The onset of 2025 seems to be marked by a significant turnaround for AlibabaTraditionally, the Chinese New Year, a time when retail sales slow down, has not hindered the company’s momentumInstead, Alibaba has gained considerable attention due to its advancements in artificial intelligence (AI), most notably through its open-source large model named QwenUpon the release of its latest model, Qwen2.5-Max, on January 29, 2025, Alibaba showcased its competitive edge as this new model outperformed its rival, DeepSeek V3, in various performance tests.
As the company resumed operations after the holiday season, news broke on February 11 regarding a strategic partnership between Alibaba and Apple focused on AI technologyThis collaboration further amplified market enthusiasm and interest in Alibaba's direction under the leadership of newly appointed CEO, Wu Yongming, who took the helm in September 2023. Since assuming his role, Wu has pushed for two main strategies: "User First" and "AI-Driven," leading to multiple adjustments throughout Alibaba's operations in 2024.
The financial report released on February 20 served as a benchmark for evaluating the outcomes of these strategies over the past yearThe quarterly data revealed that Alibaba's revenue for Q4 of 2024 rose by 8% year-on-year to 280.15 billion RMB, with net profit surging by an impressive 239.12% to 48.95 billion RMBFor the entire year of 2024, Alibaba’s total revenue reached 981.77 billion RMB, accompanied by a net profit of 220.3 billion RMBThis eye-popping growth stands in stark contrast to the challenges faced by the company in previous years.
Moreover, the presence of Jack Ma, Alibaba's co-founder, at a significant private enterprise symposium on February 17 was interpreted as a symbolic gesture indicating the company’s “relaunch” and transition back into competitive offense modeAfter multiple adjustments and a renewed focus on its core e-commerce business, Alibaba is banking on AI to create a new atmosphere of opportunity in 2025. The burning question is whether the company can generate growth within its e-commerce sector and how its non-core businesses will perform as well.
Recent figures indicate that Alibaba is indeed recovering
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Based on revenue collected in 2024, it was noted that while the company's quarterly results were slightly better than 2023, the average growth was modest, remaining around 5%. The current Alibaba ecosystem encompasses a comprehensive portfolio of operations, categorized into five verticals and two horizontal divisionsThe verticals include Chinese Commerce (43.99% of revenue), International Commerce (12.20%), Local Life (5.49%), Entertainment (1.76%), and Others (17.17%). The two horizontal segments consist of Cainiao Logistics (9.13%) and Cloud Intelligence (10.26%). Notably, the top three revenue contributors outside of other businesses are Taotian Group, International Digital Commerce, and Cloud Intelligence.
This broad spectrum of operations can be analyzed in three hierarchical levelsAt the first level are Cloud Intelligence and International Commerce, which emerge as the undisputed engines of growthCloud Intelligence has demonstrated consistent profitability with rapid growth rates of 45%, 155%, and 89% year-on-year across the first three quarters of 2024. By Q4, it maintained profitability with an adjusted EBITA of 3.138 billion RMB, a 33% year-on-year increase, placing it amongst the top earners.
However, the growth in profit has been somewhat offset by the greater customer growth and increased technology investmentsThe recent launch of the new large model during the Spring Festival indicates significant ongoing commitment to investment.
On the other hand, the International Digital Commerce sector, led by Jiang Fan, achieved the highest revenue growth over four consecutive quarters in 2024, with rates soaring at 45%, 32%, 29%, and 32%, primarily driven by the rising revenues from AliExpress and Trendyol (a Turkish e-commerce platform).
In contrast, the core Chinese Commerce operations, represented by Taotian Group, stand out as the most pressured and heavily adjusted segment within AlibabaThroughout 2024, growth in revenue remained stagnated, with figures indicating changes of 4%, -1%, 1%, and 5% across the four quarters
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In response to competitive pressures, Alibaba had previously adopted a low-price strategy which, unfortunately, led to increased advertising and commission costs, stifling customer management revenue.
To counter this decline, Alibaba has introduced a revised charging policy, shifting from a fixed fee model to a dynamic GMV-based fee structure starting in September 2024. This shift has resulted in an encouraging rebound in the company's customer management revenue, as growth rebounded from a mere 1% in mid-2024 to 9% by year-end, though this still ranks low in comparison to its other business units.
The third tier includes the Local Life group, which encompasses companies such as Didi and Ele.meThis segment faces the dual challenge of turning losses into profits and tackling competitive pressures within the industryAlthough Local Life's revenue has shown steady growth across four quarters in 2024, it has nonetheless struggled with sustained losses due to intense competitionNevertheless, by Q4, adjusted EBITA losses narrowed significantly to 596 million RMB from a staggering 2.1 billion RMB in the same quarter of the previous yearThis trend could indicate promising potential for a future profit turnaround in 2025.
As instant retail has become increasingly popular, Local Life must cope with mounting competition, particularly from rivals such as Meituan and Douyin, urging Ele.me to showcase its ability to thrive in a heated marketplace.
Overall, Alibaba has shown clear signs of recovery through 2024. Profit-wise, the company has managed to recover from significant losses in the first quarter of the year, achieving new profit records in the third and fourth quartersBusiness-wise, they've divested multiple underperforming retail units while stabilizing their domestic e-commerce foundationMoreover, stock prices are on the rise in 2025, having surged over 36% since February.
The dual focus on global e-commerce strategies and AI integration heralds a new growth era for Alibaba in 2025, as the capital market begins to recognize the firm not merely as an e-commerce entity, but as a technologically advanced firm merging e-commerce with innovative tech solutions.
Among the themes explored in the recent financial report was Alibaba's significant investment and developments in AI
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The emergence of DeepSeek has spotlighted the competitive nature of open-source large models, thereby underscoring the importance of Alibaba's Qwen series within this ecosystemNotably, Alibaba’s selection by Apple as a partner for developing AI capabilities for its Chinese iPhone version reinvigorated interest in Alibaba’s contributions to the tech landscape.
Industry insiders conveyed that Apple’s choice of Alibaba over other competitors was due to its strong capabilities in end-to-end solutions, customer service, and its comprehensive large model prowessThis was a calculated move that emphasizes Alibaba’s comprehensive strength across the AI sphere.
Moreover, Alibaba has consistently invested significant resources into building a robust infrastructure for its AI efforts, becoming a prominent cloud supplier to various domestic AI companiesInvestments in notable startups such as Zhiyun, MiniMax, and others further highlight Alibaba's positioning within the AI ecosystemThe ongoing collaboration also allows for a feedback loop that improves Alibaba's technological capabilities.
After years of strategic planning, Alibaba's ventures in AI are finally beginning to show resultsDespite early challenges in cultivating a strong public presence for Qwen, discussions are now pivoting towards new AI consumer-facing services and hardware innovations, such as AI glasses, as potential growth avenues.
In line with Alibaba's aspirations for growth, international business has become equally pivotalThis segment has started to evolve into a cohesive structure integrating its cross-border operations with local outlets such as Lazada and Miravia, creating a formidable marketplace for Alibaba abroad.
Since Jiang Fan took charge in early 2022, reform efforts have centered on transitioning AliExpress from a conventional platform model, typical of consumer-to-consumer sites like Taobao, to a more managed offering that emphasizes direct control over inventory, procurement, and logistics
This has enabled AliExpress to better compete against rivals and simultaneously attract a broader user base.
As competition intensifies, AliExpress has introduced a new strategy called “Choice,” offering hassle-free returns within a specified timeframe to appeal to new customers, thereby enhancing its market penetration strategies.
Despite being a laggard in the global e-commerce race and facing fierce competition, AliExpress has surged forward to become one of Alibaba's fastest-growing sectors, although the pressure it faces in managing costs and logistics remains formidableThe ongoing rivalry with SHEIN, Temu, and others remains a constant reminder of the challenges ahead.
At the same time, Aliyun (Alibaba Cloud) has experienced fluctuations in profitability and slow revenue growth, which raises concerns about the immediate future of its business modelThe added pressure from price wars and operational challenges is detrimental to this segment, which needs to recalibrate its strategy to navigate future challenges.
In addressing its domestic retail sector, including e-commerce and new retail, Alibaba has implemented significant changes to ensure a dual focus on both online and offline channelsThe intention is to break free from a destructive cycle of competing solely on price while retaining stable income streams amid cutthroat competition.
The transition to charge a basic software service fee with a new dynamic pricing model aims to revitalize revenue streams within Taotian Group, while ensuring accountability and service quality among merchantsAdditionally, integrating popular payment methods like WeChat Pay into the system highlights the progressive nature of Alibaba's strategy moving forward.
As 2025 approaches, Alibaba is merging its domestic and international e-commerce divisions under Jiang Fan’s leadership, indicating a cohesive approach to managing its varied businessesWith a renewed operational strategy that emphasizes collaboration among merchants, Alibaba aims to bolster overall GMV and drive revenue.
Meanwhile, offloading less profitable assets such as Intime and hypermarkets has become necessary to streamline operations and maintain profitability
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