Alibaba announced non-GAAP earnings of $1.73 per ADS for the fourth quarter of fiscal 2025, exceeding estimates by 16.89%. In local currency, earnings reached RMB 12.52, showing a 23% increase compared to last year. Total revenues were $32.6 billion, falling just short of expectations by 1.49%. However, in RMB, revenues grew 7% year-over-year to RMB 236.5 billion.

Key Drivers

The revenue boost primarily came from the core domestic e-commerce section, including Taobao and Tmall Group, as well as growth in Cloud Intelligence and International Digital Commerce. After the earnings announcement, Alibaba’s stock rose 1.65% in pre-market trading and has gained 46.2% year-to-date. Taobao and Tmall Group reported revenues of RMB 101.37 billion, contributing 42.9% of total earnings and marking a 9% increase from the previous year. The 88VIP membership program grew to 50 million members, a significant rise. The Retail and Wholesale segments in China achieved revenues of RMB 95.6 billion and RMB 5.8 billion, respectively. Revenue for the International Digital Commerce Group grew by 22% to RMB 33.6 billion, driven by successful cross-border operations. Operating income reached RMB 28.5 billion, a remarkable 92.8% increase from last year. By the end of Q4, cash and cash equivalents totaled $20 billion, with short-term investments at $31.5 billion.

Mixed Signals

Alibaba’s latest earnings report offers a mixed view, but there are clear factors that require attention, especially in the current economic climate. Profit exceeded expectations significantly, but revenue fell just short of analyst forecasts. This divergence must be considered in future investment strategies, particularly for those using leverage. Starting with earnings, the adjusted figure of $1.73 per ADS, or RMB 12.52, indicates a 23% rise from the previous year. The market often rewards efficiency, and in this case, we saw operating income more than double, rising 92.8% to RMB 28.5 billion. This suggests improved cost management and effective monetization—crucial when facing rising interest rates or currency fluctuations. On the downside, revenue was a slight letdown at $32.6 billion, or approximately RMB 236.5 billion, which was 1.49% below what analysts expected. The 7% increase in local currency indicates moderate growth, but those expectations put pressure on further revenue acceleration. The domestic e-commerce sector remains the key driver, with Taobao and Tmall together bringing in over RMB 101 billion, a 9% increase from last year. With 50 million 88VIP members rapidly growing, it shows strong customer loyalty and retention among high-value users. This encourages pricing power over time. The China Commerce Retail segment contributed positively, while the smaller Wholesale segment remained steady. Additionally, international growth is on the rise, reflected in a 22% increase in revenue from cross-border commerce. The company’s liquidity is strong, with $20 billion in cash and $31.5 billion in short-term assets, supporting future investments or buybacks. This solid balance sheet is valuable, especially in volatile markets. Markets reacted modestly, with shares up 1.65% in early trading. However, shares have risen 46.2% this year, which raises questions about possible overextension or momentum-based positions. As we witness volatility surrounding key events—such as regulatory changes or economic reports—investors with leveraged positions should reassess their options and stress-test their strategies. Gross risk exposure should be adjusted based on earnings cycles and cash generation capabilities. The underlying fundamentals allow for selective long positions, but hedging is wise unless market sentiment shifts substantially. We’re taking cues from revenue consistency and fiscal discipline to navigate the nuances of summer liquidity with sharper strategies. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now