In mainland China, there were two giants, alibaba and tencent. At their peak, the market cap of these two companies was neck and neck, both exceeding $700 billion at one point. In recent years, the stock prices of these two giants have seen sharp declines, but tencent's market cap still exceeds $400 billion, while alibaba is left with just over $200 billion, less than half of tencent's, and at one point was overtaken by the rising star pdd holdings. Can alibaba's stock price regain its former glory? Perhaps it depends on whether its performance can hit bottom and rebound, breaking out of the predicament and reversing the trend.

Recently, alibaba will announce its latest earnings. Every time the company releases earnings, it may also mean a good trading or investment opportunity. Before that, investors need to understand how to interpret its earnings. How to assess alibaba's performance? We can focus on three main points: revenue growth changes, profitability changes, and share buybacks.

1. Revenue Growth Rate

Whether alibaba can turn the tide of its predicament first depends on whether its revenue growth rate can stabilize and rebound.

Until the Q2 fiscal quarter of 2022, alibaba's revenue maintained a growth rate of over 30% for most of the time, making it a high-growth company in the eyes of the market. The turning point came in the Q3 fiscal quarter of 2022, when alibaba's revenue growth rate suddenly dropped to 9.7%. In the following 10 quarters, its revenue growth rate has been mostly below 10%, and even experienced a decline at one point. Can alibaba's revenue stabilize and rebound, returning to double-digit growth? We can look at it separately from its business composition.

Alibaba's business can be described as a mixed bag. Starting from Q1 of 2024, alibaba will split its business modules, including taotein group for domestic e-commerce, alibaba international for cross-border e-commerce, alibaba cloud for cloud business, cainiao group for domestic and cross-border logistics, ele.me and local services group for takeout and in-store business, entertainment business for online video and movie distribution, and a bunch of other miscellaneous businesses.

Within alibaba's complex business, there are three areas of business that may be of interest to the market.

The first is naturally the taotein group, including taobao and tmall, which is alibaba's founding business and currently the largest source of revenue, accounting for nearly half of the revenue in fiscal year 2024. The decline in alibaba's revenue growth rate is largely due to the sluggish performance of the domestic e-commerce business.

As alibaba's domestic e-commerce business growth slows down, in addition to being affected by the domestic economic environment, it is largely squeezed by the competition from pdd holdings. Taking the five financial quarters since alibaba's business restructuring as an example, Taotian Group's revenue growth rate in four consecutive quarters is lower than 5%, almost in a state of stagnant growth. In contrast, pdd holdings' revenue growth rate during the same period has accelerated significantly, approaching a doubling growth year-on-year in the past few quarters. In this scenario, alibaba's domestic e-commerce business will naturally face enormous pressure.

"If you can't beat them, join them." In order to regain market share, alibaba has also started to imitate its competitors, offering more benefits to consumers and leaning towards small and medium-sized businesses, which has achieved certain results. In the Q4 of 2024 fiscal year to Q1 of 2025 fiscal year, alibaba's GMV returned to double-digit growth, but its revenue growth rate declined in Q1 2025.

The second part is alibaba's international business, including Lazada, AliExpress, Alibaba.com, etc. With the intensification of the domestic market competition, going global has become the main theme for many companies. Alibaba has been in this field for more than a decade, but to a large extent, it can be said that they started too early and missed the boat. Currently, the most vigorous cross-border e-commerce players are undoubtedly pdd holdings' Temu and Ticktock, especially the rising Temu in the past two years, with consecutive doubling growth rates that leave all competitors far behind.

However, due to the large space in the cross-border e-commerce market, alibaba's international business also maintains a high growth rate, with revenue growth rates exceeding 30% in the last 5 financial quarters. It is also the fastest-growing sector among all alibaba's businesses. In addition, due to alibaba's rookie business division also being responsible for its cross-border e-commerce logistics performance, the revenue growth rate in the past few quarters has also exceeded 15%, making it the second fastest-growing business.

The third part is the cloud intelligence business, namely Alibaba Cloud. This business used to be a hot cake for alibaba, with annual growth rates exceeding 50% before the 2022 fiscal year. However, in the past two fiscal years, alibaba cloud's growth has also stagnated. In the recent four fiscal quarters, alibaba cloud's revenue growth rate has been less than 10% in each quarter.

However, considering that alibaba cloud is actively cutting off some inefficient, mainly project-based private and hybrid cloud businesses, the decline in revenue from this segment has also dragged down the overall growth. Alibaba disclosed in its performance that the revenue growth rate of its core public cloud products exceeds 10%. In the future, we can continue to observe whether alibaba cloud can further accelerate its revenue growth after optimizing its revenue structure.

In addition to these three key businesses, alibaba's local life business including Ele.me and Gaode, the large entertainment business including Youku and Ali Pictures, as well as businesses categorized as [other] such as ali health, Hema, and Sunart Retail, have relatively low revenue proportions, average development situations, and relatively low market attention.

For future performance, we can focus on whether their domestic e-commerce business can accelerate growth and regain more market share; whether their cross-border e-commerce business can continue to maintain growth of over 30%; and whether their cloud business can return to double-digit growth or higher after structural optimization.

2. Profitability

During this downturn cycle, the revenue growth of Alibaba and Tencent both experienced a cliff-like decline, but Alibaba's stock price drop was much greater than Tencent's, the core reason being the different trends in the profitability of these two companies.

Tencent's adjusted net profit margin, after a period of decline, gradually increased again to reach a new high. However, Alibaba's level of net profit margin fell and never returned to its peak, remaining below 20% for the past few quarters.

Specifically from a business sector perspective, Alibaba will disclose the EBITA of each business sector. Among them, Taotian Group is the absolute main contributor to profits, while the other business sectors combined even incur losses.

The first key business, Taotian Group's adjusted EBITA profit margin has been on a downward trend in the past few quarters. Looking at the growth trend of Taotian Group's adjusted EBITA, the growth rate has also been steadily declining, from 9.1% all the way down, even showing negative growth from 2024Q4 to 2025Q1.

The decline in Taotian Group's profit level is largely due to the intensified competition within the domestic e-commerce industry. In order to regain market share, Alibaba had to increase investment, reduce monetization rates, which naturally puts pressure on profitability. Therefore, the profitability level of Taotian may have to wait until the competitive landscape of the domestic e-commerce industry stabilizes before stable recovery can be expected.

The second key business, Alibaba International's EBITA has been in a continued loss state with the loss rate expanding, leading to Cainiao Group also turning from profit to loss. However, considering Alibaba International is still in a high-speed growth expansion phase, temporary losses may be acceptable. Our focus going forward will be on whether Alibaba International can achieve a marginal improvement in its loss rate level while maintaining fast revenue growth, ultimately turning a profit. Otherwise, if Alibaba International's revenue growth slows down while the loss rate remains high, then it may completely lose room for imagination.

The third key business, Alibaba Cloud's EBITA is in a relatively benign state, with its profit margin level showing year-on-year increases in the past 5 quarters. The EBITA profit has seen a year-on-year growth rate exceeding 40% for four consecutive quarters.

After cutting inefficient project-based businesses, Alibaba focuses on a more standardized public cloud business, which indeed shows a more obvious boost in profit margin. Going forward, we can observe whether with the continuous optimization of Alibaba Cloud's business structure, its profit margin level can continue to rise, driving the profit scale to a higher level, thereby bringing considerable gains to Alibaba's overall profit level.

In addition to these three key businesses, Alibaba's local lifestyle business is in the process of reducing losses. The digital entertainment and other business sectors, while experiencing revenue growth slowdown, seem to have an uncertain timeline for turning losses around. To some extent, they appear as negative assets, so it remains to be seen whether Alibaba will choose to divest these continuously bleeding businesses in the future.

3. Share Buyback

Alibaba's revenue growth has been struggling, and its profitability has been somewhat lackluster, which are areas criticized by some investors and important reasons for the long-term pressure on its stock price. However, it cannot be denied that Alibaba's cash flow is indeed strong. Even in the past two fiscal years, Alibaba's annual free cash flow was around 150 billion, with a cash reserve of nearly 600 billion.

With ample cash reserves and strong overall blood-making ability, Alibaba has the ability to conduct share buybacks. With the stock price deep in decline, Alibaba also needs to use buybacks to boost investor confidence. After all, only true silver and gold buybacks are the most direct and powerful way for the company's management to show confidence in the company's prospects.

In the past five fiscal years, Alibaba has engaged in buyback activities, but the intensity of buybacks has clearly increased in the past two fiscal years. In the 2024 fiscal year, Alibaba's buyback amount reached as high as $12.5 billion, and declared a dividend of $4 billion. The total buyback plus dividends amounted to $16.5 billion, with a return on investment exceeding 8% of its total market value.

In the third quarter of the fiscal year 2024, Alibaba announced an expansion of its total buyback plan to $65 billion by the end of the 2017 fiscal year. Excluding historical buyback amounts, there is still nearly $30 billion remaining in the buyback plan, meaning an average annual buyback of around $10 billion over the next three fiscal years, along with regular dividends, the annual buyback + dividend return rate also exceeds 5%. If Alibaba continues to expand the buyback plan or increase dividends in the future, with market value unchanged, the return rate will be even higher.

In the future, we can continue to observe the execution of Alibaba's buyback plan and dividend pace, as well as whether the company will take further action to increase the size of the buyback plan. In the difficult times when Alibaba's performance is still deeply mired in difficulties and awaiting a turnaround, the company's buyback is undoubtedly the most important support for its stock price.

By this point, you may have some new insights on how to read Alibaba's earnings. It is worth mentioning that every time a prominent company releases its earnings, it may represent a rare trading opportunity for different types of investors.

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Conversely, if investors believe that the latest performance of a certain company will not be optimistic and will bring pressure on the short-term stock price, investors may consider short selling, which can be done by considering margin selling or buying put options.

Of course, if investors think that the bullish and bearish direction of a company's performance is unclear, but the stock price may experience significant fluctuations after the performance release, then investors may consider the straddle strategy of buying call and put options to capture potential opportunities.

In conclusion, when it comes to Alibaba's earnings reports, we can focus on three main points: revenue growth rate, profitability, and share buybacks.

Regarding Alibaba's revenue growth rate, we can observe whether its domestic e-commerce business can stabilize, narrow the growth gap with competitors; whether its cross-border e-commerce business can maintain a high growth rate; and whether its cloud business, after structural adjustments, can return to double-digit growth.

For Alibaba's profitability, we should pay attention to when the industry consolidation in its domestic e-commerce business can end, leading to a rebound in profit margins; whether the loss level of its cross-border e-commerce business can narrow as its revenue scales up; and whether the profit margin of its cloud business can further improve.

Regarding Alibaba's share buybacks, we can monitor the execution of its existing buyback plan and the expansion of future buyback plan amounts.