Alibaba Earnings: Increased Investments Bring Uncertainty to Margins; Fair Value Estimate Cut

We like Alibaba upsizing its share-repurchase program until the end of March 2027 to USD 35.3 billion, amounting to 18% of its market cap as of Feb. 7. Alibaba is committed to reducing its outstanding shares by at least 3% annually for the next three fiscal years. However, as cash and investments under current assets accounted for 44% of its market cap, we hope to see share repurchase at a faster pace and greater magnitude. While we agree with the firm's emphasis in driving market share growth at domestic and international e-commerce, and in cloud, we think this will come at the expense of margin erosion. Alibaba is committed to selling noncore assets and increasing return on invested capital to double digits over the next few years. This is longer than we hope, as selling assets amid weak market conditions is difficult.