Sun Masayoshi and SoftBank cleared all of Ali's shares and switched to All-in-AI investments. Is the trend coming?

SoftBank Group announced on Monday that the company has sold almost all of its Alibaba Group (BABA.US) shares in order to focus on investment in the field of artificial intelligence (AI). During the earnings call, SoftBank's chief financial officer Yoshimitsu Goto (Yoshimitsu Goto) confirmed the shift in the company's investment focus from e-commerce giant Alibaba to British chip design company ARM. SoftBank revealed that Alibaba's share of SoftBank's net asset value has dropped from 48% in 2020 to close to zero, while ARM (ARM.US)'s share has risen to 45%, and Vision Fund accounts for 29%.

According to Nikkei Asia, ARM plans to develop AI chip prototypes next spring and plans to begin large-scale production in the fall. ARM will establish a new division dedicated to the development of AI chips, and eventually this division will become part of the SoftBank Group.

After three consecutive years of losses, SoftBank promised to invest 5 billion US dollars in the AI sector and said it has promised to invest 1 billion US dollars in each of the five projects. SoftBank Group's British chip design company ARM helped the Group grow significantly in its net asset value. Furthermore, the SoftBank Group had a net loss of nearly 228 billion yen for the fiscal year ending March 31. Despite this, SoftBank's net asset value reached 183.6 billion US dollars as of March 31, an increase of 48 billion US dollars over three months ago, mainly due to large purchases of ARM shares by investors.

Since ARM's stock was listed in the US in September last year, SoftBank still holds 90% of the company's shares. ARM's design is widely used in smartphone chips, and is increasingly being used in the field of AI. After a difficult period, SoftBank began to bet on the growth of AI. SoftBank Chief Financial Officer Yoshimitsu Goto said that while the company is defending, it is also capable of attacking.

SoftBank's flagship fund, Vision Fund, has suffered significant losses over the past few years, causing the company not to make new investments for a period of time. Recently, however, SoftBank has begun actively seeking investment opportunities again. SoftBank and its associated investment funds invested 3.9 billion US dollars in the fiscal year ending March 31, and promised to invest in five more companies, each with an investment amount of about 1 billion US dollars. New investments include GreenBox, a joint venture providing automated warehousing services operated by AI.

ARM's recently released earnings report shows a sharp increase in net profit in the three months ending March, partly due to increased demand for chips related to AI and data centers. SoftBank's Vision Fund made a profit in the last fiscal year after losing tens of billions of dollars in the previous fiscal year. Technology stocks have performed well for most of the year so far due to the market's fervent pursuit of AI and the expectation that the Federal Reserve may cut interest rates later this year.

SoftBank Chief Financial Officer Yoshimitsu Goto said that SoftBank hopes ARM and other companies that SoftBank invests in can create a new AI ecosystem. He also mentioned that SoftBank CEO Masayoshi Son (Masayoshi Son) will focus on developing the AI business, so he will not attend the quarterly earnings meeting, but may attend the June annual shareholders' meeting. In a speech in October last year, Sun Zheng emphasized that AI will become much more powerful than all human intelligence within the next ten years, and warned, “Either use AI or be left behind by AI.”

On May 14, Alibaba released financial results for the quarter ending March 2024 and fiscal year 2024 (the fiscal year starts and ends on April 1, 2023 to March 31, 2024).

For the financial year ending March 31, 2024, Ali's revenue was RMB 941,168 billion (US$130.350 million), an increase of 8% over the previous year. Operating profit was $113.50 billion (US$15.699 billion), up about 13% year over year. The year-on-year increase was mainly due to an increase in adjusted EBITA and a reduction in equity incentive fees, partially offset by increases in intangible assets and goodwill impairment.

In this fiscal year, intangible asset impairment was mainly related to Gaoxin retail, while goodwill impairment was mainly related to Youku. Excluding equity incentive expenses, intangible asset and goodwill impairment, and several other items, adjusted EBITA (a non-GAAP financial measure) increased 12% year over year to $165,028 billion ($22.856 billion).

Net profit attributable to common shareholders was $79.741 billion ($11.044 billion). Net profit was 71,332 billion yuan (US$9.889 billion), an increase of 9% and 5.759 billion yuan over the previous year.

Mainly due to an increase in operating profit, partially offset by an increase in net losses due to changes in the market value of our equity investments.

Excluding equity incentive expenses, income (loss) from investments, impairment of intangible assets and goodwill, and several other items, non-GAAP net profit for fiscal year 2024 was $157.479 billion (US$21.811 billion), an increase of 11% year-on-year compared to $141,379 billion in fiscal 2023.

Net cash flow from operating activities was $182,593 billion (US$25.289 billion), down 9% from FY2023 of $19.752 billion.

Free cash flow (a non-GAAP financial liquidity measure) was $156.210 billion ($21.635 billion), down 9% from $171,663 billion in fiscal 2023.

The year-on-year decline mainly reflects the receipt of Ant Group's special dividend of 14.464 billion yuan in fiscal year 2023 and changes in working capital, partially offset by the year-on-year increase in adjusted EBITA.

Ali's operating costs for fiscal year 2024 were 586,323 million yuan (81,205 million US dollars), accounting for 62% of revenue, and 549,695 million yuan for fiscal year 2023, accounting for 63% of revenue.

Product development expenses were $52,256 million ($7,237 million) in fiscal year 2024, accounting for 6% of revenue, and 56,744 million yuan for fiscal year 2023, accounting for 7% of revenue.

Sales and marketing expenses were 115,141 million yuan (15,947 million US dollars) in fiscal year 2024, accounting for 12% of revenue, 103,496 million yuan in fiscal year 2023, and 12% of station revenue.

General and administrative expenses were $41,985 million (US$5,815 million), accounting for 5% of revenue, and $42,183 million for fiscal year 2023, accounting for 5% of revenue.

Equity incentive expenses The equity incentive fee for fiscal year 2024 that incorporates these costs and expenses is $18,546 million ($2,569 million), and $30,831 million for fiscal year 2023. The share of equity incentive expenses as a share of revenue was reduced from 4% in FY2023 to 2% in FY2024.

Ali International Digital Business Group, Local Life Group, Dawen Entertainment Group, and others are still losing money

Since the three months ending June 30, 2023, Ali has adopted a new organizational structure that includes six major business groups and other business companies.

1) The revenue of Taotian Group's retail business in China in the 2024 fiscal year was 414,414 million yuan (57,396 million US dollars), an increase of 5% compared to 395,352 million yuan in fiscal year 2023 — Taotian Group's dominant revenue position is still significant.

Customer management revenue increased 4% year over year, mainly due to healthy year-on-year growth in online GMV (excluding unpaid orders).

Direct and other revenue from retail businesses in China was 110,405 million yuan (15,291 million US dollars) in fiscal year 2024, an increase of 6% compared to 103,811 million yuan in fiscal year 2023, mainly driven by strong revenue in the consumer electronics and electrical appliances category.

Taotian Group's Chinese wholesale business revenue for the 2024 fiscal year was 20,479 million yuan (2,836 million US dollars), an increase of 15% compared to 17,854 million yuan in fiscal year 2023, mainly due to increased revenue from value-added services provided to paid members.

In fiscal year 2024, Taotian Group's adjusted EBITA was 194,827 million yuan ($26,983 million), an increase of 3% over the 2023 fiscal year of 189,140 million yuan. The increase was mainly due to increased revenue from customer management services and narrowing losses in several businesses, partly offset by increased investment in user experience and technology infrastructure.

2) Cloud Intelligence Group's revenue for the 2024 fiscal year was 106,374 million yuan (14,733 million US dollars), an increase of 3% over the 2023 fiscal year of 103,497 million yuan. The year-on-year increase in revenue was mainly driven by Alibaba's consolidated business.

Overall revenue (excluding revenue from Alibaba's consolidated subsidiaries) declined slightly year-on-year as project-based contract revenue was gradually reduced with lower profit margins. Strong revenue growth from public cloud and AI-related products is expected to offset the decline in project-based contract revenue.

In fiscal year 2024, Cloud Intelligence Group adjusted its EBITA to 6,121 million yuan (848 million US dollars), an increase of 49% over 4,101 million yuan in fiscal year 2023, mainly due to product structure improvements and operational efficiency improvements due to the focus on public clouds.

3) Ali International Digital Business Group's international retail revenue for the 2024 fiscal year was 81,654 million yuan (11,309 million US dollars), a 60% increase compared to 50,933 million yuan in fiscal year 2023 — a rapid increase, but my peers also grew very rapidly abroad, and some were even more intense.

This increase was mainly due to strong growth in overall AIDC retail orders, revenue contributions from AliExpress Choice, and increased monetization rates.

Ali International Digital Business Group's international wholesale business. In the 2024 fiscal year, international wholesale business revenue was 20,944 million yuan (2,901 million US dollars), an increase of 7% compared to 19,573 million yuan in fiscal 2023. The increase was mainly due to increased revenue from value-added services associated with cross-border business.

The adjusted EBITA for the 2024 fiscal year was a loss of 8,035 million yuan (1,113 million US dollars), and the 2023 fiscal year was a loss of 4,944 million yuan.

The year-on-year increase in losses was mainly due to increased investment in businesses including AliExpress Choice, Trendyol's cross-border business and Miravia, which was partly offset by an increase in monetization rates.

4) In fiscal year 2024, Cainiao Group's revenue was 99,020 million yuan (13,714 million US dollars), an increase of 28% over 77,512 million yuan in fiscal year 2023, mainly contributed by revenue growth from cross-border logistics fulfillment services.

In the 2024 fiscal year, Cainiao Group's adjusted EBITA was a profit of 1,402 million yuan (194 million US dollars), and the 2023 fiscal year was a loss of 391 million yuan. The year-on-year increase was mainly due to improvements in the operating performance of cross-border logistics fulfillment services and domestic logistics businesses, and was partially offset by retention incentives granted to Cainiao employees due to the withdrawal of the initial public offering.

5) Local Life Group's revenue for the 2024 fiscal year was 59,802 million yuan (8,282 million US dollars), an increase of 19% compared to 50,249 million yuan in fiscal year 2023, mainly due to the increase in orders from Hungry and Gaode businesses.

In fiscal year 2024, Local Life Group's adjusted EBITA was a loss of 9,812 million yuan (1,359 million US dollars), and a loss of 13,148 million yuan in fiscal year 2023, mainly due to the continuous narrowing of the “home to home” business losses due to improvements in Hungry's unit economic efficiency and expansion of scale.

6) Dawen Entertainment Group's revenue for the 2024 fiscal year was 21,145 million yuan (2,929 million US dollars), an increase of 15% over the 2023 fiscal year of 18,444 million yuan, mainly driven by strong revenue growth in Alibaba Pictures's offline entertainment business.

In the 2024 fiscal year, Dawen Entertainment Group adjusted its EBITA to a loss of 1,539 million yuan (213 million US dollars), and a loss of 2,789 million yuan for the 2023 fiscal year. The year-on-year narrowing of losses was mainly due to the increase in the profit level of Alibaba Pictures.

7) For all other fiscal year 2024, revenue was 192,331 million yuan ($26,637 million), down 2% from 197,115 million yuan in fiscal year 2023, mainly due to the decline in Gaoxin's retail revenue, which was partially offset by Hema's revenue growth. The decline in Gaoxin's retail revenue was mainly due to the reduction in the scale of the supply chain business and the reduction in customer unit prices.

The adjusted EBITA for all other segments for fiscal year 2024 was a loss of $9,160 million ($1,268 million) and a loss of $9,388 million for fiscal year 2023.

With the organizational transformation of Ali, as of the end of March 2024, the total number of Alibaba employees was 204,900, a decrease of more than 14,000 from the previous quarter, and a total decrease of about 30,000 for Ali.

As for investors, if they also want to invest in Ali or follow Sun Zhengyi's boss in the AI layout. You can try Chinese securities and stocks in the AI sector.Finally, I also wish everyone to seize the upcoming big wave of market and make big profits.