On February 20, Alibaba Group Holdings Limited released its third-quarter financial report for the fiscal year 2025, which concluded on December 31, 2024. The report reveals that Alibaba generated a revenue of 280.15 billion yuan, marking an 8% increase from the previous yearThe operating profit experienced a remarkable surge, reaching 41.205 billion yuan – an impressive 83% year-on-year growthNon-GAAP net profit stood at 51.066 billion yuan, reflecting an increase of 6% compared to the same quarter a year earlier.

The primary source of revenue for Alibaba is the Taobao and Tmall operations, which report a total revenue of 136.09 billion yuan, an increase of 5% compared to last yearThe adjusted EBITA (Earnings Before Interest, Taxes, and Amortization) was recorded at 61.083 billion yuan, a slight uptick from 59.93 billion yuan in the same quarter of the prior yearNotably, revenue from customer management saw a significant growth of 9%, a marked improvement from the 2% growth observed in the previous quarterMoreover, Alibaba's International Digital Commerce Group reported revenues of 37.756 billion yuan, a staggering 32% growth year-on-year; however, the adjusted EBITA reflected a loss of 4.952 billion yuan compared to a loss of 3.146 billion yuan last year, attributed to increased investments in its cross-border business ventures with Trendyol and AliExpress.

Alibaba Cloud also showed positive progress, generating revenue of 31.742 billion yuan during the reporting period, showcasing a 13% growth that tripled from the previous quarter's 7% incrementThe report attributes this growth to rising public cloud revenues prompted by AI-related productsAlibaba Cloud's AI revenue has seen triple-digit growth for six consecutive quartersFurthermore, its external commercial revenue climbed by 11% year-on-year.

Turning to other segments, the Local Services Group saw its revenue grow by 12% year-on-year, while the Digital Entertainment segment recorded an 8% revenue increase despite still operating at a loss

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Contrarily, Cainiao's quarterly revenue experienced a decline of 1%, with adjusted EBITA dropping by a staggering 76%, primarily due to the decreasing profits in cross-border logistics solutions and logistical operations within ChinaDuring this quarter, it was announced that Alibaba entered into equity sale agreements with Intime and Gome Retail.

According to WIND data, Alibaba's Hong Kong stock surged by 48.7% this year, closing at 120.9 HKD per share on February 20. The rise in share price has been driven largely by growing valuations largely fueled by AI developments, with predictions that Alibaba Cloud may benefit from capabilities introduced by DeepSeekAfter Apple secured an order for services, Alibaba's stock growth over the past five days settled at 11.54%, with the market now on high alert regarding Alibaba Cloud's future performance and the investments Alibaba plans for AI technology.

In light of its strategic development plans, Alibaba is noticeably ramping up its investment in its core business, Alibaba CloudThe latest financial report highlights this trend, noting capital expenditures for the quarter reached 31.78 billion yuan, signaling proactive movements concerning business expansion and asset procurementHowever, it should be noted that the free cash flow for this quarter declined by 31%, settling at 39.02 billion yuanThe report indicates that this downturn was chiefly due to substantial investments made by Alibaba Cloud in improving its cloud infrastructureWith the acceleration of digital transformation, Alibaba Cloud has significantly increased its financial input towards enhancing server capabilities, data center functionalities, and overall infrastructural developmentThe decline in free cash flow appears to be mitigated partially by changes in other operational funds, illustrating a dynamic equilibrium in Alibaba's overall financial allocation.

Taking a closer view at the growth trajectory, the past year has displayed an impressive revenue rebound for Alibaba Cloud

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Initially, cloud growth hovered around only 3%, yet the recent quarter has propelled this figure to 13%, showcasing marked progressFurthermore, Alibaba Cloud has maintained a consistent growth pattern in revenues over recent quarters while steadily turning profits, with its adjusted EBITA margin resting around 10%. This quarter, the adjusted EBITA saw a 33% uptick reaching 3.138 billion yuan, largely driven by the optimization of its product mix, prioritizing higher-margin public cloud products, while operational efficiencies have also significantly improved, thereby driving profit increasesNevertheless, to support its development, Alibaba Cloud has consistently increased its investments in customer acquisition and technology research and developmentThankfully, the benefits arising from these strategic initiatives have partially offset these exhortations, ensuring a continued trajectory of profitability.

During the earnings call following the report's release, Alibaba Group's CEO Zhao Xingming conveyed that the next three years could possibly witness the largest infrastructure investments in cloud services and AI in the company's historyHe emphasized that the growing user demands observed currently, along with anticipated industry trends, suggest that the resulting infrastructure investments will be rapidly absorbed by both internal and external client needs.

As for the future, Alibaba's strategic focus will remain on three primary sectors: e-commerce, technology related to AI and cloud computing, and internet platform productsIn this trajectory, the company plans to significantly invest in AI-related infrastructure, foundational model platforms, and AI-native applications over the next three years, while also indicating upcoming releases based on the Qwen2.5-Max deep reasoning model.

As reflected in the stock market, following the release of the financial report, Alibaba's U.S. stock soared, signaling a 10% rise as the pre-market price reached $138.37 per share, evidencing the bullish investor sentiment built around the company's recent performance and optimistic future forecasts.

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