Alibaba's Q2 Earnings and Senior Unsecured Notes Offering Supported Stock Repurchases

On November 18, Alibaba announced on HKEx that it intended to issue senior unsecured notes denominated in dollars and in RMB concurrently. According to Alibaba, the issuance of two notes is subject to market and other conditions. Two notes are not conditional on each other. The principal amount, interest rate, maturity date, and other terms of the notes will be determined at the time of pricing of the offering. Alibaba intends to apply the net proceeds from the notes offering for general corporate purposes including repayment of offshore debt and share repurchases.

Besides the proposal of note issuance, another big incident of Alibaba is its earnings release. On November 15, Alibaba released its second quarter FY2025 financial report. The report showed that Alibaba realized total revenue of $33.7 billion in the quarter, growing 5% year-on-year and meeting market expectations.

In the report, Alibaba highlighted the robust growth of platform orders. During this quarter, the double-digit YoY growth of TaoTian (abbr. of Taobao and Tmall platforms) order volume drove the growth of online GMV. The number of 88 VIP members continued to grow in double digits to 46 million people.

Wu Yongming, CEO of Alibaba Group, said during the quarter, TaoTian served consumers better by constantly investing in user experience and diversifying product offerings. Alibaba expected a significant volume increase on Taobao and Tmall based on its cooperation with its technology peers and expansion of payment and logistics services.

Other than earnings growth, the report also reflected Alibaba's scheme of repurchasing shares, investing $4.1 billion in Q2 to repurchase 414 million common shares, with a further net reduction of 2.1% in shares outstanding from the end of June. These stock buybacks mean to realize better returns for shareholders. According to statistics, Alibaba has repurchased more than $4 billion for three consecutive quarters.

Guoxin Securities commented on Alibaba's Q2 FY2025 earnings report, which showed that the company's operating revenue increase was driven by its international digital commerce, cloud business, and local groups. It analyzed that the merit of Alibaba's earnings is that the flat TaoTian's revenue growth, the outperformed cloud computing business, the triple-digit growth in AI-related revenues, and a significant improvement in EBITA margins. A decline in its EBITA margin stemming from Alibaba's continued investment in user experience indicates a risk. Given the continuation of its share buyback program of $22 billion, the bank maintained Alibaba's “superior to the market" rating with a target price of HK$120-HK$127.