Alibaba Earnings: Cloud Spinoff Halt a Surprise, Size and Timing of Capital Returns Uncertain

We are surprised that Alibaba will no longer fully spin off the Cloud Intelligence Group and we see larger uncertainty around the size and timeline of capital returns to shareholders. We leave Alibaba’s forecasts and fair value estimate unchanged. Although Alibaba is still undervalued, we now prefer JD.com over Alibaba as we think the former is more likely to turn around next year. Alibaba de-emphasizes the importance of gross merchandise volume, or GMV, which leads us to think Alibaba is not confident about its GMV growth in the future. Meanwhile, JD.com guided for 2024 GMV growth to be higher than the retail sales of consumer goods growth next year. In the September quarter, there was a modest decline in Taobao and Tmall online paid GMV, but a high-single-digit GMV growth at JD.com.