China's Amazon equivalent (and a lot more), Alibaba Group Holding Limited ($Alibaba(BABA)$) is dual listed as an "American Depositary Share" in U.S. bourses and as a stock ($BABA-W(09988)$) in the Hong Kong Stock Exchange (HKEX). The company's earnings release on the 20th of February marked the first three quarters ("9M") for its Fiscal Year 2025 (FY 2025). The resulting effect on the two tickers is fascinating: on the 20th, the U.S. ticker rose by 8% while the HKEX ticker fell by 3% over the previous day's close. On the 21st, both tickers rose by 6% and 15% respectively. On the 22nd, they fell by 10% and 2% respectively.
This form of performance imputed on a high-conviction mega-stock clearly indicates how vividly different the collective outlook on a company could be.
Trend Drilldown
As of the first nine months of FY 2025, trends indicate that the company is well on its way to beating the previous FY's revenues in practically every one of its major segments:
As the previous article about Alibaba's Q1 2025 earnings indicated, the company now runs in several clearly-defined segments with distinct management personnel in place to oversee growth.
Taobao and Tmall Group, the company's China-centered commerce business remains the biggest earner with a 46% share of total revenue. Trends indicate however, that the segment will close out FY 2025 with about 4% increase in both revenue and EBITA ("Earnings Before Interest, Taxes, and Amortization") respectively relative to the previous FY.
The company's internationally-focused commerce business, meanwhile, has shown ferocious outperformance. If trends continue, revenues and EBITA for FY 2025 will close 26% and 89% higher than previous FY's respectively. Its total revenue share also increases by 2%.
Current trends in the company's AI and cloud business indicate that FY 2025's revenue and EBITA will close 9% and 75% higher than previous FY's. Its total revenue also increases by 1% and is presently deemed the most-vaunted growth driver by the company.
The company's logistics division will close out FY 2025 with a 6% increase and a 15% decrease in revenue and EBITA respectively than previous FY's. The local services (food/grocery delivery, map data, etc.) segment will close FY 2025 with a 12% increase and a massive 81% decrease in revenue and EBITA over previous FY's.
The logistics and local services divisions highlight the challenging environment within the Chinese economy. With goods movement volumes in disarray as global economies veer away from China and declining economic fortunes in the mainland affecting consumption, these segments' networks cost burdens have increased. Nonetheless, the projected rise in revenues indicates that the company is busy at work in both these sectors, potentially at a cost to its rivals.
Led by strong performance in the China business, AI & cloud business and international commerce, overall revenue and cost of revenue are projected to close FY 2025 a modest 6% and 1% higher than previous FY's respectively.
On the other hand, Net Income is poised to close out FY 2025 a full 88% higher than last FY's while Earnings Per Share (EPS) is set to close with a solid 105% higher than previous FY. Both these line items have steadily increased over the past two full FYs as well.
Market Convictions and Trends
When considering the movement of the company's two tickers in their respective exchanges, a distinct sharpening of conviction is discernible.
In the previous article around Alibaba's Q1 earnings, traded volumes in its Hong Kong-listed shares had averaged at 3.5 times that of its U.S.-listed American Depositary Shares (one of which equals eight shares) over the past year. Now, this ratio has increased to 4.1 times. At a period when China's retail investors have loosened their overall conviction across the board almost in tandem with global investors, this heightened ratio indicates that the company's Hong Kong ticker has been a net beneficiary as a "safe harbour" with a greater survivability bias in the midst of China's fitful economy.
Meanwhile, the U.S. ticker has maintained healthy volumes, with occasional dips in activity even resulting in increased volumes in Hong Kong. In terms of price performance, the U.S. ticker's valuation shows a startling 10% underperformance over the past year, with the bulk of this attributable to the immediate period after the "9M" earnings release.
In Conclusion
Despite its AI and cloud businesses delivering such massive earnings in the year so far, it's unlikely that this will remain as free cash for all of Alibaba's endeavours. The company has committed to spending $53 billion in its AI infrastructure and data centers over the next three years - thus effectively cycling back these earnings back into this segment. However, to build this infrastructure, it will likely need U.S. tech, which it might have hurdles accessing.
On the 21st of February, the White House unveiled the "America First Investment Policy" wherein it highlighted the need to contain the risk of certain adversaries "systematically direct and facilitate investment in United States companies and assets to obtain cutting-edge technologies, intellectual property, and leverage in strategic industries." Effectively, this means that the sale of technology to the likes of Alibaba will be heavily scrutinized.
Another pressure point on the company is the directive made to government officials to "determine if adequate financial auditing standards are upheld for companies covered by the Holding Foreign Companies Accountable Act". Alibaba, along with over 100 other companies, was listed by the U.S. Securities and Exchange Commission (SEC) in 2022 as being "non-compliant", leading to Alibaba's primary listing in Hong Kong. The new policy demands a time-bound mitigation protocol over "perpetual and expensive compliance obligations". It is quite unlikely that Alibaba would be able to comply, since the Chinese government bars examination of its companies' books by foreign regulators on national security grounds.
The facts, as they lie, indicate that Alibaba is much more than an "AI company" as per its segment trends. Also, as the variance in ticker performance indicates, there is substantial conviction resting in the company among investors not in the United States. In the AI space, the company unveiled the QwQ-Max, an AI reasoning model that it contends rivals both OpenAI’s o1 and DeepSeek’s R1. Whether it can monetize this claim with the acquisition of infrastructure required to deliver viable commercial solutions is a question worth more than $53 billion.
All in all, the drop in U.S. ticker performance is well-reasoned but the company still holds enormous potential in its other endeavours as well. It's an interesting bet for U.S.-based investors if they look past the delisting threat. For investors elsewhere, the delisting threat as well as the volume trends makes the Hong Kong ticker an interesting proposition to consider. Caveat emptor.
Professional investors with access to European exchanges and a more tactical bent might find two ETPs particularly interesting for tactical trading strategies. The “3x Alibaba ETP” ($3X BABA(BAB3.UK)$) provides magnified exposure to the upside of the U.S. ticker’s performance while the “-3X Alibaba ETP” ( $LS -3X SHORT ALIBABA (BABA) ETP(BA3S.UK)$) does the same on the downside. Both products have seen a massive amount of buy-ins in recent times.
But like with many products favourd by retail investors, the upside sees a lot more in turnover than the downside.
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