Good day, everyone. Thank you for joining us. Welcome to Alibaba Group's conference call for the results of the September Quarter 2025. I will now hand the call over to Lydia Lu, Head of Investor Relations at Alibaba Group. Please proceed.

Thank you. Good day, everyone. Welcome to our September quarter 2025 earnings conference call. With me today from Alibaba are Joe Tsai, Chairman; Eddie Wu, Chief Executive Officer; Toby Xu, Chief Financial Officer; Jiang Fan, Chief Executive Officer of Alibaba E-commerce Business Group. I would like to remind you that this call is also being webcast on our corporate website. A replay of the call will be available on our website later today. Just a few forward-looking statements before we begin today. Today's discussions may contain forward-looking statements, particularly statements about our business and financial results that are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the safe harbor statements that appear in our press release and investor presentation provided today. Please note that certain financial measures that we use on this call are expressed on a non-GAAP basis. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. With that, I'm going to turn the call over to Eddie.

Welcome to Alibaba Group's quarterly earnings call. Over the past quarter, Alibaba delivered steady and healthy growth. Our total revenue increased 15% year-over-year, excluding Sun Art and Intime. Our continued investment in core businesses is yielding results with China e-commerce CMR growing 10% and Cloud Intelligence revenue rising 34%. Let me walk you through the latest developments across our AI + Cloud and consumption businesses. Sustained strong demand for AI and rising usage of public cloud drove Alibaba Cloud's 34% revenue growth this quarter, while revenue from external customers accelerated by 29%. AI-related products continued to post triple-digit year-over-year growth for the ninth consecutive quarter. In the cloud computing market, two major trends are becoming increasingly apparent. First is AI applications scale; more developers and enterprise customers are choosing vendors with full-stack AI technology portfolios. Second, customers are deepening and broadening their use of AI, which is significantly increasing demand for compute, storage, and other traditional cloud services. Together, these forces are accelerating revenue growth driven by external customer demand. This quarter, we continued to strengthen our full-stack AI capabilities, spanning high-performance AI infrastructure, foundation models, and AI development frameworks. Our flagship model, Qwen3-Max, ranks among the global leaders in benchmarks for real-world coding tasks, agent tool use capabilities, and other specialized valuations. Our full-stack AI capabilities are now a defining competitive advantage. Alibaba Cloud is gaining market share across multiple segments. In the hybrid cloud market, Alibaba Cloud has become a key player, growing more than 20% year-over-year, outpacing the industry and steadily expanding market share. Our financial cloud business is also growing faster than the market with market share continuing to rise. In China's AI cloud market, we are also the clear leader with a market share larger than the combined total of the second to fourth largest providers. Recently, businesses such as the NBA, Marriott, China UnionPay, and Bosch have partnered with Alibaba Cloud on AI initiatives. Last week, we officially launched the Qwen app, which aims to be the most advanced personal AI assistant system powered by our latest models. In the first week of its public beta, the Qwen app has already surpassed 10 million in new downloads. The launch of the Qwen app marks Alibaba's commitment to both AI for enterprise and AI for consumers. In enterprise-focused AI, our goal is to build a world-leading full-stack AI provider serving businesses across all industries. For consumers, we aim to build native AI-first applications by leveraging our best-in-class models and Alibaba's extensive ecosystem. On one hand, Qwen3-Max's intelligence and world-class tool use capabilities, combined with Alibaba's rich consumer and lifestyle use cases, contributed to exceptional user retention in the Qwen app's beta release. We believe this is the right moment to scale our consumer AI efforts. On the other hand, the synergy between AI and the broader Alibaba ecosystem is a powerful multiplier. Alibaba is the only company in China with both a leading large model and extensive lifestyle and commerce use cases. Qwen will gradually integrate e-commerce, map navigation, local services, and more, becoming an AI-powered entry point for everyday life. With AI innovation and ecosystem collaboration reinforcing each other, we're confident in our ability to deliver substantial user value. In consumption, we continue to deepen collaboration across businesses and the benefits of our large integrated platform are becoming increasingly evident. This quarter, China E-commerce CMR grew 10%. Our Quick Commerce business saw a significant improvement in unit economics with greater fulfillment efficiencies, stronger user retention, higher average order value and expanding scale. The growth of the quick commerce business contributed to rapid growth in Taobao app's monthly active consumers and supported CMR expansion. Brands on Tmall are also accelerating their adoption of on-demand retail. As of October 31, approximately 3,500 brands on Tmall have onboarded their offline stores to our quick commerce business. Going forward, we will further enhance synergy between quick commerce and the broader Alibaba ecosystem, continue improving unit economics, and meet consumers' fast-growing demands for immediate access to diverse products and services. On October 1, Amap's daily active users reached a historical high of 360 million. In September, we launched the Amap Street Stars feature that has significantly boosted user engagement. In October, Amap Street Stars averaged more than 70 million daily active users with average daily user reviews more than triple the amount from the same period last year, indicating strong future growth potential. Amap Street Stars has built a trust-based rating system for local offline services using user-consented metrics such as the users' credit rating. We believe that enhancing consumer trust is essential to strengthening consumer confidence, enabling merchants to focus on operations while giving consumers greater peace of mind, supporting the healthy and sustainable growth of the local offline services sector. Looking ahead, we'll continue investing decisively in our two core strategic pillars: AI plus cloud consumption. We will advance both enterprise and consumer-focused AI, unlock deeper synergies across Alibaba's businesses and use these entrants to drive Alibaba's long-term growth and carry the company to the next level. Thank you. I will now hand over to Toby.

Thank you, Eddie. We are continuing our focus and discipline on AI plus cloud and consumption and we see strong momentum from these strategies with gains in technology, market share, consumers, and user engagements. Now let's look at the financial results. On a consolidated basis, total revenue was RMB 247.8 billion. Excluding revenue from Sun Art and Intime, revenue on a like-for-like basis would have grown by 15% year-over-year. Total adjusted EBITA decreased 78%, primarily due to our strategic investments in the quick commerce business to grow its user base and transaction volume, partly offset by double-digit revenue growth in China E-commerce Group and Cloud Intelligence Group and improved operating efficiencies across various businesses including AIDC and Hujing DME. Our GAAP net income was RMB 20.6 billion, a decrease of 53%, primarily attributable to the decrease in income from operations. Operating cash flow was RMB 10.1 billion, a decrease of RMB 21.3 billion compared to the same quarter last year. The year-over-year decrease was mainly attributed to our increased strategic investments in the quick commerce business. Free cash flow was an outflow of RMB 21.8 billion, which reflected our significant investments in the quick commerce business and AI plus cloud infrastructure; we are reinvesting our free cash flow to create a winning quick commerce business and to be a leader in AI. Our strong balance sheet backed by USD 41 billion in net cash gives us confidence in this reinvestment strategy. Revenue from Alibaba China E-commerce Group was RMB 132.6 billion, an increase of 16%. Customer management revenue increased 10% primarily due to the improvement of the take rate, which benefited from the increasing penetration of Quanzhantui and the addition of software service fees. Revenue from our quick commerce business increased 60%. During the quarter, we executed our plan to grow the scale of our quick commerce business, improve user experience, and narrow UE loss. The adjusted EBITA from Alibaba China E-commerce Group was RMB 10.5 billion. Excluding losses from our quick commerce business, our Alibaba China E-commerce Group EBITA would have grown at mid-single digits year-over-year for the quarter. Going forward, this adjusted EBITA may fluctuate quarter-over-quarter due to intense competition and a significant investment in user experience. Revenue from AIDC grew 10%. AliExpress, in particular, has developed the AliExpress direct model that leverages local inventories in over 30 countries. AliExpress has also enhanced the range of our product offerings by launching the Brand+ program, providing go-to-market solutions to Chinese brands going overseas. A combination of logistics optimization and investment efficiency enhancement resulted in AIDC's adjusted EBITA profit of RMB 162 million this quarter. Looking ahead, while we continue to enhance operating efficiency, AIDC adjusted EBITA may fluctuate quarter-over-quarter due to tactical investments in select markets. Our cloud business delivered another quarter of accelerated growth as both cloud segment revenue and revenue from external customers accelerated to 34% and 29%, respectively. This momentum was primarily driven by public cloud revenue growth, including the increasing adoption of AI-related products. AI-related product revenue continues to grow at a triple-digit pace. This quarter, AI-related product revenue accounted for over 20% of revenue from external customers, with its contribution continuing to increase. We are seeing accelerated adoption of our AI products across a broader range of enterprise customers with a growing focus on value-added applications, including coding assistance. The adjusted EBITA margin remained relatively stable at 9%. We will continue to invest in customer growth and technology innovation to increase adoption of AI infrastructure cloud and strengthen our market leadership. All other segment revenue decreased by 25% and was mainly due to the disposal of Sun Art and Intime businesses. All other adjusted EBITA was a loss of RMB 3.4 billion, primarily due to the increased investment in technology businesses, partly offset by the improving operating results of other businesses. Hujing DME has achieved profitability for 3 consecutive quarters. The all other segment comprises a set of innovative initiatives, including several strategic AI-driven technology infrastructure and businesses, including our foundation model and AI apps. We are excited to continue investing in these initiatives for future growth. Thank you. That's the end of our prepared remarks; we can open up for Q&A.

Thank you, Toby. Hi, everyone. You can ask questions in either Chinese or English. We have a third-party translator who will provide interpretation during the Q&A session. This translation is for convenience only. In the event of any discrepancies, the management's statements in the original language will take precedence. If you can't hear the Chinese translation, bilingual transcripts of this call will be available on our website within one week after the meeting. Operator, please proceed with the Q&A session. Thank you.

Your first question today comes from Gary Yu at Morgan Stanley.

Congratulations on a strong set of results. My question is related to the cloud business. How should we look at the growth outlook going forward? Should we continue to expect growth to accelerate? And on the demand side, given we don't have a big AI company like in the U.S., how should we look at the key drivers driving the external revenue growth going forward?

Thank you for your questions. Let me address the first one. Customer demand for AI is very strong. We're struggling to keep up with the growth in demand as orders are outpacing our ability to deploy new servers. The demand for AI is clearly accelerating. It's coming from various areas of enterprise operations, as AI adoption not only speeds up but also deepens with its applications in product development, manufacturing processes, and in helping enterprises and customers use their products. In all these areas, AI adoption continues to strengthen. Moreover, the activity around model training and inference requires significant computing power. Thus, we are witnessing substantial potential and a continually increasing demand from real customers engaged in practical use cases. Therefore, we are confident in the future growth of AI demand.

Your next question comes from Kenneth Fong at UBS.

Congrats on the strong performance in our quick commerce initiative. Can management share some key progress regarding quick commerce and its synergy with our core e-commerce so far? Given the synergy, what's the outlook for December quarter CMR and EBITA for our core e-commerce?

Thank you for your question. Over the past few months, we have been focused on optimizing our unit economics in quick commerce while sustaining our market share, and we believe we have made significant progress. The order mix has improved, and the economies of scale from increased order volume have led to noticeable reductions in logistics costs. Since November, the per order unit economics loss for quick commerce has been halved compared to July and August. Consequently, quick commerce has maintained a stable order share, and its GMV share is holding steady and trending upward. We are also witnessing substantial growth in related physical e-commerce categories. Let me elaborate on some of these points. First, concerning order mix optimization, over the last two months, the share of higher average order value orders has risen. Recent data indicates that non-beverage orders now represent over 75% of total orders. Recently, the average order value for quick commerce has increased by double digits compared to August, contributing to an uptick in quick commerce's overall GMV share. Regarding logistics, as order volume increases, quick commerce is benefiting from clear economies of scale in fulfillment logistics. Delivery speed has improved compared to the same time last year, and average logistics cost per order has significantly decreased. In fact, the average cost per order is now lower than it was before we made substantial investments in quick commerce. These two factors have allowed us to meet our near-term target of reducing per order losses by half compared to July and August. Importantly, during this phase of reducing unit economics losses, both user retention and purchase frequency have exceeded our expectations. Beyond food delivery, we are also experiencing rapid growth in retail categories through quick commerce, driving expansion across related sectors and businesses, particularly in groceries, healthcare products, and supermarkets within physical e-commerce. For instance, orders through Freshippo and Tmall Supermarket quick commerce have surged by 30% since August. In recent months, we have also been actively onboarding merchants and brands onto Taobao Instant Commerce, and we plan to further enhance integration and synergies between key retail categories and the quick commerce model moving forward. In summary, we strongly believe that the quick commerce model has tremendous potential for synergy with the wider Alibaba ecosystem. In Phase 1, we effectively achieved rapid scaling. In Phase 2, unit economics optimization is advancing as expected, establishing a solid foundation for the long-term viability of the quick commerce business and strengthening our commitment to sustained long-term investment in this area. In the next phase, we will continue to enhance the user experience through operational improvements, focusing on high-value users and expanding retail categories. Quick commerce is a crucial strategic component of the Taobao Tmall Group's platform upgrade. Our objective is to generate RMB 1 trillion in GMV for the platform within three years, thus driving market share growth across associated categories.

Thanks. This is Toby. Let me address the second part of your question regarding CMR and EBITA. As Jiang Fan mentioned, quick commerce is significantly enhancing user engagement and driving transactions in key categories, positively impacting CMR. Our priority in this next phase is to better integrate and achieve synergies between conventional e-commerce and quick commerce to fully realize this impact. However, we are currently in an investment phase, which relates to EBITA. I anticipate that the September quarter will see the highest level of investment. As we improve efficiency and user engagement, and as the scale of this business stabilizes, we can expect a significant reduction in the size of those investments by next quarter. That said, we will adjust our investment pace and size based on market competition. Regarding CMR and the e-commerce business, there will be an impact from the base effect related to the payment processing fee and the rollout of QZT. We began charging the payment processing fee in September of last year, so starting next quarter, we expect a slowdown in growth due to this base effect. However, as we have consistently emphasized, our main objective is to secure market share for the medium and long term. During this period, we will continue to invest decisively in consumers and merchants, and we will move forward with upgrading our e-commerce platform. Therefore, you can expect some short-term fluctuations in CMR and EBITA.

Your next question comes from Alex Yao at JPMorgan.

Thank you for the opportunity. As Jiang Fan mentioned, we have completed the first phase of our investments and are now in the second phase focused on enhancing efficiency. My question is about the cost savings we achieve as we optimize efficiency. How will these savings be allocated across the value chain among key stakeholders? For instance, if we maintain our current level of subsidies for consumers while improving our financial performance, how will that impact subsidies for merchants? The cost savings will have to be distributed among consumers, merchants, and the platform. If we don’t reduce subsidies for consumers and continue on our current path, relying on optimizing user mix, increasing order share, and driving higher basket sizes, what does that mean for user engagement? Additionally, what potential is there for user engagement growth going forward?

Yes. This is Jiang Fan. Let me address this question. It relates to some earlier points I made. Recently, we have been focused on enhancing user experience while also increasing the average order value. This means that the revenue linked to each order will rise as our revenues are tied to the average order value. I mentioned earlier that we have improved logistics efficiency, and we plan to continue making progress in that area with scale. Looking ahead, there remains significant potential, especially regarding consumers, as we have mostly attracted new users in recent months. We are working on converting these users into more engaged customers across the platform. Through this approach, we will continue to boost average order size, average order value, and adjust our subsidy strategies. Additionally, the traffic on the Taobao app, particularly in the quick commerce segment, has surged to over 100 million daily users, indicating that there is substantial potential for further monetization. This also presents an opportunity to enhance user experience in the future. However, I must note that the market is very competitive, so we will seek these opportunities while adapting our strategies based on market conditions.

Your next question comes from Ronald Keung at Goldman Sachs.

I would like to ask about CapEx over the next three years. I'm curious about the RMB 380 billion figure you previously mentioned, especially since I've noted that RMB 120 billion has already been spent over the past four quarters. How should we consider CapEx going forward, the additional revenue it might generate, and how to assess the relationship between CapEx and the anticipated incremental revenue?

Thank you for your question. The CapEx figure of RMB 380 billion that we mentioned earlier was a planned amount for a three-year period. Currently, the rate at which we can add new servers is not enough to meet the growth in customer orders. Considering our current CapEx situation, along with supply chain issues, the speed at which we can expand our IDCs and launch new servers is also a factor. We are doing everything we can to meet customer demand. If we find ourselves unable to satisfy all customer needs, particularly given our current investment pace, we may consider increasing that CapEx. However, this would depend on supply and availability. From a broader perspective, the RMB 380 billion figure might be too low based on the current customer demand. As for your second question about the incremental revenue from these capital expenditures and whether we can calculate a ratio between CapEx investment and incremental revenue, it isn't feasible to produce that estimate right now because the AI sector is still developing. Our AI infrastructure is utilized in various ways, which are changing and cover multiple areas. For instance, we have servers rented out to customers for training, others for inference, and some are used internally for inference and applications like Amap, Taobao, Qwen, and Quark, which are being transformed into member services. Consequently, our AI products and infrastructure are generating diverse revenues and gross margins. Therefore, the ratio you mentioned would not be consistent at this stage. However, in the long run, our focus is on ensuring our infrastructure delivers high-quality tokens and maintains good cost effectiveness with those tokens.

Your next question comes from Ellie Jiang at Macquarie.

This is a follow-up question. The company is a comprehensive AI service provider and is currently undergoing a significant investment phase. We can observe that the investments you're making span various parts of the value chain. Given the ongoing challenges in supply chains, I'm curious about how you manage the allocation of resources, particularly with your model-as-a-service layer. We are also enhancing our foundational capabilities, and on the user-facing side, we have rapidly developed and scaled apps like Tongyi, Qwen, and Amap. In the current macroeconomic environment, how should we assess the return on invested capital regarding AI, including both training and inferencing?

Thank you. Let me address that question. As a comprehensive AI service provider, we are currently engaged in a crucial investment phase for AI, focusing on both our products and infrastructure. We are investing in several areas and have been contemplating how to prioritize these investments, which I would like to outline. First and foremost, our top priority is to ensure the continuous training of our foundation models. In the AI sector, our infrastructure's ability to attract more customers or valuable use cases depends on our ongoing efforts to iterate and improve our foundation models. This is essential to generate new demand and gain new customers by exploring new use cases. Following that, once we have tapped into these higher-value use cases, our next focus will be on the amount and quality of token consumption, as well as customers' willingness to pay for those tokens, which is gradually increasing. I would consider this one of our highest priorities for investment allocation. Another key priority revolves around inference, particularly providing inference as a service on Bailian. We aim to ensure that our AI resources are available around the clock and fully utilized to produce more tokens. Bailian serves as a vital resource for us and is a major focus area. In addition, we have internal AI inference use cases and external customers who are using our inference services. When serving these external clients, we prioritize those who utilize all our services across the cloud, including storage and big data, as they will receive a higher level of focus. In contrast, customers simply renting a GPU for basic inference needs will be given lower priority. Concerning demand and supply, we have observed a global trend where fabs, DRAM vendors, storage companies, and CPU manufacturers are all facing undersupply. The supply does not meet the demand for AI components worldwide, and this situation is likely to persist throughout this investment cycle driven by AI demand. Consequently, we foresee a rapid increase in demand over the next three years, resulting in an undersupply of AI resources as demand continues to exceed supply. Overall, we do not anticipate major challenges related to an AI bubble.

Well, let's take the last question, please, operator.

Your last question comes from Jialong Shi from Nomura.

In the last earnings call, management mentioned that Alibaba plans to increase its market share in China's consumption market. We have observed that your investments in quick commerce have led to a rise in market share over the past few months. I would like to know, in addition to quick commerce and Instant Commerce, what other areas within the consumption market do you view as promising investment opportunities where you might consider expanding your investments?

Thank you. This is Jiang Fan. Let me address this question. Alibaba has been strategically investing in the consumption market for many years, entering numerous categories and sub-verticals. In addition to quick commerce, which we've heavily invested in, we've also focused on Freshippo, the offline O2O model, Fliggy, Amap, and local services. This is the landscape of businesses we've invested in. Our current focus is to integrate and connect these businesses to enhance synergies across our existing operations. This approach will help us achieve further increases in market share within the larger consumption market.

Thank you. Thank you, everyone, for joining us today. We look forward to speaking with you again on our December quarter earnings call.