On the evening of February 20, Alibaba Group Holding Limited, one of the largest e-commerce conglomerates in the world, reported its financial results for the third quarter of fiscal year 2025, which ended on December 31, 2024. The report revealed a revenue of 280.15 billion RMB, marking an 8% increase year-on-yearOperating profits saw an even more impressive surge, bringing in 41.205 billion RMB, up a staggering 83%. The net profit, calculated using non-GAAP criteria, was recorded at 51.066 billion RMB, a 6% rise compared to the same period last year.

Among Alibaba's diverse range of business units, the Taotian Group emerges as the primary revenue generatorThis segment reported total revenue of 136.09 billion RMB, showing a year-on-year growth of 5%. Its adjusted EBITA was at 61.083 billion RMB, up slightly from 59.93 billion RMB in the previous yearNotably, revenue from customer management also experienced a 9% increase, a significant acceleration from the 2% growth observed in the previous quarterThis marks a positive trend, indicating a recovery in consumer engagement and business transactionsMeanwhile, the international digital commerce wing, Alibaba International Digital Commerce Group, recorded a revenue of 37.756 billion RMB, boasting a remarkable 32% increase year-on-year, although it still faced challenges with an adjusted EBITA loss of 4.952 billion RMB as investments in cross-border businesses like Trendyol and AliExpress increased.

Alibaba Cloud, a critical component of the company's strategy, reported revenue of 31.742 billion RMB, witnessing a 13% uplift compared to the previous yearThis marked a significant rebound from a 7% growth rate recorded in the prior quarterAnalysts attribute this growth to rising public cloud revenues driven by AI-related productsRemarkably, Alibaba Cloud's AI revenue has consistently shown triple-digit growth for six consecutive quartersFurthermore, external commercialization revenues from Alibaba Cloud rose by 11% year-on-year, showcasing strong market demand for its services.

In other segments, the Local Life Group reported a revenue increase of 12%, while the Big Entertainment Group’s revenue grew by 8%. Both divisions, however, are still in the phase of narrowing losses

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On the contrary, the Cainiao logistics segment experienced a slight downturn, with revenues declining by 1% and an adjusted EBITA drop of 76%. This decline stems largely from decreased profitability in domestic logistics and cross-border fulfillment solutionsDuring the quarter, Alibaba also formalized equity sale agreements with businesses like InTime and Yonghui Superstores.

Tracking the stock market performance, data from Wind revealed that the Hong Kong-listed shares of Alibaba have surged by an impressive 48.7% since the beginning of the year, closing at 120.9 HKD on February 20. This robust upward trend in stock value has mainly been attributed to investor optimism surrounding AI developments driven by Alibaba's strategiesParticularly in recent days, Alibaba Cloud has been expected to benefit from computational capabilities influenced by DeepSeek and the substantial order it received from Apple, although share price growth slowed to 11.54% in light of market anticipation about Alibaba's continued investment in AI and cloud services.

Analyzing the trajectory of growth, Alibaba Cloud has rebounded notably over the past year, elevating its quarterly growth from approximately 3% to the current 13%. For several recent quarters, Alibaba Cloud has maintained stable profitability, with an adjusted EBITA profit margin around 10%. During this quarter, adjusted EBITA grew by 33% to reach 3.138 billion RMBThis success is principally attributed to a shift in product mix towards higher-margin public cloud offerings, along with improvements in operational efficiency that partially offset rising expenditures in customer growth and technology advancements.

In terms of capital investments, Alibaba has been increasingly bullish on its cloud segmentThe latest fiscal report indicated that capital expenditure for the quarter reached 31.78 billion RMB, while free cash flow dipped to 39.02 billion RMB, reflecting a 31% year-on-year declineThe drop in free cash flow is largely attributed to heightened spending on cloud infrastructure, although this was somewhat mitigated by changes in working capital within other operational sectors.

During the earnings conference following the release of the financial report, Alibaba Group's CEO, Wu Yongming, emphasized that the next three years are projected to be the most capital-intensive period for investments into cloud and AI infrastructure in Alibaba's history

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