Growth Dragons Weekly: Alibaba, Tencent, NetEase Earnings; Meituan Enters Brazil; Hengrui’s Billion Dollar IPO
It is earnings season so this week is mainly about Big Tech earnings review:
Alibaba Missed Revenue Estimates—But Don’t Miss the Stock
Top Investors Took Profits on China Stocks in Q1, While Others Like Ray Dalio Bought More
Tencent and NetEase Got a Big Boost from Gaming in Q1
Meituan’s Keeta Expands to Brazil After Success in Hong Kong and Saudi Arabia
Hengrui Pharma, Backed by Singapore’s GIC, Seeks Billion-Dollar IPO in HK
#1 Alibaba Missed Revenue Estimates—But Don’t Miss the Stock
For the quarter ended March 2025, Alibaba Group reported a 7% year-on-year increase in revenue to 236.5 billion yuan (S$42.6 billion), slightly missing analysts’ average estimate of 237.9 billion yuan. Despite this modest shortfall, net income nearly quadrupled to 12.4 billion yuan—though this was largely driven by gains from equity investments.
The market reacted cautiously, with shares falling more than 6% in pre-market trading. We believe this is a short-term pullback—and investors should see it as a buying opportunity rather than a reason to sell.
The Business Is Improving—Thanks to New Management and a Better Macro Outlook
The improvement across Alibaba’s businesses is real. Here’s a snapshot of the segment revenue trends before we dive deeper into our commentary:
Taobao and Tmall Group (TTG): Revenue grew 9% year-on-year—a notable recovery after several quarters of flat growth.
While competition remains intense—with ByteDance, JD.com, and PDD all gunning for market share—Alibaba is adapting. A new partnership with Xiaohongshu (a popular social media platform in China) now allows Taobao and Tmall merchants to embed product links into influencer content. This move into social commerce is showing early signs of working, helping to reaccelerate e-commerce growth into the high single digits.Cloud Intelligence Group: Revenue jumped 18% year-on-year, breaking out of the single-digit growth trend of past quarters. This is a core focus for the current management team, which has prioritized AI as a strategic driver.
Alibaba has committed over 380 billion yuan over the next three years to build AI infrastructure—including advanced data centers. CEO Eddie Wu has publicly stated Alibaba’s ambition to achieve artificial general intelligence (AGI), aiming to join the ranks of global AI leaders like OpenAI. These investments are not just about the cloud business—they also enhance recommendation and search capabilities across Alibaba’s platforms.
The company has been aggressively rolling out and upgrading its AI offerings. The Qwen 3 family of large language models has been continuously improved to drive performance and global adoption. Even its video-generation model has seen two major upgrades in just one month—underscoring the urgency and intensity of its AI push.
What’s Not So Rosy
Alibaba International Digital Commerce (AIDC) grew 22%—which may sound impressive, but is a notable slowdown for what was previously the company's fastest-growing segment.
Cainiao revenue fell 12%. Management attributed this to internal restructuring—Taobao and Tmall have started handling some logistics functions previously managed by Cainiao. While this explains the drop, it also raises a question: if Cainiao’s logistics revenue is being moved to TTG, is TTG’s growth partially inflated by these transferred functions?
This suggests that e-commerce growth may not be as strong as it appears if we exclude the embedded logistics contribution.
Valuation Remains Compelling
Despite signs of recovery, Alibaba remains undervalued. The stock trades at just 16x PE, while its 5-year average is closer to 29x. We're talking about the largest e-commerce platform and cloud provider in China, one of the country’s top AI developers, and a business with accelerating momentum. A PE in the 20s would be more appropriate.
Management clearly thinks the shares are undervalued too—they’ve committed to aggressive buybacks, and in this latest quarter, they announced plans to reduce outstanding shares by 5.1% in FY25.
Final Thoughts
Alibaba’s latest results present a mixed—but ultimately encouraging—picture. Structural challenges remain: China’s consumer economy is still soft, and competition is fierce. But signs of improvement are undeniable. Key businesses are gaining momentum, the management team is executing well, and the company has a vision and a direction.
And it’s still cheap.