• The holding company set to pay first-ever dividend of about $2.5 billion in aggregate

• AIDC’s Q2 revenue +53% YoY as Group’s reorganization unleashes entrepreneurialism

Alibaba Group said it would pay its first-ever dividend, with an aggregate distribution of $2.5 billion, and reported a solid set of second-quarter results.

The holding company’s business groups accelerated their deployment of artificial intelligence during the quarter. Taobao and Tmall Group added to its AI toolbox for merchants, while Alibaba Cloud released an upgraded version of its proprietary large language model, Tongyi Qianwen.

Alibaba Group completed its leadership transition on Sept. 10, with Joe Tsai assuming the role of Chairman and Eddie Wu becoming CEO. They laid out a strategy to embrace the opportunities created by advances in artificial intelligence.

“We are committed to investing for growth and making bold decisions where necessary,” said Wu in his first earnings report as Alibaba Group’s CEO. “Through a more flexible organizational governance mechanism, we aim to capture brand new opportunities from the ongoing AI technological transformation and create more value for our customers,” he added in a statement on Thursday.

Alibaba’s board of directors approved the annual cash dividend for fiscal year 2023 of $0.125 per ordinary share, or $1.00 per ADS.

Solid Results

Alibaba Group reported a solid set of second-quarter results. During the three months ended Sept. 30, Alibaba’s revenue climbed 9% year-over-year to RMB224.79 billion ($30.81 billion), in line with the consensus forecasts.

The holding company’s adjusted EBITA, a non-GAAP measurement of core earnings, increased 18% year-over-year to RMB42.85 billion for the quarter. Quarterly non-GAAP net income climbed 19% year-over-year to RMB40.19 billion.

In March, Alibaba embarked on a major reorganization engineered to unlock value and spur its businesses to be more nimble.

“Alibaba Group delivered a solid quarter, marked by renewed momentum and energy across multiple businesses as a result of our strategic reorganization,” said Alibaba Group’s Wu.

For one, Alibaba International Digital Commerce Group (AIDC) delivered robust growth, posting second-quarter revenue 53% higher year-over-year. AIDC is preparing to raise funds externally. Meanwhile, Alibaba’s logistics arm Cainiao applied for an initial public offering (IPO) in Hong Kong.

Cloud Rethink

The holding company said that in light of the recent expansion of U.S. restrictions on exports to China of advanced computing chips, it is re-evaluating its strategy to execute a sustainable growth plan for Cloud Intelligence Group.

Given current uncertainties, it believes a full spin-off of Cloud Intelligence Group may not enhance value to shareholders as it had originally planned. So, it has decided not to pursue the full spin-off while continuing to evaluate alternatives to highlight the value of Cloud Intelligence Group.

Alibaba added that the IPO of technology-powered grocery chain Freshippo has been put on hold to evaluate market conditions and other factors that would contribute to a successful transaction to enhance shareholder value.

China Retail

Consumer sentiment in China is gradually recovering post-pandemic. In October, the country’s total retail sales of consumer goods rose 7.6% year-on-year. Still, against a backdrop of global economic uncertainty, mass affluent and lower-income Chinese consumers have sought value for money, according to retail experts.

In May, Taobao and Tmall Group unveiled a three-year plan to put users first and claw back market share. Its Taobao app grew users organically year-over-year in the month ended Sept. 30 due to its content and price-competitive strategy.

Alibaba’s largest revenue generator, Taobao and Tmall Group’s China commerce retail business, grew quarterly revenue by 3% year-on-year. The business’s quarterly customer management revenue, mainly marketing services and commissions on transactions, gained 3% year-over-year.

Taobao and Tmall Group released a slew of AI products and services to help improve merchants’ operating efficiency, including tools for new online store designs, product photos and description generation, customer service, and financial and order management.

In August, Taobao and Tmall Group upgraded a key advertising platform, dubbed the Wanxiangtai Unbounded Edition, featuring proprietary AI technologies. Alibaba reported strong adoption of Wanxiangtai Unbounded Edition among new and existing merchants during the quarter.

Global Connections

International retail commerce was a highlight of second-quarter results. Marketplace AliExpress and Southeast Asian e-commerce platform Lazada registered a double-digit quarterly jump in orders year-over-year. 

AIDC said the quarterly revenue of its international retail commerce business, including Lazada, AliExpress, Trendyol, Daraz and Miravia leaped 73% year-over-year.

AIDC’s losses significantly narrowed year-over-year primarily because margins improved at Lazada and Trendyol. The improvement was partly offset by the increase in investment in its new businesses, such as local e-commerce platform Miravia in Spain, and AliExpress’s Choice.

A broader array of logistics services supported international commerce, such as Cainiao’s five-day delivery service. Cainiao’s quarterly revenue grew 25% year-over-year.

Gen AI Advances

Generative AI could drive a 7% increase in global GDP and lift productivity growth by 1.5 percentage points over a decade, according to a report by Goldman Sachs, an investment bank.

Cloud Intelligence Group released an upgrade of its proprietary large language model Tongyi Qianwen last month and rolled out eight vertical models for specific industries and use cases.

Its open-source AI developer community ModelScope has gathered over 2,300 AI models, attracting 2.8 million AI developers and over 100 million cumulative model downloads since launch. It is making the open-source version of its Tongyi Qianwen model available in ModelScope, which will include a 72 billion-parameter version.

Cloud Intelligence Group posted quarterly revenue growth of 2% year-over-year.