Alibaba (09988.HK) Increased Investment in Flash Sales Weighs on Short-Term Profits August 27, 2025 21

PSR Recommendation: ACCUMULATE Status: Maintained
Target Price: HKD144

Company background
The company provides technological infrastructure and marketing platforms, operating
seven business segments. The China Commerce segment includes retail commerce
businesses such as Taobao, Tmall, and Hema, as well as wholesale businesses. The
International Commerce segment comprises international retail and wholesale commerce
businesses, including Lazada and AliExpress. The Local Services segment includes locationbased businesses such as Ele.me, Amap, and Fliggy. The Cainiao segment covers domestic
and international end-to-end logistics services and supply chain management solutions. The
Cloud segment offers public and hybrid cloud services to enterprises both in China and
internationally, including Alibaba Cloud and DingTalk. The Digital Media and Entertainment
segment includes platforms such as Youku, Quark, and Alibaba Pictures, along with other
content and distribution platforms, as well as online gaming businesses. The Innovation
Initiatives and Others segment encompasses Damo Academy, Tmall Genie, and other
businesses.
Financial performance
For FY2025Q4, the company achieved total revenue of RMB 236.5 billion, a year-on-year
increase of 6.6%; operating profit was RMB 28.5 billion, up 92.8% year-on-year; adjusted
EBITA reached RMB 32.6 billion, an increase of 36.1% year-on-year; adjusted net profit was
RMB 29.8 billion, rising 22.2% year-on-year.
For full Year FY2025, the company reported total revenue of RMB 996.3 billion, a year-onyear increase of 5.9%; operating profit was RMB 140.9 billion, up 24.3% year-on-year;
adjusted EBITA amounted to RMB 173.1 billion, growing 4.9% year-on-year, primarily driven
by revenue growth and improved operational efficiency, partially offset by increased
investments in e-commerce and technology sectors. Adjusted net profit was RMB 158.1
billion, remaining stable year-on-year.
By revenue type, Taotian Group revenue reached RMB 449.8 billion, up 3.4% year-on-year,
accounting for 45.1% of total revenue. Alibaba International Digital Commerce Group
revenue was RMB 132.3 billion, an increase of 28.9% year-on-year, representing 13.3% of
total revenue. Cloud Intelligence Group revenue amounted to RMB 118.0 billion, growing
11.0% year-on-year, accounting for 11.8% of total revenue. Local Services Group revenue
reached RMB 66.9 billion, up 12.2% year-on-year, representing 6.7% of total revenue.
Taobao and Tmall Group: GMV demonstrated steady growth and monetization rate
improved, but increased investment in flash sales weighed on profits
Driven by national policies to expand domestic demand and boost consumption, coupled
with the platform’s continued efforts to enhance price competitiveness and optimize the
consumer experience, we expect Taotian Group’s GMV growth in FY2026Q1 to accelerate
compared to the previous quarter. The deeper application of site-wide promotion tools,
along with the additional 0.6% basic software service fee introduced by Taobao since
September 2024, collectively contributed to a year-on-year improvement in Taotian Group’s
overall monetization rate. As a result, we anticipate that customer management revenue
will increase by 7.7% year-on-year in FY2026, reaching RMB 347 billion.
However, substantial investments in flash sales are putting pressure on short-term profits.
On July 2, 2025, Taobao Flash Sales announced that it would provide direct subsidies totaling
RMB 50 billion to merchants and consumers over the next 12 months. The initiative yielded
significant results shortly after its launch—on July 7, daily orders for Taobao Flash Sales
combined with Ele.me exceeded 80 million (compared to just over 60 million on June 23 of
the same year), with non-food orders surpassing 13 million and daily active users exceeding
200 million.

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About the author

Profile photo of Megan Tao

Megan Tao
Analyst
Research

She graduated from the University of New South Wales with a bachelor's degree in accounting and finance and from the University of Hong Kong with a master's degree in finance. He is currently a licensed analyst at Phillip Securities, mainly responsible for research in the TMT and semiconductor sectors, and has worked in securities companies and family offices.

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