Alibaba Doesn't Meet Lofty Expectations
Here's our initial take on Alibaba's (NYSE: BABA) fiscal 2025 fourth-quarter financial report.
Key Metrics
| Metric | Q4 2024 | Q4 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | RMB 221.9 billion | RMB 236.5 billion | 7% | Missed |
| Adjusted EPS | RMB 10.14 | RMB 12.52 | 23% | Missed |
| Free cash flow | RMB 15.58 billion | RMB 3.74 billion | -76% | n/a |
| Cloud Intelligence Group revenue | RMB 25.6 billion | RMB 30.1 billion | 18% | n/a |
Alibaba grows but misses expectations
In its latest fiscal quarter, Alibaba generated the U.S. dollar equivalent of about $32.6 billion in revenue, up about 7% year over year, although this failed to meet the expectations of analysts. On the bottom line, Alibaba's adjusted earnings increased significantly but also fell short of estimates.
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Within the business, Alibaba's growth was relatively strong. Customer management revenue in the flagship Taobao and Tmall Group China e-commerce platforms grew by 12% on improved take rates. The Alibaba International Digital Commerce Group grew by 22% on strong cross-border business. And the Cloud Intelligence Group, which includes the company's artificial intelligence (AI) efforts, saw revenue grow by 18%.
During the quarter, Alibaba spent about $600 million on buybacks of shares traded in the U.S., which makes its trailing-12-month total spending $11.9 billion. As a result, Alibaba's outstanding shares have declined by more than 5% compared with a year ago.
Immediate Market Reaction
The initial market reaction to Alibaba's earnings report was negative. As of 6:45 a.m. EDT on Thursday, Alibaba stock was down 5% for the day. This isn't surprising considering the misses on the top and bottom lines while capex is elevated.
What to Watch
Looking ahead, it will be worth watching if the ongoing trade tensions between the U.S. and China have any effect on the nation's economy, either directly or indirectly. After all, keep in mind that this quarter took place before the Trump administration's big reciprocal-tariff announcement.
Alibaba's AI investments will also be important to keep an eye on, as the company recently launched the newest version of its Qwen large language model. You'll notice in the chart above that Alibaba's free cash flow declined by 76% year over year, and the primary reason was increased investment in cloud infrastructure.
Helpful Resources
- Full earnings report
- Investor relations page
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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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