Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group's December Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a Q&A session. I would now like to turn the call over to Rob Lin, Head of Investor Relations of Alibaba Group. Please go ahead.

Good day, everyone, and welcome to Alibaba Group's December quarter 2023 results conference call. With us are Joe Tsai, Chairman; Eddie Wu, Chief Executive Officer; Toby Xu, Chief Financial Officer. We have also invited Jiang Fan, CEO of Alibaba International Digital Commerce Group, AIDC, to join the call. This call is also being webcast on the IR section of our corporate website. A replay of the call will be available on our website later today. Now let me cover the safe harbor. Today's discussion may contain forward-looking statements including, without limitation, statements about our new organization and governance structure, strategies, and business plans as well as our beliefs and expectations about our business prospects such as the future growth of our business, revenue, and return on investment. Forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report on Form 20-F and other documents filed with the U.S. SEC or announced on the website of the Hong Kong Stock Exchange. Any forward-looking statements that we make on this call are based on assumptions as of today, and we do not undertake any obligation to update these statements, except as required under applicable law. Please note that certain financial measures that we use on this call, such as adjusted EBITDA, adjusted EBITDA margin, adjusted EBITA, adjusted EBITA margin, non-GAAP net income, non-GAAP diluted earnings per share or ADS, and free cash flow are expressed on a non-GAAP basis. Our GAAP results and reconciliation of GAAP to non-GAAP measures can be found in the earnings press release. Unless otherwise stated, growth rates of all stated metrics mentioned during this call refer to year-over-year growth versus the same quarter last year. With that, I will now turn to Eddie.

Hello, everyone. Over this past quarter, we delivered steady growth while making organizational adjustments that align with our strategic focus. At the same time, we took a deep look at our core business operations and the competitive landscape. We concluded that to maintain our competitive edge, we will increase our investment in core capabilities and adopt a more aggressive approach towards competition in order to win growth. Our top priority is to reignite the growth of our two core businesses, e-commerce and cloud computing. During the quarter, the execution of our user-first and competitive pricing strategies in Taobao and Tmall Group, TTG, was effective, resulting in healthy year-over-year GMV growth as the number of active buyers and order volume showed a robust increase. The number of merchants continued to grow at a double-digit rate, and I'll elaborate on the outlook and plans for 2024 in a moment. In Cloud Computing, we're committed to our strategy of prioritizing public cloud. We have proactively optimized our business structure, reduced revenue from project-based contracts, and increased investment in public cloud products. These structural adjustments are showing results and Alibaba Cloud's overall profitability capability continues to improve. We've also upgraded Alibaba Cloud's sales operations, establishing different sales and service systems to serve different types and sizes of customers. By improving our customer coverage and service capabilities, we will enhance our growth rate. In the International Commerce business, we focused on expanding cross-border offerings and enhancing the shopping experience. This quarter, all of AIDC's retail platforms achieved growth, resulting in international digital commerce overall revenues growing at a rapid rate of 44% year-over-year. Cainiao continued to develop its global smart logistics network with cross-border logistics fulfillment solutions contributing to 24% and year-over-year revenue growth, as well as realizing strong synergies with the cross-border e-commerce business. Next, I'd like to share the strategic priorities for TTG in investing and capturing growth opportunities. TTG operates in the world's most competitive e-commerce market, which is China. As we carefully evaluate TTG's competitive position within the China e-commerce market, we note that TTG continues to be number one in GMV share and is the leading platform for consumer shopping. Merchants operate on the platform as their primary place of e-commerce business, and TTG has the deepest and most comprehensive selection of products among its peers. However, we must still make targeted investments and improvements in price competitiveness, service, and user experience. Given that consumers use multiple platforms, returning to a user-centric approach is at the heart of our strategy. We'll increase investment in core user experiences to enhance the customer shopping experience. I'm confident that by focusing on delivering the incredible Taobao or universal Taobao experience, offering quality products at attractive prices with great service, meeting the different needs of different consumer segments, TTG will earn users' trust and return to growth. Thus, 2024 will be a year of comprehensive capability upgrades for TTG and also a year of significant investment, and we'll be prioritizing investment in the following areas. One, product supply. We'll increase our investments in growing the selection of branded and direct-for-manufacturer products on TTG's platform. This will further strengthen our product supply advantages to better address new consumption trends and demands. Two, competitive pricing and efficiency. We'll increase investment into product sourcing capabilities and optimizing business model relationships between merchants and our platform. For different types of suppliers, we will offer flexible business models that are best suited to improve their operational efficiency and thereby enhance Taobao's value proposition. The competitive pricing we're focused on delivering is attractive prices for quality products. This is a demand that consumers have across cycles and is fundamental to doing business. Three, quality service. We will work with our merchants and logistics partners to invest in improving the entire consumer service experience including presale, in-sale, post-sale, and logistics. For different customer segments on the platform, we will build a consumer service system that accurately identifies and meets the various needs of the different groups. Fourth, increased purchase frequency. Through the above investments, we will enhance our comprehensive capabilities to offer quality products at attractive prices with great service. We believe that improving the platform's overall shopping experience and service quality will lead to increased purchase frequency and materially improve the efficiency of user growth. Today, Taobao and Tmall remain the most valuable shopping platforms and the main place for merchants to do business. With the comprehensive capability building plan for 2024, we're confident that TTG will return to growth. Next, I'll hand over to Jiang Fan to present on AIDC.

Good evening, everybody. Over the past quarter, despite the uncertain international environment and more intense market competition, AIDC achieved rapid growth. Total orders grew by 24% year-on-year driven by strong growth across all major retail platforms. Growth in our cross-border business was especially significant. Our three major growth drivers are; first, enhanced consumer experience as a result of our business model and supply chain services upgrade; second, product and technology innovation; and third, our targeted expansion in priority markets. Next, I will present our business results and future development plans around these three drivers. First is our business model and supply chain services upgrade. Last quarter, AliExpress achieved year-on-year order growth of over 60%. This was mainly driven by the new AE Choice model that we launched in early 2023. The AE Choice model is, in essence, an upgrade that we made to our original pure platform model into a hybrid business model that combines purchasing on the one hand with a fully entrusted model on the other, and it's underpinned by supply chain efficiency. It optimizes supply on the platform by balancing experience with richness of offerings. By offering entrusted cross-border logistics, marketing, and other services, we lower the barrier for merchants to engage in cross-border business, bringing more certainty to their operations and a more diverse assortment to the platform. At the same time, we continue to enhance the end-to-end consumer experience, including providing more stable product quality, more competitive prices, optimizing delivery times, and adding value-added services like local product returns. As of January 2024, choice already made up half of all AliExpress orders. This high-quality user experience has driven significant user and transaction growth on the AliExpress platform. And going forward, we'll continue to invest resolutely to further increase choice penetration and provide a better experience to more users. In terms of product and technology innovation, AIDC serves consumers in different countries and regions around the world. We've already optimized products in certain key countries and regions in line with local preferences. These efforts have been highly appreciated, and we'll continue to pursue that kind of innovation and upgrading. We're also actively deploying AI to enhance operating efficiency and lower barriers for merchants. Our suite of AI-based digital foreign trade products has been officially launched, enabling real-time language translation AI and logistics services, and rapid generation of images and videos for marketing, etc. Third, sustained growth in key markets. In the last quarter, we achieved good growth in different regional markets. In certain key markets, we achieved breakthrough rapid growth to become the leading platform locally. In Turkey and neighboring markets, Trendyol continues to achieve robust double-digit order growth and maintained its leading position in the Turkish market. It also further expanded its business in valuable new markets in the Middle East. In Europe, alibaba.com completed its acquisition of the well-known European B2B digital trade platform, Visable, further expanding its supplier base in the region and further advancing alibaba.com's global expansion and dual brand strategy. There is huge potential for AIDC to increase user penetration in the majority of overseas markets. Building on our current resources and footprint, we will increase our investment in select regional markets where we see opportunities and value to achieve opportunities for high certainty and healthy growth. Going forward, we'll continue to maintain our rapid growth momentum and provide consumers with improved differentiated services. To that end, we'll continue to increase our investments in enhancing user experience and business competitiveness while expanding our business scale.

Thank you, Jonathan. We achieved a healthy financial performance in the past quarter, driven by steady business momentum and improving operating efficiency in several major businesses. Total consolidated revenue was RMB260.3 billion, an increase of 5%. Consolidated adjusted EBITDA increased by 2% to RMB52.8 billion. Our non-GAAP net income was RMB48 billion, a decrease of 4%. Our GAAP net income was RMB10.7 billion, a decrease of RMB35 billion. That was primarily attributable to changes in investment values and impairments. Firstly, there was a market-to-market change from our equity investments of about RMB19 billion; second, amortization impairment of intangible assets was RMB14.6 billion, of which RMB12.1 billion was related to Sun Art impairments. Third, impairment of goodwill was RMB8.5 billion related to Youku. The above three items were excluded from non-GAAP net income. As of December 31, 2023, we continue to maintain a strong net cash position of RMB487 billion or $68.6 billion. Free cash flow this quarter was RMB56.5 billion, a decrease of 31%. The decrease in free cash flow was attributed to increased capital expenditures and several one-time factors, including timing of income tax payments and working capital changes related to several of our businesses. Now let's look at the segment results. Starting with Taobao and Tmall Group. Revenue for Taobao and Tmall Group was RMB129.1 billion, an increase of 2%. During this quarter, we made steady progress to execute our Taobao and Tmall strategies. We observed a few positive trends. As Eddie mentioned, our online GMV achieved healthy growth with order volume growing strongly during the quarter. Notably, the order volume exited double-digit year-over-year growth during the second half of the quarter. Importantly, we continued our efforts to onboard a wide range of brands and merchants. The number of operating merchants on our platform continued to grow at double digits, and this trend has sustained over the past four quarters. Additionally, we are also seeing strong growth in paying merchants. Customer management revenue was RMB92.1 billion, relatively flat year-over-year. The overall take rate decreased slightly year-over-year, mainly because the increase in GMV came from Taobao merchants. The mix shift of GMV towards Taobao merchants provides us with further monetization potential because the take rate from Taobao merchants has been improving, while Tmall merchants' take rate was unchanged during the quarter. Importantly, this trend also reflects increasing consumer demand for price-competitive products offered on our platform. Direct sales and other revenue increased 2% to RMB31.6 billion. The China commerce wholesale business revenue increased 23% to RMB5.3 billion, primarily due to an increase in revenue from value-added services of 1688.com. Taobao and Tmall Group adjusted EBITDA increased by 1% to RMB59.9 billion. The increase was primarily due to the narrowing losses in certain businesses, partly offset by the increasing investment in content, user acquisition, and retention of Taobao EPP as well as technological innovation. We are in the process of revitalizing Taobao and Tmall Group and positioning it for future growth. We are beginning to see early signs of GMV growth recovery driven in part by investments made since earlier this fiscal year. We still have a lot of work ahead. As Eddie mentioned, we will invest for future growth and strengthen Taobao and Tmall Group's market leadership. Our Cloud Intelligence Group's revenue quality continues to improve as we proactively reduced revenue from low-margin project-based contracts. Additionally, we recorded healthy growth of our public cloud revenue from external customers. Revenue from Cloud Intelligence Group was RMB28.1 billion this quarter, an increase of 3%. Cloud's adjusted EBITA increased by 86% to RMB2.4 billion. The continuous improvement in our adjusted EBITDA reflects improving product mix through our focus on public cloud and operating efficiency. The enhanced profitability of the Cloud business gives us confidence to invest in technology and customers to strengthen our public cloud leadership in the future. Alibaba International Digital Commerce Group revenue was RMB28.5 billion, an increase of 44%. Revenue from the International Commerce Retail Business increased by 56% to RMB23.3 billion. The increase in revenue was primarily due to solid revenue growth from AliExpress, especially the Choice business and Trendyol. Revenue from our International Commerce Wholesale business increased by 8% to RMB5.3 billion, primarily due to an increase in revenue generated by cross-border related value-added services from alibaba.com. AIDC's adjusted EBITA was a loss of RMB3.1 billion. Losses increased primarily because of increased investment in AliExpress Choice and Trendyol's international business, partly offset by improvement in monetization across all major platforms. Overall, we have seen very rapid order and revenue growth of our AIDC cross-border e-commerce business over the last few quarters. To sustain this momentum and provide differentiated services to customers, we increased the investment during this quarter and will step up investments to drive further growth. Total revenue from Cainiao grew 24% to RMB28.5 billion, primarily contributed by the increase in revenue from cross-border fulfillment solutions. Cainiao adjusted EBITDA was RMB961 million compared to a loss of RMB12 million in the same quarter last year. The increase reflected economies of scale that lead to cost optimization as well as optimized operating expenditure spending in the coming quarters as a strategic partner of AliExpress. We will increase investments in expanding our cross-border logistics capabilities to support Choice's growth. Local services group revenue in the December quarter grew 13% to RMB15.2 billion, driven by healthy growth of Ele.me and rapid growth of Amap. Local Service Group adjusted EBITDA was a loss of RMB2.1 billion this quarter compared to a loss of RMB2.9 billion in the same quarter last year, primarily due to the continued narrowing of loss from our two home businesses, driven by Ele.me's improved unit economics and increasing scale. Revenue from our DME group was RMB5 billion, an increase of 18%, primarily driven by strong revenue growth of offline entertainment businesses. Adjusted EBITA was a loss of RMB517 million compared to a loss of RMB391 million in the same quarter last year. Losses increased primarily due to the increased losses of Youku. Revenue from all other segments decreased 7% to RMB47 billion, mainly due to the decrease in revenue from Sun Art. Adjusted EBITDA from all other segments was a loss of RMB3.2 billion compared to a loss of RMB1.7 billion in the same quarter last year, primarily due to increased year-over-year loss from Sun Art due to the scale down of certain businesses. Excluding Sun Art, flushable, and in-time businesses that have physical retail operations, group revenue would have grown at approximately 8%, and our group consolidated adjusted EBITDA margin would have been 4 percentage points higher at approximately 24% this quarter. Lastly, we remain committed to returning cash to shareholders. We have been consistently buying back shares. In the 12 months ended December 31, 2023, we have repurchased $9.5 billion in shares and have reduced the share count by 3.3% accounting for shares issued under our ESOP. Additionally, quarter-to-date until February 6th, we have repurchased another $1.4 billion worth of our shares. Our Board of Directors has approved an upsize of the share repurchase program by another $25 billion through March 2027. Upsizing our share repurchase program demonstrates our strong confidence in our business fundamentals and cash flow generation capability. Following the upsize, we currently have $35.3 billion available under our share repurchase program. The upsize program will allow us to achieve a net reduction in share count and achieve EPS and cash flow per share accretion. Subject to market conditions, we target to achieve at least a 3% annual reduction in total shares outstanding for the next three fiscal years. Thank you. That's the end of our prepared remarks. We can open up for Q&A.

Everyone, for today's call, you are welcome to ask questions in Chinese or English. A third-party translator will provide consecutive interpretation for the Q&A session. Please note that the translation is for convenience purposes only. In the case of any discrepancy, our management statement in the original language will prevail. If you are unable to hear the Chinese translation, a bilingual transcript of this call will be available on our website within seven working days after the Chinese New Year holiday. Operator, please connect the speaker and SI conference line right now and start the Q&A session when ready. Thank you.

Your first question comes from Ronald Keung with Goldman Sachs. Please go ahead.

I want to ask about the Taobao Tmall take rate this quarter that we just mentioned in Slide 4 and the blended take rate. You mentioned the different factors, the mix shift, but also Taobao take rate increase. So, I want to hear what is driving the take rate increase particularly on Taobao, how is the adoption of our sales base and the cost per sales-based shift in our ad tech upgrades and just on the blend of this. Then how should we expect take rates to stabilize, i.e., when should we expect GMV and CMR to stabilize at the same rate? And how should we think about the long-term take rate potential, given that we are still much lower than global peers and I would say lower than quite a few Chinese peers, so the potential there in the near term when it should stabilize and long-term potential?

Okay. Thank you, Ronald. I will take this question. For this quarter, actually, if you look at the overall take rate, it dropped a little bit. As I was explaining in my script, this drop was because of the mix shift, as we can see consumer appetite for relatively price-competitive products grow. So that's why we can see GMV shifting towards the Taobao merchants. This demonstrates the early success of the execution of our strategy because as we announced earlier this year, the strategy for Taobao and Tmall is user-centric. So we need to build up the supply for all our consumers, particularly for the price-competitive products. So that's why this is sort of demonstrates the early success of our strategy execution. So for the overall take rate, we are not too concerned because we believe, as I said, for Taobao merchants, the take rate is growing. Just like what you said, the overall take rate in our platform is still relatively lower compared with the other platforms, which actually shows the big potential we have in terms of increasing some of the take rates via providers, so enhancing the operating efficiency on our platform as well as enabling the merchants to increase their operating efficiency, which will help us increase our take rate.

Thank you. This is Eddie. I'd like to add to that answer that Toby just gave. Talking on an overall strategic level about how we view the relationship between purchase frequency, GMV growth, and take rate and what our strategy is. The strategy that we're executing now is focused on increasing purchase frequency. By increasing purchase frequency, we will achieve GMV growth. On the basis of that GMV growth, and once that has been achieved, then we will be developing more advertising products that are highly optimized for SME merchants. At that point, we'll be able to leverage those new advertising products to achieve higher monetization. There's a clear strategy and a plan time-wise regarding how we're going to approach it.

Your next question comes from Alicia Yap with Citigroup. Please go ahead.

Question also relating to the strategy for the Taobao Tmall group. I'm wondering if my understanding is correct. And if you could confirm this for me, in my understanding, we're going forward focusing more on light-asset strategy for TTG, and as a result of that light-asset strategy, we can expect to see an increase in EBITA. Is that correct? And then my second question is I'd like to know, what is the biggest difference that TTG has in terms of its platform model when compared against other platforms? What's the biggest advantage that we offer to merchants? What's the way that we create more value for merchants than the other platforms do? We know that the short-form video platforms have lots of organic traffic and are able successfully to convert that into purchases of goods. So how is TTG going to traffic and pull back those existing customers?

Thank you. This is Eddie. I'll take that. I think I heard a couple of different questions in there. If I understood correctly, the first question had to do with the revenue structure of the Taobao and Tmall group, revenue comprises two parts, really, customer management revenue and then direct sales offerings. The way we look at the business is that the bulk of our revenue and profits should be contributed by customer management revenue. The purpose of having the direct sales offerings is, firstly, to retain customers to help drive increased purchase frequency and also to achieve a competitive advantage in certain categories. But fundamentally, revenue and profits should be mostly contributed by customer management revenue. Secondly, in terms of how Taobao Tmall Group is different from its competitors, I think from the merchant perspective, certainly, TTG is the strongest platform with the most robust overall capabilities that it can offer merchants. We have live streaming and other marketing modalities on Taobao that can help to quickly drive purchase volumes for new product launches. Very important for merchants also are the day-to-day marketing operating tools that we offer. In fact, a lot of purchases are made via the search function on Taobao. Of course, we also have robust private domain tools as well that are stronger than all of the other competitors. For merchants, all of these different tools and services make it possible for them to achieve very robust marketing and high-efficiency operations. So Taobao Tmall group has the most comprehensive and fuller set of capabilities in these respects. Regarding how to retain customers and drive purchase frequency on the platform, as I said in my opening remarks, this is really about precisely targeting the needs of different tiers of customers and ensuring that we have good products at good prices provided to them coupled with good services because together, that makes up the core experience for customers relative to e-commerce. So that's how we're going to go about driving increased purchase frequency and growing GMV.

Thank you. Next question?

Your next question comes from Jiong Shao with Barclays. Please go ahead.

I have a question about shareholder return. It's great you increased the buyback by RMB25 billion. But in terms of the pace of the buyback, we understand there are constraints and the limitations such as capital control. Could you talk about sort of the cash you may already have outside of China? What needs to happen for you so you may be able to pick up the pace of the buyback? And related to that, any update on the potential IPOs of Freshippo and Trendyol. Thank you very much.

Okay. Thank you for your question. I will take the first one, and Joe will take the second one. For the share buyback and the preparation of the offshore cash, I think for us, firstly, as you can see, we really have a very strong balance sheet in terms of cash, and a certain percentage of that cash actually is sitting offshore, which we can use for the buyback. On the other hand, we also have a good channel that we can use to get cash out to offshore, further leveraging either to make investments in our offshore businesses or using that cash for the buyback. Secondly, we are very under-leveraged. If you look at the balance sheet, the debt is only a very small amount. And we can, if we need it, increase the leverage to get sufficient cash for the share buyback. As I said in my script, we are targeting to achieve a net reduction of the share count of at least 3% every year in the next three fiscal years.

Okay. I'll address the question about the IPO of Ele.me and Cainiao. So last year, when we announced our reorganization, part of the goal was to make sure that we take steps to reflect the intrinsic value of our various business units in the valuation of Alibaba Group. Okay? There are multiple ways we could do it. We specifically talked about spinning off companies and raising capital in business units like Ele.me and Cainiao so that we could put a valuation mark on these businesses. But the caveat when we made the announcement was that all these transactions were subject to market conditions. The current market conditions are just not in a state where we believe we can truly reflect the intrinsic value of these businesses. In the last few months, Eddie and his team have taken a very close look at our core business, and we've come to the conclusion that right now, focusing on generating synergies within the companies in our group will be the best way to reflect the value of the entire Alibaba Group. We're very excited about the potential for value creation through close collaboration among our businesses. In several areas, we have formed special project teams to ensure synergy creation, and we believe prioritizing synergies to strengthen our core business is the best value-maximizing path today. Having said that, we continue to explore value creation through separate financings of our business units, but given the challenging market conditions, as I said, we're not in a hurry on the timing of these transactions.

Next question?

Your next question comes from Kenneth Fong with UBS. Please go ahead.

I have a question on investment and return. We recorded, on one hand, we will continue to invest in TTG overseas for growth. But on the other hand, in our last earnings call, we also aimed to improve the ROIC for the group from single digits to double digits over time. So I want to ask about, let's say, on the numerator front, what are the segments that we see room for improvement in terms of return and then the pace that we should expect? And on the denominator side being asset-light what are the progress and strategy for the disposal of non-core assets?

Thank you, Kenneth. I'll take the first part of your question. As we said, I think as a listed company, it is important to improve ROIC for the investors. That's why during the last quarter's earnings call, we committed to improve our ROIC from single digits to double digits in the next couple of years. However, the improvement on the ROIC doesn't conflict with the investment we're going to make because making investments is for growth and for the future return of this growth, which eventually will also help to improve ROIC. What we would be doing differently from previously is that we will be more focused on the core businesses, as elaborated previously by Eddie. So we will focus on the e-commerce, which includes onshore and offshore e-commerce businesses as well as cloud computing. These are the areas, as I emphasized in my script, where we will focus our investments.

Yes. I'll talk about the sale of non-core assets since this is a major focus of the capital management committee, which I chair. We're making very good progress on non-core asset sales. So during fiscal 2024 to date, we have exited RMB1.7 billion in non-core investments. That's a pretty good pace. We're also very active in looking at our listed securities, having formed a special team to execute capital markets sales transactions to divest these listed securities. In addition, Toby has referred to this. We have a number of traditional physical retail businesses on our balance sheet, and these are not our core focus. It makes sense for us to exit these businesses, but this will take time given the challenging market conditions, but we will continue to work on it.

Next question?

Your next question comes from Alex Yao with JPMorgan. Please go ahead.

I have a couple of questions on the value return to shareholder initiatives. So first of all, you guys currently have $35.3 billion available in the buyback program, which averaged roughly $12 billion per fiscal year compared to the 2023 calendar year buyback pace; this is a sizable step-up. Do you guys have the real serious intention to step up the buyback? Or put another way, how do you determine if the $12 billion buyback per year is the right number to think about? And then holistically, if we add the buyback and dividend together and call it a yield to shareholders, do you have a target yield for the next couple of years?

Okay. Thank you, Alex, for this question. The short answer is, yes, we are serious. Of course, if you look at our track record, we have done a few upsizes of the share buyback program in the past few years. So if you look at the sort of track record, we have actually exceeded the original timetable. That's why the Board approved another upsize this time. In terms of how we decide this number, of course, we need to take a few factors into consideration, including our cash-generating capability and how much cash we can generate to get it offshore. We consider all of these factors. As I said previously, we believe $12 billion is around the right number for us to do the buyback. In addition to the buyback, for this upsize, the $25 billion is only for the buyback. As we announced in the last quarter, we started to pay an annual dividend. So if you include the buyback of $9.8 billion and the $2.5 billion dividend for fiscal year 2023, we're giving back more than $12 billion to shareholders. Going forward, we expect, with our cash-generating capability, to continue delivering cash back to shareholders, as committed.

Yes, I'd just like to supplement what Toby said. I'll do a little bit of math on this question. Toby has mentioned in his prepared remarks that we are targeting a 3 percentage point accretion per year over the next three years through our buyback program. That commitment is pretty real because if you look at the past 12 months, we actually reduced our share count by 3.3%. So that accretion is achievable. We have about 2.5 billion shares outstanding, and 3% of that would be 75 million shares. If we are deploying $12 billion a year to buy back our stock at the current stock price, we would be able to buy back even more, but we're anticipating that our stock will increase in price over the next three years, which allows us to achieve our target of 3% accretion per year. So using $12 billion a year of buyback with rising stock price, I think it is still reasonable to aim for 3% accretion a year. To add on, the 3% accretion a year plus a dividend of $1 per ADS results in a dividend yield of about 1.4%. Combined with the buyback, accretion, and dividend yield, you're looking at about 4.4% to 4.5%, which is actually quite close to the 10-year treasury yield. So if you buy Alibaba stock, it's like you bought a 10-year treasury bond with the upside of stock price appreciation. So that's the math we're looking at.

Next question.

Your next question comes from Gary Yu with Morgan Stanley. Please go ahead.

I have a question for Jiang Fan on international business. Just wanted to see if there is any kind of particular market that we are focusing on and specifically, I want to ask about our strategy in the U.S. regarding the fourth quarter e-commerce business, given the geographical rates ahead of elections. And we also talked about potentially stepping up the investment in the international business. How should we look at the level of segment loss in a couple of quarters? And how we're going to fund the investment a bit more individual financing at the AIDC level? Or are we going to tap into more of the kind of offshore financing capabilities at the group level?

Gary, your background is quite noisy. Can you repeat your questions?

Hi. Can you hear me better?

Yes, please go ahead.

Okay. Apologies for that. I'm in the middle of a Chinese New Year dinner. So my question regarding international business, and first one, is there any particular focus in terms of markets for the next couple of quarters? And specifically, what is our strategy in the U.S. market given the geopolitical risk ahead of elections? And the second question also on International is we talk about stepping up the investment. How should we look at the segment loss in the coming quarters? And how are we going to fund the investment between individual financing at the AIDC level versus tapping into the group offshore financing?

So this is Jiang Fan, and I'll take the first part of your question. We can break this out and look at the business in terms of cross-border versus local. Our local business, over the past several quarters, has seen very rapid improvement in efficiency and rapid narrowing of losses, and we expect that to continue. The cross-border business, of course, addresses all markets everywhere. It's a generic business model. In determining how we will allocate investments going forward, basically, we look at return on investment and the efficiency of the investments we've made to plan our future investments. In terms of the U.S., we actually do have a business foundation there in B2C and B2B on alibaba.com. In fact, a lot of customers are U.S. customers. So we certainly attach importance to the U.S. market. We will evaluate whether we will be increasing our investment in the U.S. based on the value that we can bring and the innovation we can deliver. In that process, we will also take into consideration the various risks that you've outlined.

I will take on the second question. Basically, you're asking how we are going to arrange financing for AIDC to secure sufficient funding for its investments. Generally, as Joe was explaining previously, AIDC is planning to do financing. However, we are not rushed to do a financing. So really depending on the market conditions, we will find the right moment to do financing. Before that moment arrives, we'll use sufficient offshore cash to finance the growth of our business.

Thank you. Next question.

Your next question comes from Thomas Chong with Jefferies. Please go ahead.

I have a question on the Cloud side. Given Eddie is now leading TTG and Cloud, what should we expect in terms of the synergies in the coming quarters? Should we expect AI to be a driver to CML? And on that front, given we have a very good margin profile in the December quarter, any color about the long-term margin assumption that we should expect?

Thank you. That’s a really great question. Certainly, I see very strong potential for greater synergy between Alibaba Cloud and the Taobao Tmall Group, especially driven by AI. As you know, we've developed our own large language model called Tongyi Qianwen. We are currently testing ways to leverage this model to enhance search and advertising capabilities as well. This initiative is still in the early testing phase, but we see very strong potential to leverage AI to significantly enhance search conversion and add monetization. So as I say, that's still in early testing, but we see excellent potential there.

Next question, please.

Your next question comes from Ellie Jiang with Macquarie. Please go ahead.

I just have a follow-up question on the AIDC International unit. The management earlier shared some exciting developments in the overseas market. But it seems like this quarter, the international unit basically saw a very big widened loss to around RMB3 billion, so just wondering, how do we anticipate the investment pace moving forward considering some key growing markets such as AliExpress Choice, the hybrid model, as well as Trendyol seem to still be in the very early development stage? So going forward, how do we really evaluate the economics as well as the competitive landscape?

Well, the loss in the AIDC business this quarter really came from three different areas. The first is that the new model, AliExpress Choice, has grown very rapidly and now accounts for a significant percentage of the business overall. At the same time, it's an early-stage business still being developed. It's a business that has very strong scale effects. So our priority is to invest in scaling up the business, and where the business has achieved scale, then as it grows, the loss will narrow and the business will become profitable. The second thing that contributed to the losses this quarter was significant spending on marketing and some major promotions that we did. Thirdly, some investments that we made in the Middle East and other key markets. Moving forward, I think we will continue to make large investments in this business, particularly regarding Choice. We clearly see that Choice is delivering a better user experience and resulting in much better user retention than the previous model. Over a longer period, we're certain that Choice will produce very positive investment returns. However, the top priority right now is to continue investing in scaling up the business.

Next question, final question.

Your next question comes from Jialong Shi with Nomura. Please go ahead.

So a couple of quick questions for management, if I may. First of all, I'm wondering if you could respond to a recent media report saying that the Alibaba Group would be considering selling Alimama. If you could respond to that, please? Second question has to do with AIDC. Can you tell us how big Lazada's business is in Southeast Asia, and the impact that you've seen in Indonesia from the team-up between TikTok and its local partner?

This is Toby. I'll take that first question. I don't think there's any need for us to make further comment because we've already addressed that rumor and have stated that that's not true. As far as Alibaba is concerned, Alimama is a very important asset for our hyper-local segment.

Thank you. Southeast Asia continues to be a very important market for us, and there remains significant potential for us to deepen our penetration in Southeast Asia. Our approach is to continue to balance efficiency against growth to narrow the losses in the business while maintaining growth. Going forward, our strategy will be to continue to make investments at an appropriate scale to grow in Southeast Asia. As far as the restrictions imposed by the Indonesian authorities, the impact on us is relatively limited because we always abide by regulatory requirements.

Hello, everyone. Thank you for joining today's earnings call. That concludes our earnings for today. Please reach out to us if you have any questions, and we'll see you next quarter. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.