Q1 2024 Alibaba Group Holding Ltd Earnings Call
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Good day, ladies and gentlemen, thank you for standing by welcome to Alibaba Group's June quarter, 2023 results conference call.
Well at this time, all participants are in a listen only mode.
After managements prepared remarks, there will be a Q&A session.
I would now like to turn the call over to Rob Lin head of Investor Relations of Alibaba Group.
Please go ahead.
Thank you and good day, everyone welcome to Alibaba group's June quarter, 2023 results conference call.
With us today are Daniel Zhang Chairman and CEO , Joe Tsai Executive Vice Chairman, Toby Shea Chief Financial Officer.
Also I'm glad they're truly dies.
How about on Tmall group that joined the call.
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.
Let me quickly cover the Safe Harbor today's discussion may contain forward looking statements, including without limitation statements about the outlook of our businesses and our organization.
Looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations.
Discussion of these risks and uncertainties. Please refer to our latest annual report on it.
Frankly F and other documents filed with the U S. S. You see were announced on the website of <unk>.
Ashish.
With the statement that we make on this call are based on assumptions as of today and we do not undertake any obligation to update these statements expect except 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 diluted earnings per share or a D. S and free cash flow are expressed on a non-GAAP basis, our GAAP results and reconciliations of GAAP to non-GAAP measures can be.
Be found in our earnings press release, unless otherwise stated growth rate of all stated metrics mentioned during this call refers to year over year growth versus the same quarter last year.
I will now turn to Daniel.
Thanks, Rob.
Hello, everyone. Thank you for joining our earnings call today.
We started the fiscal year was a robust quarter.
The latest macro data indicates some uncertainties in the peso post COVID-19 recovery.
But as he called economic and consumer activities continuing to resume our businesses demonstrated encouraging trend.
Comics resilience.
Peter you were consumption recovery and a significant potential from an integrated development of the digital economy and the real economy.
The solid quarter also showed promising early results of our reorganization.
We're just beginning to annuities.
Across our businesses.
Our revenue reached.
234 billion RMB.
At 14% year over year.
Growth was achieved across our different business segments.
Although our trusted it you'd be Pos increased 32% year over year to 45 clients forbidden RMB.
So you're progressing all while continuing to focus on operating efficiency and the quality of operation.
Next our grocery results of each of our major businesses.
First let me invite truly to share the popcorn teamwork of updates.
God Bless you betcha.
Greetings everybody.
This is trudy and it's my pleasure to speak with you again.
He just concluded June quarter under our putting users first strategy.
Apps user base has been put on a rapid track of growth.
From April of this fiscal year, the average number of D. A use each month has grown by 6% or higher year over year.
Last month July .
Growth was over 7%.
Based on third party data.
Our a D. A leadership in the E Commerce space continues to widen more and more users are choosing to use the taobao app.
At the same time, our building a prosperous ecosystem and realizing technology driven innovation strategies are also starting to yield results. Since we launched the value for money Battle. This fiscal year, we've seen a very clear trend of merchant growth on taobao and Tmall.
In the June quarter, we on boarded a large number of new merchants.
A significant portion of that fruit quickly started contributing to that value for money battle, winning over and converting users.
So.
Our value for money battled will continue.
And will be an area of major investment.
We need to give users the experience of good merchandise is not expensive on taobao and Tmall and we need to guide merchants to enhance value for money in order to achieve business scale growth and long term stable returns. In fact, we saw initial evidence of this in the June quarter.
<unk> confidence in doing business on our platform increased significantly and merchant spending also crews with an increase of over 20% in the daily average number of merchants paying for advertising. This all goes to show that more and more merchants are taking taobao and tmall as their first choice platform for stable operation of launch.
Her business.
That's we're realizing technology driven innovation, we've already upgraded merchant tools, where they are enabling merchants to open stores launched new products operate their businesses and conduct marketing campaigns with much greater efficiency and helping to optimize store display and product descriptions, thereby significantly enhancing the shopping experience for users as a result of these.
Strategy is the Taobao and Tmall group recorded close to 80 billion RMB in <unk> this quarter or year over year increase of 10%.
Within that we saw very strong willingness to invest them on merchants coming to taobao and tmall from other platforms.
As for the platform itself, we continue to be committed to reducing costs and raising efficiency will spend where it makes sense to and will save a where we can.
As a result, despite our huge investments in users and the value for money Battle and an AI. The tableau on T Mall group recorded a $9 one a year on year increase in adjusted EBITA in the June quarter.
Slightly lower than <unk> growth.
Also during that just concluded 618, taobao and Tmall shopping festival, we achieved a two wheel drive effect of user scale and purchasing power.
The data showed that within the two factors that drove G. M P growth during 618.
Both in number of paid orders at an average order size was remarkably similar so.
So that means that the contribution of each of those two factors was balanced on the one has the number of 88 VIP members and G. M. P. Both grew by double digits year over year.
And on the other hand as part of our value for money Battle. During this year's 618, we launched for the first time a talk about good price festival, marking the first time in the history of 618 that there was a dedicated promotion channels for Taobao merchants. This how 'bout good price festival proved effective in promoting value for money offer.
And in attracting more users from lower tier cities and young users to visit and also to make purchases.
Yeah.
So if I were to sum up the June quarter in one sentence.
I would say our three strategies are putting users first building a prosperous ecosystem and realizing technology driven innovation are starting to yield results throughout the remainder of the fiscal year. We will continue to implement these three key strategies specifically.
First.
We will do our utmost to meet the needs of diverse groups of Chinese consumers and to satisfy their demands around shopping.
Around consumption.
And also around daily life.
To do that we will continue to invest heavily in developing content around shopping consumption and daily life.
Second.
We will also continue to invest heavily in the value for money battle in two different ways.
On the one hand.
We will continue in line with our mission.
So to support small and medium merchants with targeted programs.
Yeah.
Such as those for merchants and industrial clusters, and four new SME merchants.
And in parallel.
We didn't build them more advanced open and inclusive merchant ecosystem and.
And attract more merchants to engage in the value for money battle.
So as to create a virtuous cycle on taobao and Tmall of merchant ecosystem revenue growth stronger profitability and that is precisely what our mission has always been.
Third.
We will continue to invest in AI.
It is our conviction that technology creates commercial value.
On Tmall have the largest collection of merchants and of merchandise on the Internet and are the most fertile soil anywhere on the internet to explore AI applications. Hence in this technological revolution. The taobao App has the greatest potential to become a one stop smart portal for life and consumption and.
Neighbors by AI satisfying the broadest variety of diverse needs across our huge base of 1 billion users in Alibaba, we often say seeing is believing.
I'm confident.
As CEO .
That over the three year management cycle with the execution of these three key strategies.
Taobao and Tmall group will create a virtuous investment cycle from investment in users and user growth.
Leading to merchant growth leading to transaction growth.
Further leading to revenue and profit growth.
And feeding back into further investment and users and user growth.
Along the way, even though there will likely be occasional months with volatility or setbacks in our operations under the leadership of the Taobao and Tmall group's board of directors and management team. We remain firmly committed to our three key strategies to continue to invest in users providing strong support for merchants and upgrading our platform with technology for the long term and where.
Fully confident in the results we will achieve for the long term. Thank you very much.
No I will share the updates on our major businesses.
How do you go about international Digital Commerce Group I D C endeavor.
Let me run per same railroad revenue growth this quarter.
And its retail business.
<unk>.
16% revenue growth year over year.
It was driven by solid order growth of our international retail parking places that's around the.
25% year over year growth.
Our housing revenue growth.
Because all the enhancement of our monetization and higher direct sales.
Revenue contribution.
As odd express expects new choice model.
Now what about also delivered a record order growth based on if a country strategy.
Accelerating progress in high priority markets such as.
Things in pilot.
In Turkey, Colombia continued to maintain its growth momentum and market leadership.
We are starting to see economics of scale, our international retail businesses.
Enhancing monetization and operating efficiency.
Reduced.
Adjusted EBITDA loss.
<unk> adjusted EBITDAR loss increased by 17% year over year during the quarter.
Okay ahead, we will continue to expand the choice model leveraging the capabilities of our integrated cross border supply chain and enhance the consumer experience and higher certainty in logistics and a service level.
This plan is to expand the choice model from Arctic Express to certain of our other retail platforms.
It's upgrading our products and services.
Especially in providing a better localized experience.
During the quarter Rudner from local service Corp.
30% year over year.
Driven by strong combined order growth across both polymer and a map.
<unk> daily active users and a true destination services.
Bended geared toward a strong recovery.
Commuting and travel demand after the pandemic measures were lifted.
What is the long term strategic focus on technology leadership.
Released new part of features such as traffic light come down in a tunnel navigation during the quarter.
Which were well received by its users.
Its market share.
The patient services continued to expand.
During the quarter all of them are focused on investing in its own service capability enhancement and a more inclusive partnership strategy.
Which helped sustain healthy order growth, while maintaining a positive.
Yeah.
Alex.
Hi, guys revenue during the quarter closer to 4% year over year.
I'm really driven by the volume increase of international fulfillment solution services.
Letting survey at express and our China domestic consumer logistics services.
Triangle suggested it become after quarter well.
877 million R&D due to the continued focus on quality.
<unk> and a lower transportation cost as international Air cargo price came down.
Okay ahead tango will continue to invest in people to purchase and network.
Cross border and domestic parcel.
Leveraging alibaba smoking both digital commerce use cases.
Spanish network effects.
Can you also share part of it savings.
This operating efficiency improvement and a transport pension cost reduction or its customers so price strategy adjustments.
And of course, you have higher economics of scale.
A larger revenue base.
During the quarter Alibaba cloud revenue growth of 4% year over year.
Our growth rate was negatively impacted by the normalization of CDN came in.
The usage of video streaming.
We're working and remote learning came down and off line activities resume after pandemic measures were lifted.
The growth rate was also partially impacted by revenue declines from our top customer.
The past quarter, we have.
Receipt Strunk, and then for Murdo training and related AI services on cloud infrastructure.
Which were only partially for food due to the near term supply chain constraints globally.
We believe the growth opportunity driven by AI services has just begun.
We believe that technology evolution, both by AI is not a short term opportunity.
Give me a new era.
That's one of the world's leading cloud service provider.
We'll continue to invest in affirming our full spec product and technology leadership Cross Us Pos.
Moss layer.
This is key for us in capturing AI opportunity and effects.
It's the 18th advantage from Ali cloud versus other players in China, which mainly focus on one of the layers.
We will leverage and expand this advantage when serving the needs of our customers.
Including training and service needs for large lenders startups as well as industrial demands.
Sure.
Customized models and our vertical motors.
But they need the high performance and low cost computing power required for Murdo training and services well open up brand new opportunities from cloud computing services.
Over the long term Alibaba cloud palisade from application of AI in all industries.
Mhm last layer.
Modest scope.
Leading open source community.
In China for mothers and their related tourists in services, which.
Which is very popular among developers.
Our community associates over right, it's all about AI models.
Crude macros recently released a landmark two and our open source model.
Seven.
It Didnt parameter version is currently chairman.
Once they leave the application and integration of upper motor ecosystem will significantly help developers optimize their model and youth services Alibaba cloud.
Since April .
Our.
Barack language model coming Chandran audio to text.
Transcription platform totally true and test of English model coming in one shot which together have accumulated millions of users.
In this quarter Alibaba cloud, but just to be reached.
<unk> hundred and 87 million RMB, representing year over year growth of 106%.
This is mainly due to the reduced.
Co location and bandwidth costs incurred as a result of normalized usage after the pandemic.
As well as enhancing product mix.
And efficiency improvement.
For example server utilization in our cloud business.
We will continue to focus on quality of operation.
And as we continue to scale up well.
Work to achieve economics of scale that will deliver long term operating benefits and it contributed to our profitability.
Our digital media entertainment business scope, it ever certainly with 6% revenue growth year over year.
And the first ever quarter of profitability.
This was a result of the following factors.
Number one.
We will of course workforce growth in subscription revenue.
Or to higher revenue contribution from Tom right under call Camp Hill, which both benefited from the recovery of offline shows and the cinemas after the pandemic.
Emma Street, Alibaba Pictures launch of several Ghostbusters and Red River.
China box office came in during the quarter.
Going forward well.
To improve our content production capabilities and he has to be I mean.
This operating result through a high quality content creation and distribution.
[noise] seem to like it.
Published our fiscal year 'twenty to 'twenty three ESG report.
Over the past year, we have made progress across several strategic.
Tenacious.
Social responsibilities.
Especially in restoring our agreement.
Climate.
We achieved solid emission reduction under scope, one two and St.
Curve emission reduction across our business ecosystem.
Was roughly equivalent to the total annual greenhouse gas emissions of one getting average.
So in China.
Leveraging our unique position connecting consumers and merchants.
Our product innovation.
Carbon.
A legend classroom in.
It enables our customers and merchants to trying to carbon savings efforts across our ecosystem.
From the announcement of our one plus six plus an organization in March the.
The six business groups have started operating in a new rate under the leadership of their respective boards.
The past quarter solid performance was also a reflection of early results of this change.
And have further enhanced our confidence towards the future.
As part of the new governance framework.
Also further strengthen the company's capital management.
Moving ahead with our various programs to improve shareholder return under the leadership of the newly established Cutler Capital Management Committee.
A couple of marquee projects, we announced last quarter.
All underway.
We have also been continuing sharing.
Continuing share repurchase activities in the market.
We will update you a rural keep you updated on our progress in the future.
Lastly, this will be the 36 earnings calls I've participated.
Since our IPO in 2014.
And a final one as chairman and CEO of Alibaba group.
It's truly has been a parallel of a lifetime to lead a company I C E O.
On our <unk> strategies of consumption cloud computing and globalization things to solve them.
15.
And a part of Alibaba high growth period.
As chairman it was an extraordinary experience to take on the challenges brought on by the pandemic.
Because of the change in the macro environment over the past four years.
This has been an incredible.
Invaluable life experience.
I see.
Theories.
Our shareholders.
Melissa.
For your trust and support over the years.
This quarter is a cumulative.
Combination of my leadership of Alibaba and the start of my journey.
I Hope you continue to support Joel and Eddie and then wound management team.
As cloud intelligence group move towards becoming a public company I look forward to reading.
Engaging with everyone in my new role in the journey ahead.
Thank you everyone.
I will pass to Toby to go through the financial updates.
Thank you Daniel.
Due to the strong business momentum and our focus on operating efficiency across businesses, we achieved a robust financial performance in the past quarter.
Total consolidated revenue was RMB $234 2 billion, an increase of 14%.
Consolidated adjusted EBIDTA increased by RMB, 11 billion or 32% to RMB 45, 4 billion in the quarter due to improvements across all business segments.
GAAP diluted earnings per share was RMB 217, an increase of 48%.
Additionally.
During the quarter, we repurchase to U S. Dollar 3.1 billion worth of our shares which accounted for 1.4% of total shares outstanding.
This is supported by our continuous generation of strong free cash flow.
During the quarter free cash flow was RMB 39 1 billion.
U S dollar $5 4 billion, an increase of 76% year over year.
Our strong free cash flow and balance sheet continue to put us in excellent position to strengthen our competitiveness and capture new opportunities.
Now, let's look at our cost trends as a percentage of revenue excluding SBC.
Cost of revenue ratio, excluding SBC decreased one percentage point to 61% during this quarter.
Product development expense ratio decreased to one percentage point to 4% during this quarter.
Sales and marketing expense ratio remains stable at 12% in this quarter.
General and administrative expenses ratio remained stable at 4% in this quarter.
Our net income was RMB 33 billion, an increase of RMB 12, 7 billion compared to the same quarter last year.
The increase was primarily attributable to the increase in income from operations and the increase in share of results of equity method Investees.
Nearly offset by the net losses arising from the decrease in market prices of our equity investments in publicly traded companies compared to net gains from these investments in the same quarter last year.
As of June 30, 2023 we continue to maintain a strong net cash position of RMB $419 2 billion or U S dollar $57 8 billion.
Free cash flow this quarter was RMB 39, 1 billion an increase of 76%.
The increase reflected an improvement on profitability and a decrease in capital expenditure.
Now, let's look at the segment results.
Starting this quarter, we have implemented a new organizational and governance structure under which we now have six major business groups and various other businesses.
Accordingly, our secondary reporting has been updated to reflect our organize reorganization.
And our updated segment reporting SEC, one revenue and adjusted EBIDTA are presented before.
Elevation adjustments.
We have also provided revenue and adjusted EBITA trend of each business groups.
For the last five consecutive quarters in the appendix of the earnings presentation for easy reference.
Now, let's look at the Taobao and Tmall group.
They use our first strategy of Taobao Tmall group is yielding positive user growth momentum and improving user retention and how 'bout E. P. P, which we have supported strong revenue growth and success for June 18th shopping festival during the quarter.
Revenue for Taobao, and Tmall group was RMB 115 billion, an increase of 12%.
Customer management revenue increased by 10% to RMB $79 7 billion, primarily due to an increase in number of paying merchants, increasing merchants' willingness to investing in advertising our platform and the increase in online physical DNV excluding unpaid.
Others.
Hi, Russell and others revenue increased 21% to RMB 32 billion, primarily due to strong sales driven by the consumer electronics category.
Taobao and Tmall group adjusted EBIDTA increased by 9% to RMB $49 3 billion.
Greece was primarily due to increase in profit from custom manual service and the narrowing losses in certain businesses, which was partially offset by taobao tmall groups investments in growing top on a P. P. Users brass has resulted in increasing.
The U of six 5%.
[laughter] Alibaba International Digital Commerce group revenue was RMB 22.1 billion, an increase of 41%.
Revenue from International Commerce retail business.
Creased by 60% to RMB 17, 1 billion. The increase was primarily due to the solid performance of our major retail platforms and improvements in monetization.
Revenue from our international Commerce wholesale business remained stable at RMB 5 billion compared to the same quarter of last year.
Hey, I D C. Adjusted EBIDTA loss narrowed by RMB 960 million to a loss of RMB 420 million in June quarter.
Losses significantly narrowed year over year, primarily because of improved margins of 10 deal in Nevada.
Partly offset by the increase in investments in new businesses, such as a new Avia and <unk> Express choice.
[noise] trendy or continued to deliver strong order growth in both of its e-commerce and the local consumer service businesses.
Through robust revenue growth and a continued improvement in operating efficiency for the first time Chengdu achieved a positive operating results during the quarter.
The reduced loss from Nevada is primarily due to improvement in monetization.
Yes.
Loco services group revenue in June quarter grew 30% to RMB 14 5 billion.
Primarily due to robust the GMB growth of Panama, and the rapid order growth of AME App.
Local service group adjusted EBITA was a loss of RMB 2 billion this quarter compared to a loss of RMB. Two 8 billion in the same quarter last year, reflecting the continued narrowing of losses driven by earned I must articles and the positivity unit.
Economics per order as well as rapid order growth of AME app driven by market demand.
Total revenue from China grew 34% to RMB $23 2 billion, primarily contributed by the increase in revenue from international fulfillment solution services and domestic consumer logistics services.
Chinese adjusted EBITA was a profit of RMB 877 million compared to a loss of RMB 185 million in the same quarter last year.
Profitability kind of positive year over year, primarily because of improved operating results from international fulfillment solution services and domestic consumer logistics services.
Revenue from power Intelligence Group was RMB 25, 1 billion in June quarter, an increase of 4%.
Our revenue growth was mainly driven by Alibaba consolidated the businesses.
And the customers within financial services.
Vacation electric power and automobile industries, partly offset by our practice efforts to manage revenue from project based cloud services.
Klaus adjusted EBITA was increased by 106% to RMB $387 million, primarily due to reduced co location and bandwidth cost up didn't talk as a result of normalization of usage as compared to the same quarter last year.
Revenue from our T. M. Eastgroup was RMB five 4 billion, an increase of 36% primarily driven by growth of online entertainment business as well as a strong recovery of offline entertainment business.
I, just say pita recorded a profit of RMB 63 million compared to a loss of RMB $907 million.
The improved adjusted EBITDA was mainly due to the increase in revenue from Alibaba Pictures and Tomei.
Revenue from all other segments. All other segment increased slightly by 1% to RMB $45 5 billion, primarily due to the revenue growth contributed by Alibaba House, flaky fresh Apple and intelligent information platform.
Partly offset by a decrease in revenue from Sunna due to decreasing ticket size resulted from the decrease in customer stockpiling behavior compared to the same quarter last year.
Adjusted EBIDTA from all other segment was a loss of RMB, one 2 billion compared to a loss of RMB two 3 billion in the same quarter last year.
Primarily due to improved operating results from fresh a poll Lucy games and flaky.
Thank you and that's the end of our prepared remarks, we can open up for Q&A.
Based call you're welcome to ask questions in Chinese to English.
Party translator will provide consecutive interpretation for the Q&A session.
Can you spell out the translation is for convenience purposes, only in the case of any discrepancy.
These misstatements in the or or regional language will prevail. If you are unable to hear to Chinese translation bilingual a transcript of this call will be available on our website within one week after the meeting.
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Operator, please connect the speaker in this conference lined out please start the Q&A session. We're ready thank you.
Thank you if you wish to ask a question. Please press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two.
To give more people the opportunity to ask questions. Please keep yourself to no more than one question at a time.
Your first question comes from Ronald Keung with Goldman Sachs. Please go ahead.
Thank you. Thank you, Joe Daniel L B to D and Rob.
Can you share how can management share just how have broader consumption trends been tracking after a pretty strong June 18th shopping festival and falling on that within the top our Tmall group. Besides the D. A U D. A C metrics that I'll keep he is how are we thinking about the balance.
[noise] tween, how 'bout T Mall for example, or other metric which is market share.
First it is out how about T. Mo group absolute profit level look we think of it on a three year horizon. Thank you.
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Ah Thanks for those questions. Let me start with your first question about our consumption trends are indeed does we've seen there is a gradual recovery underway in the Chinese economy, and the Chinese government. Indeed has made many efforts to stimulate economic growth and drive consumption.
When it comes to the other Kpis, you asked about market share and profitability.
That comes down to the three key strategies, we're pursuing are around.
Growing user scale building, a prosperous ecosystem and realizing our technology driven innovation, we're looking at creating a virtuous investment cycle by investing in users and user growth leading to merchant growth driving higher revenues and then being able to further reinforce.
Invest in growing users and user scale. So that's the positive cycle will be creating.
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So how do you rank them that it's it hasn't closed yet.
Yeah.
Looking into the future. There's certainly will be uncertainties ahead of us on this on this road, but I think faced with all of these uncertainties and potential volatility. The greatest certainty. We have is the need to continue to grow our user scale and our merchant scale and we are very optimistic.
But as long as we can maintain our leadership in terms of user and merchant scale that the mid to long term, our view of profitability and market share it will be excellent. Thank you.
Next question.
Okay.
Thank you. Your next question comes from Alicia Yap with Citigroup. Please go ahead.
Hi, Good evening management, Thanks for taking my questions and thank you Daniel on the basketball your new journey.
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Good evening and thank you management for taking my question and thank you to download them congratulations to you and all the best on your new journey.
So looking at the excellent gross members who've reported in do you use and also an 88 VIP members double digit growth there.
I'm wondering if management could give us a little more detailed information on what lies behind those numbers. For example in terms of new users where are they coming from how are they being acquired or are they mostly coming from.
Lower tier cities and how does those new users compared with existing users in terms of their willingness to spend and their spend.
Spending power.
And when we look at the 88 VIP members and the growth there, what's primarily driving that and are we looking more at a higher frequency of purchase that they're making or is it more purchases, they're making a big ticket items and in some categories.
And then looking at these trends do you think they will continue on into July .
And then finally I'm just wondering given the weakness that remains in the economy. How accurate do you think are forecasts are of trends going forward and our ability to realize our objectives.
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I'll start with your first question on the increase and do you use and where new users are coming from a number I would first we see that our value for money a battle, we've been investing in a developing value for money offerings has very much been paying off.
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At the last earnings call, we discussed our three key strategies.
Yeah that that's harder to come by that kind of thought that shouldn't be god, that's how I'm going on too and that's where I congratulate Catherine.
So there are several reasons underlying the good performance that you've seen in the June quarter, and I will set out a few of them for you below.
You got one central Louisiana, South Asia Super Amanda for sure that Gosh, that's out let me show that shouldn't have any issues that would go to teach them. The first is our improvement in the macroeconomic environment and recommencement of consumption, coupled with Uh huh.
Penetration of online purchasing within retail.
Yeah sure sure check HIV Goddamn, Shanghai can you go into a home.
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She's got who have long range outlook would've been gosh, if he got question.
Secondly, we've we're starting to see payoffs from our investments in this value for money battle, bringing.
To the market and increasing assortment of good.
Items at good prices are developing AR that supply and attracting users with this proposition and we are indeed seeing among paying users.
Increasing proportion of new users coming from lower tier cities or being young people or being older consumers.
No it's hung up on issuance, you're like well, maybe I'll come back to you godfather, Sheffield She should rethink how you went out Bob I'm happy where rent a social sharing.
All right. Thanks, you P M people, who became mcclatchy.
Yeah.
Looking at the numbers from this year's 618 shopping festival, we see several trends there that will also help to answer your question about the 88 VIP members and the proportion of sales to those members.
And then they'll go comes out yeah. They seemed happy she taught you seem like you call now tell me tell me.
Yeah. So let me tell you about she said she doesn't actually change you have to hook all my.
Again, we've seen strong interest on the part of users in value for money offerings and in the 618 shopping festival, we've certainly seen a lot of new young consumers coming to take part.
Oh My Gosh. She tells you that seems to have a talk or somebody one crunching passion since she was at 10 Marshall father God.
Caffeine jumped wrong for shipmates onto the social that teaching.
Another driver of sales. This year has been the launch of new products with a 3 million new brands being launched by products on Tmall.
This year's 618.
Driving significant sales in our consumer electronics appliances apparel and other categories.
So you can kind of watch each drill ship Ahmad al Qaeda call them cord tissue.
Sure about Houston, Xu Dong, who all come from for the culture of Cheetah.
So coming back to the 88 VIP members are what we see certainly as they are attracted by those new products that are being launched as well as by our broadened.
Broadened assortment of quality offerings.
Okay.
Okay next question.
Thank you. Your next question comes from Gary Yu with Morgan Stanley . Please go ahead.
Okay.
Hi, Thank you management for the opportunity I have one question related to cloud and a follow up on a I just wanted to check.
When do we expect to see how rapidly our revenue grow to kind of further I salivate to a higher level.
Given there appears to be some reluctance seafood culprit to spend on <unk> spending and a related question on AI.
You know keeping deposit assumptions all about AI offerings that we have launched recently.
Should we look at the timeline of rule that from a regulatory and also monetization standpoint. Thank you.
Oh go ahead sorry.
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And do you get your wallboard yoga Chengguan form yet I'll quote tickets or should keep getting <expletive> to shoot a unique format that you guys should have gone and telling you something.
Yeah.
Yeah, I think if you look at the call landscape in China, I think the total cloud infra I as a percentage of the ITU for steel in a lower treating are relatively low.
Percentage as compared to the U S peers.
So are we still are we see the steered a huge a potential first in the industry.
Yeah.
Cloud infra penetration.
Secondly, I think was this AI.
Revolution I think this spring are incremental.
Opportunities and cause today or the or the companies wanted to use our AI capabilities to upgrade their services and in there on an application so but they need a high computing high performance computing power to support.
This operation not only in today's trading but also in the insurance services to be provided so I think these two are we believe is a primary growth engine for the long term.
Yeah.
Okay.
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So I'm trying to see.
If you look at our own performance I think right now we are taking some time to digest some impact from the first from the decline of the after the men a post pandemic as we said in our scripts are for example.
For many services relating to a remote work remote education as well as the online streaming.
The demand obviously.
It's lower post pandemic, which I think I saw it.
Very important factor to drive our growth rate and also we also have some impact from the decline and then from one top customers one of the top customers. So I think we need to still need to us some time to digest. This also we also are making.
Some proactive.
Measures are too to make sure Oh, we focus on public cloud growth and the focus on high quality high quality all cloud service growth. So I think what is this the right sales structure and the customer profile are we are in.
Yeah.
That's our position will be in a better position to have a long term sustainable growth.
Uh huh.
Number if you like how you sell women similar to years either.
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She could shoot some changzhou shuttle.
Yeah for a second question on how to monetize these AI opportunity I think the answer is very straightforward. It's like agriculture has provided to our pet a monetization model is to have all the all the AI companies all the models using Alibaba cloud infra.
Our high performance low cost computing power to throw their AI. So I think that's why we do our foundational model.
And Ali cloud and deploy this in an off price I'll call in fraud is too.
Not only just run our own model is to help our our cloud industry partners are to use these foundational model.
People there to play they are fine tuned to build their own model.
Our vertical industries, and India are all customized applications.
So I think this is a I think for US I think this is a a a huge opportunity and and and I think we will.
Do everything we can to make sure we provide best in class services.
To help our these new generations of our immigration ought to be occurred on our cloud infra. Thank you.
Yeah.
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You want to go channel, yet suite Chowder children food Bank tuna, a CRO in Korea that you shouldn't.
Woman to assure shouldn't be enrollment or do some more things like hi, John C. U E R. The union.
Just to add one more point, which is when we talk about this.
Of course system and we strongly believe in.
In this new era.
That is a <unk>.
Of course system is is generating is incubating. So that's why we do a lot to grow our modal a community model scope to make sure all the relevant models all the models in the market not only from Alibaba vast lots for sure it helps them off from Oh.
From a court system to make their older models available for that there are other purse or for the industry partners and we provided tools applications to help them to use these models and and a lot of them are open source models as I said in my script and there from our side. We are also.
So well continue our efforts to upgrade our model and also continuing our open source strategy for the models and the more people use models than the more people will use computing power. That's the short answer thank you.
Okay.
Numerous shampoo trunk show me you Satish quite Shanghai C 25 minute when there really <unk>.
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So you have to show more so you could see that Natasha O T. A swan Nida Chico shoot you agree you allow your attack.
Next question.
Yeah.
Thank you.
Next question comes from Shyam Shang with Barclays.
Go ahead.
Sheesh Glenys <unk> G. So whether it's you want.
What did you say on <unk>.
When she considered Daniel <unk>.
Yeah.
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We need a machine yeah switching.
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Bundle, but you didn't see now would you say launching one oh.
So when they see some cool took a larger language model.
Inscape question somebody out there no sheets and gone to sort of a foundation of motor homes.
Yeah.
Our proprietary and open source like a mix back up with somebody else and glucose.
<unk> wishes sushi.
Yes.
Thanks, I have a follow up question for Daniel regarding AI.
We know that Alibaba has launched its a tiny model I. Just recently opened up two additional models and you're also hosting our model from a matter.
I'm wondering if we think about the future landscape in China say three to five years down the road what that landscape will look like how many are foundational models will have proven successful.
Successful what will the mix look like between proprietary versus open source models at that time, and what would be the factors that will contribute to the success or failure of these different competitors in that period.
Oh sure.
Yeah, Yeah. So he doesn't know Corey that I want to you know, let's say somebody who's a seamless part of this whole thing with I.
So you got some Yankees switches.
And that's without taking the fact that those of you with time with Quintiles.
Continuing to go up you know I think or so anything office on quite a hunt brother seems so until that person.
Well. Thanks, that's a an excellent set of questions and is difficult to answer is they are excellent you know we're standing at the advent of a new era and unprecedented new era, where things are moving so fast that most people look at things and intervals of one months and track changes month by month. So it's it's X.
Truly difficult to talk about what the future will be like three to five years out.
Alright, Shanghai, what Central Asia, Quintiles, good Jacob the Egypt, Pandora and I'll, let you do the chickens or Tom washing nekoosa.
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Thanks, Holly I wish you all see what's that telling me she washout quite I'm quite take like Colli Pee sugar.
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I don't know if she is.
Perhaps I can share with you my own observation and thinking about some of those larger issues are certainly there are quite a lot of companies in China already today that are working on a large language models I think there are basically two development pathways available to these companies broadly.
Speaking one is is the one that Alibaba has chosen because we are a cloud provider.
So we redevelop these large language models unless.
We evolved and we continue to open them up make them available even go open source with them.
To get more people to use them. So we're providing foundational models that are intended to be a universal application to benefit the broadest.
Swath of the community, making them available to developers to.
To develop applications building on them.
But at the same time, there will also be some players in this market, who although they're starting out developing foundational models will very quickly start to focus on a few particular domains, where they have expertise of course it'll be demands were to succeed they'll need to have a lot of high quality data as well as a deep insight into.
That data that some companies will start by developing those are foundational models, but quickly move into developing specific applications. So that's that's foreseeable.
That's it.
Longer Elijah until it's launching launches you pursue Pamela Ingalls the peso the peso Pamela she saw that she will see the change mushy. So you can see that you can change the size of it.
For nine months or so you're going to achieve from silver Hill performer.
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So he has all of those are quite so well.
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You can see on some of the others.
But it seemed like that it puts us so you've got tangled up the chillicothe sort of assurance applications service the hotel either changing the send you to Julie Wilson to be hazard to C suites.
So if I take quite some niches of Tau gene.
Kidney cancer.
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Farooq on your question I'm curious young woman.
John Corbett.
Because that's what excited us about Alibaba loss.
So you would hope for the sake of hunger.
The machines that are actually in soybean oil and two are pushing seemingly alibaba you see how you.
So the year to take a pause on the hill here because on the ear, which I'd say is I thought you had to go to the coast.
Yeah.
Of course growth in that second category I spoke about.
See today that they're working on a big models are large language models, but in point of fact I'll end up.
Working on a vertical models.
But it's difficult to know today and to distinguish between the two.
But you know another important point I would I would add on is that AI is not valuable just by virtue.
Being AI in fact, it has tremendous potential to revolutionize all the existing applications and services that are out there across industries and sectors, including both to see and.
To be.
So you know.
If you look at all the different applications and services that exists today on the Internet all of them can be rethought and revitalized and upgraded with where they are so we see this with Alibaba everything we're doing all of the services. We have can be rethought and redone leveraging AI and I think the same could be said.
For all players across all different industries and sectors.
Next question.
Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.
Hi, Thanks management for taking my questions.
Question regarding the international business given that the strong performance that we're seeing across the.
Countries I just wanted to get the upper management.
Hum.
<unk> landscape just link regions.
And our.
Strategy.
And then a follow up question.
That one is really about the logistics supply given the strong performance of Chine now how should we think about the synergies be Shanghai, now and our international business to enhance the user experience.
You.
Yes.
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With it yet.
Yes, actually we are reporting a very good quarter for our AI D C. Our our overseas digital commerce business and we're happy to see that our our strategies.
After a couple of us.
Cortes.
Our efforts are do we see.
Strong sign of success and we strongly believe this is a sustainable trend and Oh.
As you ask I think Oh, we are trying to find our unique position in the global market.
And when we talk about global market, we have very clear target by market like by region not only by reading also by country cause.
Consumption is highly highly relevant to our culture and highly relevant to the local retail landscape. So we need to find our uniqueness a unique strength.
222.
Creating real value.
Two of the customers in the destination country.
Our Union vantage of course wildly unit vantage is that.
Supply from China, I think a choice model just to unlock.
The vantage by a consolidated integrated supply chain.
From end to end.
So going forward, we will continue to scale up this model and together with the.
Growth of the platform model and the ink in different markets and we have where we have differentiated our market strategy in some in some businesses. We all we focus on cross border.
This could be a cause for some businesses, but for some other market we focus on local to local as a main course, plus cross border from China as a dessert.
And also today to make cross border from China, Maybe Tomorrow cross border from other countries.
Also we are trying to leverage our strong oh.
Coverage in China, with our <unk> business, because we have very successful Peter goodness, which basically have a very strong connection with our with many Chinese exports now O S. A nice summer some of them.
Industrial products, but we have many of our export or sell consumer products. So this could be a huge I mean flying wheel are too.
Commit the integrated.
<unk> changed from Peter B to B to C.
So for a second.
For your take off real question about triangle and AI D. C. I think this.
This quarter is a very good example, I show a very good example of how the synergies we can correct created a beating the among the different business groups in Alibaba.
So I think.
Strong gross of AI D C.
And then one of the main reasons is our improved logistics and servicing experience Oh.
As a together.
Strong performance of our logistic network.
So for example, right now we are providing.
Five day global delivery, which means our global delivery within five days.
If you can't give.
Our customers.
Oh.
Sullivan's miles away tens of thousands of miles away from China, a high certainty of the logistic experience.
This could be the best user acquisition tool and you use that acquisition.
Model.
So if we can if we combine these two together and you see a very strong synergies and the world will continue to.
To that end.
And Oh Wow, all right hand is to.
Enhanced assortment strategies and to make sure we have the right supply second to enhance the logistic service.
Standard and capability and to make sure our customers can have their could experience. If they have a great experience in their first few tried there'll be with us I think they have because <unk> was a good experience right.
This point upfront China supply.
Has a unique.
Strength in the world.
Okay.
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Next question please.
Thank you.
Your next question comes from James Lee with Mizuho. Please go ahead.
Yeah. Thanks for taking my questions here and just one follow up questions on you know a cloud computing, specifically and Daniel can you comment about obviously your comment about technology that's super helpful.
Talk about maybe from a marketing perspective.
What verticals are important for you to pursue in the near term to drive the growth of the business and why thanks.
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We're actually a cloud is relevant to all the industries. If you ask me.
Which industries are we.
We we prioritize I will say I actually.
First first of all I think the.
The Internet companies I think because all the internet companies are digital native companies and they're supposed to be grow their business on cloud.
So from this part I think if you look at the history of Alibaba cloud, we will grow together with the Internet company, especially the mobile Internet companies in China together.
So I think in this part of I think we still have.
Okay.
Our space to penetrate to help all the income even when their companies.
Today, and not all of them all.
Purely digital native data, driven and even though everybody and have a mobile app and have a webpage.
I think that the level of Digitization.
The complexity of that utilization is quite different so I think in this regard it where we can.
Still real clothing with them starting with the penetration of the cloud Infra and also there was a more of a penetration.
Penetration with the past products.
I think our posture and AI service today, So I think the internet of all the assays are very important sector and also financial services because financial services is a very big.
Big Industries and are there are many companies many of type two type of Subsectors are in this industry.
In this industry. So I think we'll also.
It's been Oh.
A lot of our resources on these and also we are awesome.
Uh huh.
Our services and product services to serve the industries like auto mobile because if you look at the E V companies and.
Oh, the economies no matter their new EDI, or our new UV Xi'an city or the.
Existing ones I think a criticism of them they are purely digital driven.
Driven companies.
Within the company so I think.
We will generally speaking I'd just give you a few a few examples but generally speaking we will focus on the industries, where the higher level with digitization.
But we will prioritize the industry digital native Oh.
They have a very successful digital transformation or they are on birth rates from day, one they are digital native.
So this is our focus and strategy. Thank you.
Okay.
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Let's invest the last question.
Thank you. Your next question comes from Jai long <unk> with Nomura. Please go ahead.
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Okay.
Thank you my question has to do with E Commerce and I'm wondering if you could talk to us about where you see things heading for the September quarter.
For both Tmall and Taobao in terms of do you use on revenues.
And then coming back to the June quarter, we saw a decline in margin year on year. So if you could please talk to us about.
Margin in the June quarter.
As well as on.
Tmall supermarket and on Tmall and Taobao. Thank you.
Yeah.
She sits around and I wasn't clear to us how much how about that.
Oh, no my town shoes with.
Sure.
Is that how we're driving down our total show up that you actually see Huntington I told you about.
T O.
I mean that Washington.
You can punch it out of fruit and that's what I'm, saying.
Well I'm sure you're going to share that food, if you had to ship right.
Hi, Sumit.
I've been done now.
I do think that a few times that a T shirt.
Okay.
Thank you so Ah.
On Tmall supermarket. This is a lumpy business that we're operating ourselves and profit continues to improve this.
This year, we've invested very heavily in improving user experience on tmall supermarket.
As part of that rolling out half day delivery service in 20 cities across China.
And in those cities with half day delivery, we're seeing very very significant improvements in growth in user scale.
Orders and user satisfaction.
Okay.
Oh My gosh.
She was signed yet let's say your core Michelle.
But when I go on hold once you do come to pass it through.
I'm glad.
E Commerce in general as a kind of Congress or business.
Is affected by a variety of different factors of course, including the macroeconomic environment and competition.
Sandeep I'm sure that you got done.
I think that one I couldn't quantify what this into some kind of a fact that you do that times you saw banking too premature.
So rather than focusing on short term competitive dynamics in gross numbers.
We're much more preoccupied with ensuring the long term.
Elements of the company of the business and it constantly surpassing ourselves.
We're watching a movie that you got your shipments and we liked the fact that what's ramping up production.
Yeah.
And as I said earlier, given the uncertainties and volatility.
That may lie ahead.
The future, it's all the more important investing and.
In building our own capabilities.
Mhm T shirt that you know who came with it some time to younger pinscher, Shanghai seemed that teach them showing that for that to change on the corporate team here at home.
That's why in the next three year period, we'll continue to invest.
Resolutely in growing our user scale and optimizing user experience and helping merchants grow their businesses and in improving our services that we provide to merchants.
Oh, Gosh, I am Washington, and then back to me.
I shouldn't.
So what they rely boucher.
Christian sounds absolutely want it sounds almost as you think I'm sorry, Matt.
We have over two decades of strong experience and insight in the ecommerce space and based on that I have extremely strong confidence in our ability to continue to maintain our leadership position leadership in terms of our user scale and merchant scale going forward.
I can't tell I totally agree with that.
I realize that I show you can think about it doesn't sound crazy.
The investments that we're making today will certainly pay off in the future in terms of driving revenue and profit growth.
Thanks.
Thank you everyone and that's the end of our earnings call. Today. If you have any further questions feel free to reach out to me and my team.
Thank you, we'll see you next quarter.
Okay.
That does conclude our conference for today. Thank you for participating you may now disconnect.
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