including the one P model, including the platform model, so different business models, but also multiple scenarios, including a hyper local commerce a nationwide commerce.
So with this complete basket of different offerings.
Possible to better engage consumers had a possible for merchants to build their brands and grow a healthy business.
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Once those legal fees.
He is a well made him so sequential cookies.
Taking a <unk> element genting.
You could think of.
At some point you go you wont mislead you.
Uh huh.
So since I took a horizontal especially on the phone. So she had to fully open the phones to hustle.
So I'd say, there's almost no I'm kidding.
Onto your your second question, which had to do with Oh, how do you ensure good consumer engagement across all different businesses as they develop.
We fundamentally believe that we must adopt the consumer the user point of view and looking at how we are organized and how we run our businesses because at the end of the day all of our businesses.
Our are built on serving the consumer well and we need to be able to do that across all of them.
So I think it's only a woman so where do you draw that switching so don't put on that you know going to linger on into the take up will be able to you know pushing too hard.
Cynthia Alibaba ones like one that you can see it.
Let's see the AC.
So you can talk to you all.
Well the thing.
How you want to.
We told them okay.
Johnson <unk> Johnson and goes into machines I mean, you've got many shots on goal as the shelf the shelf of yield that you should take a consumer to get business done metrics such as a woman take on the weekends. So the woman that may tend to control.
So it's something we're working on very very hard is segmenting the different consumers that we have in China with <unk>.
Closing in on 1 billion AA sees in China today, it's very important that we segment them and with our different operating offerings provide differentiated value to these different segments of consumers. So this is something that's a fundamental importance to us we are working hard on it.
Every day segmenting, the 1 billion consumers and.
And presenting to them a comprehensive consumer business matrix that satisfies their differentiated demand.
Okay. Thank you next question.
Thank you yes. The next question is from the line of James Lee of Mizuho. Please go ahead.
Great. Thanks for taking my questions my questions, mainly on cloud now given the slowdown we're seeing in Internet industry I'm. Just curious what is your plan to diversify our revenue base.
It seems like that your business plan, and maybe help us understand which verticals are logical for your business expansion and why and lastly, along with that line of investment and Clough.
Kind of investment do you need to make to expand not only on the your vertical exposure and also from a product and sales perspective. Thank you.
How could I got here with you to Auschwitz Green tea format.
Swyto, who got them all yet to go to me over the phone.
Nevada whaler.
But shouldn't even have to go shorter with future job at Toyota.
You shouldn't call due to sort of torture Tien tsin as you have seen the tweets about quiet.
What are what is the trigger by quite a Yo Yo Shiat source, you shut them up I'll quit sorry, social Formula Park with a chunk in the roof on it.
Well actually after years of efforts, we have already built a very diversified customer portfolio in all our core business.
As we shared in our earnings.
This quarter, a 52% of our cloud revenue.
From our Internet customers I think are actually this.
Percentage actually is if you look at the past few years track record.
It is.
Going up so we will overtime, we will continue to diversify the.
This portfolio.
Hum.
So Daniel equity how do you go into you know.
Not sure if you saw in Congo, Duena, then there would be a woman.
Similar to a cohort shouldn't go to Toyota and Honda project number.
Coincide the yes gotcha.
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But as I shared in my remarks, a trade today, we are still in the early stage of industrial digitalization in China.
For all the industry. They are they are going to be a a data driven company and they need to.
A new generation of packaging to support this digital transformation. So I think in this regard we see a huge opportunity.
Coming yes.
Definitely it will be a trillion RMB marquee.
If I had known rooms for sure I'm not sure. If he is on churn, yes should require a good scene Chung sure I'm, sorry, Hi crush.
The more we like cool cool, yes, soy what's your thoughts on accretion should you treat them.
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Well in terms of the industries as I said before.
We.
Keep close eye on the new industries, I mean, which.
We'll generate massive amount of data and which will consume.
The computing volume high computing power, So I think and also need a more intelligent data intelligence technology.
I think for those industries, we definitely think that's it.
It will drive the growth of the cloud business and also with our mutual collaboration is also very good for them to build the ecosystem, which also relevant to your second question.
Okay.
Yeah.
No more inquiries Shaw Guangzhou nature.
Everywhere Shenzhen for sure.
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You said it seems in the home yet eating away from where you can get with it.
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So we already see a hong yet, but you should see you should see it on into the geography.
However, it must be a strategy for cloud computing is to first tool to.
To enhance our proprietary technologies and the second will be to two to enhance the power of the ecosystem to have more stretch.
Strategic partners in the cloud ecosystem.
So we've redone tiago and T cells.
Realize towards food Puchu.
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Yeah.
Let's take the last question.
Yes. Thank you. Our next question is from the line of Alicia Yap Citigroup. Please go ahead.
It seems like one.
One.
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Sure.
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Josh.
It's.
More about that.
It sounds you got to get used to fall.
We've got a woman.
With that chunk that journey.
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They just hang out see quite hot.
Yeah, It will come down.
Why is that your question.
Sure I'll take that.
As you said.
Sure John .
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Why now.
So just on that job.
I see so much he come back quite quickly.
Thank you management.
Quick follow up questions on cloud.
We understand that the impact of that one Internet company.
Stopping the use of Alibaba cloud services around a year ago from the March quarter has been ongoing but do we expect to see.
International revenue.
For cloud Reaccelerate, starting from would you say the March quarter, and how do you view.
Competition and price trends are in the cloud space.
And in a more macro sense do you think that there are perhaps many companies out there that need to get on the cloud, but they are perhaps delaying that decision and the current macroeconomic environment.
For the time being.
And then quickly turning just to find out we saw that growth of China.
Triangle's business outside of the Alibaba ecosystem.
Only 15% I'm wondering if you could talk to us about how you see.
Finally revenue growing going forward with respect to serving external customers.
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I think the elements I would highlight.
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<unk> thousand adults shouldn't that just to save a.
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Hum solve the outfit also all that chooses a woman said, she how to cook with hundreds of feet on Sunday So.
On the women's hockey father, who you'll need.
Thank you so starting with the first part of your question about the impact of that a large cloud customer.
Not making use of our Alibaba cloud services overseas over the past several quarters. Indeed, we have seen the impact of that.
Reducing progressively quarter by quarter.
And we're now entering a new cycle.
But I think the key point to be made is that we now have a much more diversified customer base, especially if you look at the number of large customers. There are no very few a small number of large customers that account for more than 2% of revenues. So we're highly diversified and that positions us well for the future.
Uh huh.
The article in the home games being challenged.
All countries need a hung you see the kingdom, which I'd say, it's in good times. This was a lot of thoughtful dawns won't quit sushi and he thought P. J G O triangle, how here they'll take let's just watch lunching totally alien to changes in the army two channel it.
I think you all know lunch and other <unk>.
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And she sort of hung in all parts of the healthcare it and see how the whole year.
He had to go through.
Hopefully a tick or two we take a.
She said Neil.
She may also so I'm wondering you sound like Thomas machine that is really one answer.
So listen I'm going to say so.
So what are the challenges aren't well how's the shell cheap ticket.
So in general I think easily into the system does it go away like putting Segal time point, you could see it says on the T that.
Possibly you could do either <unk>.
So now that you've achieved so I took the job those aren't women shoes.
So you've got tons of Wheeler.
Clepsydra woman that's issued a tender well there is always just tell me what has gone on.
Regarding the the next part of your question.
So the impact of the overall macro environment on the current growth pace.
The cloud business I think you have to look at different sectors differently.
This broad process of industrial digitalization, that's unfolding.
But this digitalization is needed both by companies in traditional sectors, but also by other companies and new and emerging sectors, we've talked about things like.
New energy are indeed, new energy vehicles health care and.
And other sectors and these are all sectors that.
On the one hand require massive amounts of computing power and secondly need to leverage a very powerful data intelligence capabilities.
Capabilities. So I think we do need to take a sector by sector approach to define.
The strategy.
And look in particular at those sectors that have those kinds of needs for a massive computing power and for data intelligence and it's really important to understand that that really is what the cloud is about the cloud is not.
Simply about replacing traditional it infrastructure.
Infrastructure.
I'm trying to just getting started in this process.
But it does sound Italian or it wouldn't be at your tenure at women Jean Kinsey The Union of fossil and you called it seems to me either hung up on something that <unk> seen some eagle.
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<unk> couldn't couldn't pull the creatures, although it won't be it will be yes. The project until July a condo and b to B U C.
So you got to get us to call that you ought to go FID on chunky tickled Pink coaches, the Yale Global Mountain watching.
Watching quoting you are holding what are the let's say the two the chancellor so what I'm, telling you or does it go farther and they'll do the change that you anticipate on thought.
So Alibaba touch our team does it get you and me as a newly Shuang I'll take the Brooklyn for Alibaba Unequaled that either you has a full article.
Woman so in good times out in times, when the more even able to cool off well know Siobhan and good day science hunting that sounds all car types and go for it.
Homes, Assam, yet negotiates I mean, you've got U T auto <unk> I'd say on the call with minimal it's only on the challenging it's only on the tons all of its annual it sounds obviously, the father and our culture.
Yes.
Thirdly on tiny home.
Following many years of investment and development China itself. Today also enjoys a multi engine growth strategy. There are many pieces to its business. It has tonio posts. It has first and last mile delivery capabilities. It has to be.
Supply chain services.
And now with the growth of turbo deals.
Supporting the.
Manufacturer to consumer the M <unk> business model.
Overseas.
<unk> built a very large cross border parcel service now.
Now supply chain network, as well and going forward with further development in B to B I think we can expect to see.
The export side also it should be pretty good.
Robust at all of that is underpinned by the international cargo network that China has built up so I think there's huge potential for tiny out given the diversified business matrix and is a member of the Alibaba family.
We want to find out to be well positioned to serve the different parts of Alibaba as businesses internally with an integrated design, providing the logistics underpinning.
As well as to be able to.
Service other customers and we can find ways to create further growth for it.
With the incremental growth in our different businesses.
Okay. Thank you everyone.
That was the end of our Q&A session.
Questions further questions. Please reach out to the IR team and myself.
Thank you for your participation.
Thank you and this concludes today's conference call and thank you for participating you may.
Now all disconnect.
Yeah.
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