Alibaba Takes One Small Step For E-Commerce & One Giant Leap Forward on AI + Cloud, Week in Review
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Week in Review
- Asian equities were mixed but mostly higher this week as Mainland China’s STAR Board and Vietnam outperformed, while India and the Philippines underperformed.
- It was another busy week for internet earnings as Meituan revealed how much the instant commerce price war weighed on its bottom line in the second quarter, PDD Holdings beat estimates, and Alibaba missed top-line estimates only due to the offloading of its two brick-and-mortar businesses.
- There were multiple releases from local governments and the central government this week on AI and cloud development and real estate, which powered gains in both sectors.
- AI chipmaker Cambricon has emerged as the “Nvidia of China”, according to some, after increasing its revenue by over 4,000% year-over-year (YoY) in the second quarter.
Alibaba Q2 Earnings Overview
Alibaba reported financial results after the Hong Kong close last night. Results missed analyst expectations on revenue, adjusted net income, and adjusted earnings per share (EPS). The revenue “miss” is a misnomer, as the company sold its supermarket chain Sun Art and department store chain Intime, which were included in last year’s quarterly revenue. Excluding revenue from these businesses in the comparison shows that Alibaba revenue grew 10% year-over-year (YoY).
Going into the quarterly results, investor concerns were primarily about the costs associated with instant commerce, as evidenced by the poor financial results from JD.com and Meituan. The relief rally is driven by management’s prudent participation in instant commerce, which weighed on net income but did not kill it off, like its two competitors.
Taobao’s monthly active users grew 25%, as instant commerce users grew to 300 million. The company projected RMB 1 trillion in gross merchandise value (GMV) for instant commerce within the next three years. AI and cloud computing services also took a big step forward, increasing EBITDA by 26% YoY. Buyback dry powder remains significant, at $19.3 billion.
% changes are year-over-year
- Revenue increased +2% to RMB 247.65 billion ($34.57 billion) from RMB 243 billion versus expectations of +4% to RMB 253 billion
- Revenue Excl. Sun Art & Intime +10%
- China E-Commerce Group Revenue +10% to RMB 140.07 billion, though adjusted EBITA was down -21% due to the investment in Taobao Instant Commerce
- Alibaba International Digital Commerce Group Revenue +19% to RMB 34.74 billion, as the unit has almost become profitable
- Revenue from Cloud Intelligence Group +26% to RMB 33.40 billion ($4.66 million), as adjusted EBITDA +26% to RMB 2.95 billion
- Adjusted Net Income -18% to RMB 33.51 billion ($4.68 billion) from RMB 40.2 billion, versus expectations of -7% to RMB 37.50 billion
- Adjusted Earnings per Share (EPS) -10% to RMB 14.75 ($2.06) from RMB 16.44 versus expectations of -3% to RMB 15.92
- Share Repurchases 56 million ordinary shares (7 million US-listed shares) at a cost of $815 million, with $19.30 billion left over in budget for further share repurchases, as of June 30, 2025.
Key News
Asian equities were lower overnight, though Hong Kong, Mainland China, and others managed small gains, while Thailand and Malaysia underperformed.
The Renminbi (RMB), China’s currency, paused its gains versus the US dollar after appreciating to 7.13 per US dollar. It was a quiet night from a news perspective, though volumes in Hong Kong and Mainland China continue to be very strong, which is impressive.
Hong Kong was driven by a positive day in pharmaceuticals, biotech, and life sciences, along with autos, electric vehicles, batteries, precious metals, and mining. While insurance held up, banks and brokers were off.
Alibaba fell -0.09% in advance of results, while Meituan gained +0.98% and Tencent gained +0.42%. Mainland investors bought a healthy $1.6 billion worth of Hong Kong-listed stocks via Southbound Stock Connect, as Alibaba and Tencent were big buys.
The Mainland had more decliners than advancers today, as semiconductors took a breather, and STAR Board heavyweight Cambricon fell -6.01% after warning investors about how quickly the stock has risen +200% year-to-date.
Electric vehicle battery giant CATL gained +10.37% on strong expectations for its batteries, as one of its suppliers, Wuxi Lead Intelligent Equipment, raised guidance on strong demand.
Foxconn Industrial Internet gained +9.99%, as the company’s market cap reached RMB 1 trillion.
There was chatter about the Mainland stock market’s total market cap closing in on RMB 100 trillion, after reaching RMB 95 trillion in July.
China’s trade team is leaving Canada, en route to Washington, DC, today.
Nvidia’s market cap of $4.38 trillion is larger than that of the 558 companies comprising the MSCI China Index. It is larger by $1.77 trillion! By market cap, Nvidia would be the 2nd largest country in the MSCI All Country World Index. This reminds me of the 2001 Greg Lemond comment about Lance Armstrong’s Tour de France, when he stated “unbelievable”, a decade in advance of Armstrong’s doping admission. Only time will tell!
Last Night’s Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | 0.3% |
| Hang Seng Tech | HSTECH Index | 0.5% |
| Hong Kong Turnover | HKTurn Index | -14.3% |
| Hong Kong Short Sale Turnover | HKSST Index | -22.6% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 14.8% |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 1,538.38 |
| China (Shanghai) | SHCOMP Index | 0.4% |
| China (Shenzhen) | SZCOMP Index | 0.5% |
| China (STAR Board) | Star50 Index | -1.7% |
| Mainland Turnover | .chturn Index | -5.8% |
| Northbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | Not Available |
| Jing Daily China Global Luxury Index | CHINALUX Index | 0.5% |
| Japan | NKY Index | -0.3% |
| India | SENSEX Index | -0.3% |
| Indonesia | JCI Index | -1.5% |
| Malaysia | FBMKLCI Index | -0.8% |
| Pakistan | KSE100 Index | 0.9% |
| Philippines | PCOMP Index | -0.6% |
| South Korea | KOSPI Index | -0.3% |
| Taiwan | TWSE Index | 0% |
| Thailand | SET Index | -1.1% |
| Singapore | STI Index | 0.4% |
| Australia | AS51 Index | -0.1% |
| Vietnam | VNINDEX Index | 0.1% |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume as % of 1-Year Average | 166 | 209 |
| Advancing Stocks | 64 | 1090 |
| Declining Stocks | 429 | 3989 |
| Outperforming Factors | ||
| Underperforming Factors | Growth, Liquidity, Momentum | Value, Dividend Yield, Quality |
| Top Sectors | ||
| Bottom Sectors | Real Estate, Healthcare, Communication | Real Estate, Communication, Staples |
| Top Subsectors | Food | Communication Equipment, Internet |
| Bottom Subsectors | National Defense, Pharmaceutical, Consumer Durables/Apparel | Daily Chemicals, Education, Leisure Products |
| Southbound Connect Buys | HK Tracker ETF (Massive), Alibaba (Very Large), Meituan (Large), Akeso, Hua Hong Semi (Moderate), Tencent (Small) | N/A |
| Southbound Connect Sells | SMIC (Moderate), Sensetime, Xiaomi (Small) | N/A |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 151 | 0.58 |
| Communication Services | 9 | 0.42 |
| Consumer Discretionary | 28 | 0.98 |
| Consumer Staples | 13 | 0.16 |
| Energy | 7 | 0.68 |
| Financials | 23 | -0.51 |
| Health Care | 13 | 4.64 |
| Industrials | 20 | -1.09 |
| Information Technology | 10 | -0.39 |
| Materials | 10 | 3.06 |
| Real Estate | 6 | 0.37 |
| Utilities | 12 | 0.14 |
| Mainland China Listed | 404 | 0.94 |
| Communication Services | 6 | 0.27 |
| Consumer Discretionary | 31 | 1.81 |
| Consumer Staples | 24 | 2.4 |
| Energy | 13 | -0.34 |
| Financials | 64 | -0.1 |
| Health Care | 31 | 2.19 |
| Industrials | 64 | 1.89 |
| Information Technology | 91 | 0.08 |
| Materials | 58 | 2.17 |
| Real Estate | 6 | 0.02 |
| Utilities | 16 | 0.01 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | 0.4 |
| Alibaba HK | 9988 HK Equity | -0.1 |
| JD.com HK | 9618 HK Equity | 2.3 |
| NetEase HK | 9999 HK Equity | 0 |
| Yum China HK | 9987 HK Equity | 0.1 |
| Baozun HK | 9991 HK Equity | 6.5 |
| Baidu HK | 9888 HK Equity | 3.2 |
| Autohome HK | 2518 HK Equity | -0.9 |
| Bilibili HK | 9626 HK Equity | 4.8 |
| Trip.com HK | 9961 HK Equity | 4.7 |
| EDU HK | 9901 HK Equity | 1.1 |
| Xpeng HK | 9868 HK Equity | -1.2 |
| Weibo HK | 9898 HK Equity | 0.9 |
| Li Auto HK | 2015 HK Equity | 4 |
| Nio Auto HK | 9866 HK Equity | 0.2 |
| Zhihu HK | 2390 HK Equity | -3.9 |
| KE HK | 2423 HK Equity | -1 |
| Tencent Music Entertainment HK | 1698 HK Equity | -2 |
| Meituan HK | 3690 HK Equity | 1 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -0.1 |
| MEITUAN-CLASS B | 1 |
| TENCENT HOLDINGS LTD | 0.4 |
| SEMICONDUCTOR MANUFACTURI-H | -2.6 |
| GUOTAI JUNAN INTERNATIONAL | 15.7 |
| XIAOMI CORP-CLASS B | -0.5 |
| HORIZON ROBOTICS INC | 5.4 |
| SENSETIME GROUP INC-CLASS B | 2.4 |
| BYD CO LTD-H | 2.1 |
| PING AN INSURANCE GROUP CO-H | 0.2 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| EAST MONEY INFORMATION CO-A | 3.4 |
| CAMBRICON TECHNOLOGIES-A | -6 |
| CONTEMPORARY AMPEREX TECHN-A | 10.4 |
| CHINA NORTHERN RARE EARTH -A | 1.2 |
| EOPTOLINK TECHNOLOGY INC L-A | 0.4 |
| VICTORY GIANT TECHNOLOGY -A | 3.2 |
| SEMICONDUCTOR MANUFACTURIN-A | -3.7 |
| FOXCONN INDUSTRIAL INTERNE-A | 10 |
| ZHONGJI INNOLIGHT CO LTD-A | -1.1 |
| SHANGHAI STONEHILL TECHNOL-A | 6.2 |
Last Night’s Exchange Rates, Prices, & Yields
- CNY per USD 7.13 versus 7.13 yesterday
- CNY per EUR 8.32 versus 8.34 yesterday
- Yield on 10-Year Government Bond 1.84% versus 1.85% yesterday
- Yield on 10-Year China Development Bank Bond 1.88% versus 1.89% yesterday
- Copper Price 0.51%
- Steel Price -0.29%
