Bullbear Buffett : A summary and discussion on Alibaba's income statements for FY 2022

Saturday, 6 June 2026

A summary and discussion on Alibaba's income statements for FY 2022 - FY 2026

Over the past five fiscal years (FY2022–FY2026), Alibaba has demonstrated steady revenue growth, expanding from HK$1,034.7 billion in FY2022 to HK$1,124.7 billion in FY2026, with annual increases of approximately 3–5 percent. This top-line stability reflects the resilience of its core e-commerce business and the gradual contribution from strategic initiatives such as cloud computing and international expansion. However, profitability trends have been more nuanced. Contrary to a common narrative of prolonged margin compression, net income actually grew modestly but consistently over the first three years: from HK$75.2 billion in FY2022 to HK$82.9 billion in FY2023 (up 10.3 percent), and further to HK$87.1 billion in FY2024 (up 5.0 percent). This period was not one of earnings decline but rather of slow, disciplined growth, even as Alibaba faced intense competition from rivals like Pinduoduo and Douyin (TikTok) and made heavy strategic investments in new businesses.

The inflection point came in FY2025, when net income surged 60.6 percent to HK$139.8 billion—a multi-year peak driven by a combination of cost optimization, asset divestments, and improved operational efficiency following the company’s major restructuring. This profit boom, however, proved temporary. In FY2026, net income fell by approximately 16.8 percent to HK$116.4 billion, as Alibaba aggressively reinvested its earnings into two capital-intensive priorities: quick-commerce (instant retail, primarily through Taobao Instant Commerce) and AI/cloud infrastructure. The sharp increase in SG&A expenses (up 42.9 percent in FY2026) and higher depreciation charges (up 48.5 percent) directly compressed margins, illustrating management’s deliberate choice to trade short-term profitability for long-term strategic positioning.

The latest five quarterly statements provide a granular view of this profit volatility. In the second quarter of FY2026 (September 2025 quarter), net income reached HK$46.5 billion on revenue of HK$270.8 billion, representing a strong performance. But over the next two quarters, net income collapsed to HK$22.9 billion (Q3) and then to HK$17.9 billion (Q4), even as revenue climbed to a peak of HK$312.5 billion in Q3. This divergence was driven by mounting operating costs from quick-commerce expansion and rising R&D spending on AI. Encouragingly, the most recent quarter (Q1 FY2026, ending March 2026) showed a clear rebound, with net income rising to HK$28.7 billion—a 60.5 percent increase from the prior quarter—suggesting that the initial investment drag may be easing as these new businesses begin to scale more efficiently.

Several strategic events have shaped this financial trajectory. The “1+6+N” restructuring announced in 2023 aimed to unlock value by separating Alibaba’s business units, but geopolitical tensions (particularly US chip export restrictions) forced the company to scrap the full spin-off of its cloud unit. Instead, Alibaba pivoted to simplifying its portfolio by disposing of non-core assets such as Sun Art and Intime, which helped streamline operations and generated one-off gains that boosted FY2025 earnings. More importantly, the cloud division has transformed from a cost center into a genuine growth engine: in the September 2025 quarter, cloud revenue grew 34 percent year-on-year, driven by AI-related workloads that more than doubled and now account for over 20 percent of external cloud revenue.

In conclusion, Alibaba is navigating a deliberate strategic transition. Its core e-commerce business remains stable, providing a reliable revenue foundation. However, the company is consciously reinvesting its earnings—including the windfall from FY2025—into quick-commerce and AI infrastructure, which are margin-dilutive in the near term but hold the key to future growth. Investors should therefore expect continued earnings volatility as Alibaba balances short-term profitability against long-term market leadership. The critical question is whether these large-scale investments will generate sustainable returns quickly enough to justify the current profit compression. Based on the latest quarterly rebound, there are early signs that the strategy may be starting to pay off.

No comments:

My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

Bullbear Buffett

Saturday, 6 June 2026

A summary and discussion on Alibaba's income statements for FY 2022 - FY 2026

No comments:

All equity security investments present a risk of loss of capital

The Ultimate Hold-versus-Sell Test

Some thoughts on Analysing Stocks (KISS)

Benjamin Graham

Sell the losers, let the winners run.

Investment Style

Warren Buffett

Political and Economic News

Interesting Blogs