Alibaba Group Holding Limited (BABA) Q3 2021 Earnings Call Transcript

Alibaba Group Holding Limited (NYSE: BABA) Q3 2021 earnings call dated Nov. 18, 2021

Corporate Participants:

Rob Lin — Head of Investor Relations

Daniel Yong Zhang — Chairman and Chief Executive Officer

Maggie Wei Wu — Director and Chief Financial Officer

Analysts:

Thomas Chong — Jefferies LLC — Analyst

Alex Yao — J.P. Morgan Securities — Analyst

Piyush Mubayi — Goldman Sachs — Analyst

Alicia Yap — Citigroup — Analyst

Yang Bai — CICC — Analyst

Gary Yu — Morgan Stanley — Analyst

Presentation:

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Alibaba Group’s September Quarter 2021 Results Conference Call. [Operator Instructions]

I would now like to turn the call over to Rob Lin, Head of Investor Relations of Alibaba Group. Please go ahead.

Rob Lin — Head of Investor Relations

Good day, everyone, and welcome to Alibaba Group’s September quarter 2021 results conference Call. With us today are Daniel Zhang, Chairman and CEO; Joe Tsai, Executive Vice Chairman; Maggie Wu, Chief Financial Officer. This call is also being webcast from the IR section of our corporate website. A replay of the call will be available on our website later today.

Now, let me quickly go over the Safe Harbor. Today’s discussion may contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussion 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 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, commerce-adjusted EBITA before strategic investments, 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 reconciliations of GAAP to non-GAAP measures can be found in our earnings press release.

Unless otherwise stated, growth rate of all stated metrics mentioned during the call refers to year-over-year growth versus the same quarter last year. In addition, during today’s call, management will give their prepared remarks in English, a third-party translator will provide simultaneous translation in Chinese on another conference line. Please refer to our press release for details. During the Q&A session, we will take questions in both English and Chinese and a third-party translator will provide consecutive translation. All translations are for convenience purposes only. In the case of any discrepancies, management statements in the original language will prevail.

With that, I will now turn the call over to Daniel.

Daniel Yong Zhang — Chairman and Chief Executive Officer

Thank you, Rob. Hello, everyone. Thanks for joining our earnings call today. In the past quarter, Alibaba continued to firmly invest into our three strategic pillars of domestic consumption, globalization, cloud computing and data intelligence. We believe this will establish solid foundations of our long-term goal of sustainable growth in the future. Some context on the China macro environment before I share our business updates.

In the September quarter, China’s GDP and consumption continue to grow but slower than the previous quarters. Overall, retail sales for the quarter increased 5% year-over-year and our retail of physical goods rose 8% year-over-year compared to the 19% during the same period last year. Offline retail has only just returned to the same level as two years ago. These economic headwinds coupled by intensifying market competition also affected our core commerce business in China. In line with industry retail trends in China, physical goods GMV year-over-year growth rate moderated to single-digit this quarter, mainly due to a slowdown in apparel and the general merchandise categories. That said, growth rate of consumer electronics and home furnishing categories remain resilient.

In the challenging macro environment, we continue to invest in user acquisition and have seen promising progress in low-tier cities, which I will elaborate on later. Our global annual active consumers reached approximately 1.24 billion, which is a net increase of 52 million quarter-over-quarter and a 20% growth year-over-year this past quarter. Our AAC grew to now 153 million in China and 285 million overseas. We are on track to deliver the 1 billion China AAC target by the end of this fiscal year and we remain firmly committed to achieving our long-term target to serve 2 billion consumers globally.

Let me turn to our long-terms investment strategies. In less developed areas across China, Taobao Deals has continued incremental growth to our overall user base and stimulate more user activity and engagement in our China consumer ecosystem. Taobao Deals AAC surpassed 214 million this past quarter. Close to half of Taobao Deals daily active users are unique incremental users, in addition to Taobao app DAU. Consumers are attracted by the value for money products and differentiated user experiences offered by Taobao Deals. At the same time, manufacturers take advantage of it’s one-stop full service solution that includes online store operation and fulfillment to sell directly to end customers. We call this solution and to see all manufacturers to consumers.

During this past quarter, Taobao Deals and [Indecipherable] grew nearly 400% year-over-year. For our community marketplaces business, Taocaicai, we continue to focus on investing in and building a new digitalized community commerce model that is sustainable and healthy. Taocaicai has expanded operations to close to 100 cities and it’s a GMV growth surpassed 150% quarter-over-quarter. We are deliberate in our approach and faithful to our belief in true value creation rather than blinded pursuit of unqualified and unsustainable growth. We are instead focused on leveraging core capabilities that Alibaba has built over the years in the supply chain, logistics, user engagement and the channel development. We aim to grow a new digitalized social commerce infrastructure that offer consumers quality services and products with highly competitive price.

Consumer survey results have shown that product quality is the top deciding factor for consumers to choose Taocaicai over other platforms. Taocaicai has contributed to increasing the purchase frequency of our core commerce consumers. More than 50% of Taocaicai users were first time buyers of fresh produce on our China retail marketplaces. We believe the ultimate value proposition of the community commerce infrastructure is in our ability to elevate the quality of routing everyday services in local communities. It ranges from guaranteeing supplies during pandemic lockdowns, supporting local farmers to to sell high quality produce, vocational training and job-creation. We will continue to enhance these services to create value for our communities.

In local services, we are creating a product and service metrics centering around synergies between Ele.me, Amap, and Fliggy. Ele.me and Amap are positioned as our two main user entry points for home bound and the destination bound local services respectively. Ele.me delivered 29% growth in AAC’s and 30% growth in order volume year-over-year with non-meal delivery order growth outpacing total order growth this past quarter. In addition to map navigation services, Amap has been expanding into service offerings around the user journeys and the destinations, such as ride hailing, hotel bookings, etc.

During the quarter, transacting users of this designation services on Amap increased more than 200% year-over-year. Although the recent resurgence of COVID-19 in parts of China impacted sustainability in the supply of hotel rooms and travel products in many provinces, we see the positive contribution in user value from adding freaky product supply to Amap and our other user platforms. We just celebrated our 13th November 11 Global Shopping Festival with a record GMV of RMB54.03 billion excluding unpaid orders, representing a year-over-year growth rate of 8.5% for the 11-day campaign. The stable and healthy growth of the high base over last year reflects China’s consumption power and economic resilience. Looking forward, we remain confident in development of China consumption. Today, we already have the largest and the most valuable consumer base in China with 953 million AACs which are still growing. At the same time, we will serve our large and a diverse consumer population through the user segmentation, addressing different needs and used cases through an assortment of apps with differentiated value propositions. Further through cross-selling of products and services, we will increase our user stickiness, wallet share and overall retail penetration.

Outside of China, we continued healthy expansion of our user base and revenues, achieving 285 million AACs and 33% revenue growth during the quarter. In Southeast Asia, Lazada produced 82% order growth year-over-year during the quarter, with triple-digit growth in Thailand, Vietnam and Malaysia. Trendyol, the largest e-commerce platform in Turkey delivered GMV growth of over 80% year-over-year. AliExpress GMV growth decelerated this quarter due to the negative impact of net VAT rules in Europe and the gradual recovery of the local supply chain and consumption in it’s destination markets. Looking ahead, AliExpress, will further invest to expanding local operations in it’s strategic markets in Europe.

For our logistic business, Cainiao Post has achieved coverage in over 200 cities as of the end of September. They have become our stations for consumer services in more than 100 counties and towns across less developed areas. The daily average package volume delivered through Cainiao post increased nearly 70% year-over-year to 59 million during the quarter. In the domestic supply chain business, Cainiao’s fulfillment volume for Taobao Deals and Taocaicai increased by more than 200% year-over-year. As part of its global logistics network expansion, Cainiao launched new initiatives to improve the user experience for international consumers by introducing self pickup lockers in Russia, Spain, France, and Poland, while continuing to enhance it’s cross-border end-to-end logistic capability.

Last but not least, Alibaba Cloud delivered revenue growth of 33% year-over-year this past quarter, driven by strong revenue growth from customers in the Internet, financial services and retail sectors. In October, we held our 13th Apsara Conference, which is now the biggest technology conference in China by attendees. We unveiled several new proprietary products and technologies upgrades, including Yitian 710 server, the X-Dragon architecture, Panjiu cloud native server series, Alibaba AI and big data platform, and a new generation of PolarDB database. These show that Alibaba Cloud is benchmarking against the world’s top cloud computing technologies and a milestone in it’s proprietary product capabilities in [Indecipherable]

In September, we announced 10 initiatives and pledged to invest RMB100 billion by 2025 to advanced scientific and technological innovation, economic development, high quality employment and the vulnerable group support in China. We believe these four areas are among the common focus of all responsible companies in the world under the ESG framework. We will incorporate these 10 initiatives into the social responsibility pillar of our ESG strategy and hope that our digital commerce and technology ecosystem can contribute our perks in these areas. Looking ahead, we will continue to invest heavily into three — into our three growth engines of domestic consumption, globalization, cloud computing and data intelligence as we announced at the beginning of our fiscal year.

In core commerce, we have started — started to see encouraging initial results of our investment in low-tier cities, local services and logistics in the form of user growth and enhanced logistics capabilities. Our investment in globalization has also delivered progress in user base consumption and the revenue growth. In cloud computing in better intelligence, we will strengthen our market leadership by further enhancing our core product and technology capability. No matter the challenges in the current macroeconomic environment and with more and more players entering into the industry, we remain very confident in our business strategy and our future. We will continue to focus on capacity building, value creation and a multi-engine approach to growth. We firmly believe our strategy and the perseverance will bring mid and long-term returns to our customers and investors.

Now, I would like to turn it over to Maggie, who will walk you through the details of our financial results.

Maggie Wei WU — Director and Chief Financial Officer

Thank you, Daniel. Let me share some high-level thoughts on our financial results first. Our revenue growth continued to be strong and our revenue are becoming more diversified. So overall, we grew revenue by 29% year-over-year to RMB200 billion. Revenue of our international commerce business and car computing exhibited robust growth of 34% and 33% respectively.

Our adjusted EBITDA was RMB28 billion. The core profitability before investments in key strategic areas remain very significant and stable at about RMB52 billion, so I will talk about our investment areas later. The decline of RMB13.2 billion year-over-year in total adjusted EBITDA is a result of our investment in strategic areas and merchant support. We have one of the most diversified and loyal customer base in China, and then we believe these investments will further strengthen our position and our overseas investment will also help us gain mindshare in many international markets in the future.

So, here we provide a revenue breakdown by segment, where you can see that Alibaba has evolved into a multi-engine growth company with businesses across different runways and the growth and revenue continue to be more and more diversified. Cost trends, now let’s look at our overall cost trends, excluding SBC as a percentage of revenue. Cost of revenue ratio increased in September quarter due to higher proportion of our direct sales business, mainly from the consolidation of Sun Art. It’s direct sales business will continue to strengthen our retail initiatives, especially in the development of our product sourcing capabilities. For example, our community marketplace business continue to grow rapidly, which is partially, thanks to the strong procurement and supply chain capability in perishables, FMCG and general merchandise categories of Sun Art. Sales in the marketing ratio also increased in September quarter due to an increase in marketing and promotional spending for user acquisition and engagement for our mobile commerce businesses, such as Taobao Deal, Lazada, Palomar, and also Taocaicai. G&A expense remained stable at 4% compared to same quarter last year.

Now let’s look at our profitability and area of investment. Commerce-adjusted EBITA before key strategic investments was largely flat at RMB52 billion, primarily reflected our support to merchants as well as the increased spending in user acquisition engagement of our marketplaces. So if excluding our merchant support program spending, the growth of commerce adjusted EBITDA before key strategic investment was similar to that of our CMR revenue growth, suggesting a relatively stable EBITDA margin of our China retail marketplace. Adjusted EBITDA decreased by RMB13.2 billion. The decline primarily reflect RMB12.6 billion year-over-year increase in combined losses of key strategic areas such as Taobao Deals, local consumer service, community marketplaces and Lazada within commerce.

Let’s take a closer look at the business progress revenue and profitability of our business segments during the quarter. Before — okay, first our commerce segment. Revenue from our commerce segment in quarter was RMB171 billion, 31% year-over-year growth. Revenue of China commerce business showing 14% year-over-year growth excluding Sun Art consolidation, and CMRs growing 3%. There are two key reasons for the slower growth of CMR. First, our CMR growth were primarily tied to single-digit physical goods GMV growth that resulted from slowing market conditions and more players entered into this sector, the China e-commerce market. China’s MBS statistics have shown us a slowdown of overall consumption. We experienced large — larger impact given our position as largest e-commerce player in China. Secondly, CMR growth was lower than physical goods GMV growth primarily due to the incremental year-on-year increase in merchants supports and subsidies.

Revenue of international commerce grew 34% year-over-year with continued strength of both International wholesale and international retail businesses, such as Lazada, Alibaba.com, AliExpress and Trendyol. Commerce adjusted EBITDA decreased by 12% [Phonetic] the decrease reflect RMB12.7 billion. The decrease reflected increased investment in those strategic initiatives. Now on these initiatives we invested within commerce, as noted, where you both business that strengthen consumer experience, enhance loyalty, penetrate into less developed area in China and further expand our presence internationally. So during the quarter, the businesses all saw robust growth. Taobao Deal and Taocaicai continued to penetrate into less developed markets of China and they expand our addressable market. Taobao Deal achieved a RMB248 million AAC, up RMB49 million. Taocaicai grew GMV by over 150% Q on Q. As a reminder, our community marketplace business started early this year.

Ele.me continues to deliver strong order growth of 30% year-over-year and it’s one of the main consumer gateways for our local service business with high frequency purchasing intent. Lazada and Trendyol continue to generate robust growth in new international markets. Lazada order grew 82% year-over-year. Trendyol GMV grew over 80% year-on-year.

Let’s take a look at the cloud computing business. Ali Cloud’s revenue growth 33% year-on-year to RMB20 billion during this quarter, which we accelerated compared to the June quarter growth. We saw strong revenue growth from customers in internet financial services and retail industries. Ali Cloud generated an adjusted EBITDA of RMB396 million given strong revenue growth and economical scale. Next, our DME business during the quarter was RMB8 billion in revenue. And if you look at the losses, a slightly increase year-over-year because the investment in content, etc., but overall they continue to narrow in losses in the first half of the fiscal year.

Income statement selected financial metrics. Let’s review some of these line items. Interest and investment income was a loss of RMB11 billion in September quarter primarily due to net losses arising from changes in market prices of our equity investments in publicly traded companies in the quarter. This is compared to net gains in the same quarter of 2020. Income tax expense in the quarter were RMB6.1 billion compared to RMB1.9 billion in the same quarter of last year. In the same quarter of last year, tax expenses reduced by approximately RMB6 billion because during that quarter certain subsidiaries were officially notified that they were approved of key software enterprise status for calendar 2019, which entitled them to a reduced tax rate — tax rate of 10%.

Share of results of equity method investees was RMB5.5 billion during the quarter. Here we saw a GAAP and non-GAAP net income attributable to shareholders. Besides the reasons we discussed above, the year-over-year decrease was also due to losses arising from the changes in market prices of our equity investment in publicly traded companies. September quarter free cash flow, we continue to have a strong net cash position. As of the end of the quarter, our cash, cash equivalents and short-term investments were RMB443 billion, which is approximately $69 billion. Free cash flow was RMB22 billion. The decline was driven by a decrease in the profits.

Before we go into Q&A, I would like to provide some perspective on our financial outlook. Over the last six months, we have observed a softer market conditions with slowing consumption growth in China. Given a slower than expected domestic consumption growth since we provided our revenue guidance in May, we now expect our fiscal ’22 revenue growth to be 20% to 23% year-over-year. The adjustment primarily reflects lowering of commerce revenues that include both direct sales and the customer management revenue. Let me share with you a bit more on our investment and profitability. So firstly, in China, we’re seeing more players entering into the e-commerce industry. Our peers are increasing investments to acquire users and most of them continue to show a level of — high level of spending. We will continue to invest in our e-commerce business that create value for consumer and merchants and keep our market leadership position and then for the competitive strength in longer-term. Secondly, we believe our local service business still have ample long-term potential. These businesses have generated strong transaction growth and high user retention rate, setting a strong foundation to compete for the long-term.

We are seeing robust GMV and user growth in our international commerce business. These businesses, Lazada, Trendyol, AliExpress are exhibiting robust growth driven by localization strategy as well as our ongoing investment in building technology and logistic capabilities. Lastly, we continue to expect exciting growth opportunities for our Cloud business that will benefit from this taxation industry, industrial Internet era. Given our significant profit generation and the strong balance sheet, we believe it is important to grow and expand into new addressable markets for the long-term despite near term weakness in domestic macro environment. As such, we will continuously invest into the above mentioned areas and we’ll report to you the business development progress along the road. We believe this business will continue to increase consumer mindshare and wallet share, that will be important to our longer-term growth and value.

Lastly, before we go to Q&A, we would like to inform you that we will be hosting an Investor Day on December 16th and 17th. During the event, our senior management team will provide you an update on Alibaba’s key businesses and our vision for the future. Over the last several quarters, investors and analysts have communicated their desire to understand better on how we measure the success of our growth businesses mentioned and that their — these businesses long-term perspective — prospects. This Investor Day will be an opportunity to provide you with more details and insight.

Now, let’s open the floor for Q&A. Thank you.

Rob Lin — Head of Investor Relations

Thank you. Hi, 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. Our management will address your questions in the language asked. Please note that the translation is for convenience purpose only. In the case of any discrepancy, our management statement in the origin language will prevail.

[Foreign Speech]

Operator, please connect speaker and SI conference line now and then start the Q&A session when ready. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question is from the line of Thomas Chong of Jefferies. Your line is open. Please go ahead.

Thomas Chong — Jefferies LLC — Analyst

Yeah, hi, good evening. Thank you management for taking my questions. I have a question regarding our new initiatives. Given that Taocaicai, Taobao Deals [Indecipherable] are doing very good and we are seeing Taobao Deals, the AAC already surpassing RMB240 million. So Just want to get a sense about, regarding our new initiatives. When should we expect the monetization to wrap up? And on the other hand, over the long run how should we think about the revenue scale of these new initiative versus our existing business?

And I have a second questions regarding connectivity. Given that it has been quite a while after we have been cooperating with our peers on connectivity, just want to get a sense about any latest progress or the amortization potential that can be shared? Thank you.

[Foreign Speech]

Daniel Yong Zhang — Chairman and Chief Executive Officer

Okay, let me answer the questions one by one. For the first one. I think today our priority for for Taobao Deals and Taocaicai is to still to build the right, I mean, infrastructure in terms of the manufacturers to consumers model in Taobao Deal as well as a hyper local community marketplace in infrastructure. So I think that these are our priorities. And in terms of user engagement, we see very, very strong user engagement in the past quarters as you can see the AAC for Taobao Deals reached 240 million and for Taocaicai it –because this is a more likely additional services on Taobao mobile app and Taobao Deals, so, which also show a very good, I mean, user conversion to the fresh produced under food categories. So we are very confident that if we can provide value to the consumers as well as the manufacturers and the suppliers from the farmers, we believe that we can find a very — we can generate also the value to the platforms as well.

[Foreign Speech]

So looking ahead, I think for the — for the value creation model, I would say it’s not only like a marketplace to monetize the traffic in the marketplace, but also we can see a strong potential in the supply chain as a result of the supply chain optimization for the manufacturer to the consumer business as well as the farmer to table business.

[Foreign Speech]

Yeah, for your second question, connectivity. As we always said, connectivity and openness are the core value of internet. We strong believe that it will be a win-win situation if all platform companies can embrace openness and connectivity are in substance and not in form. So I think, for us we will continue to promote the [Indecipherable] user sharing and the consistent all across platform to make sure our consumers have — have the consistent user experience. Because today if you are Taobao users, you can — you can, you may have the experience that when you want to share some product links with your friends in social platforms, the experience is trace bad. So I think this is for our mutual customers benefit to improve the experience in the — when they try to — try to do whatever they want across ecosystems and we will make — we actually have already made necessary preparations for the future interconnectivity.

[Foreign Speech]

Rob Lin — Head of Investor Relations

Thank you. Operator, next question.

Operator

Thank you. The next question is from the line of Alex Yao of J.P. Morgan. Please go ahead.

Alex Yao — J.P. Morgan Securities — Analyst

Good evening, Management, and thank you for taking my question. So during your prepared remarks, you guys mentioned that the weak revenue momentum was up due to both macro and the competition and based on the commercial results today night, you guys looks like underperforming the industry peers in this quarter. Can you help us understand to what extent is the revenue weakness due to macro and to what extent is due to competition? For competition, what are the areas you see the most pressure and the challenge and what are the strategies to regain competitiveness in those areas? Thank you.

[Foreign Speech]

Well, if you look at the — that the landscape actually today for e-commerce and for the definition of e-commerce actually is evolving. So today in the market there are multi-format of e-commerce model and as long as you have some traffic, you have user with you and based on the public available third-party payment solution and the logistics and delivery — fast delivery — fresh deliveries, anybody can try something on e-commerce. So, but we strongly believe that our — for Taobao, our advantage is that consumer — that a consumer mindset and we are a purely a consumption destination for all the customers. So we will continue to develop multi features and applications in our Taobao app at the same time to segment our user group by different mobile apps for specific value propositions.

And today, if you look at the — if you look at the market, I would say for the — for all the our players, actually they are — they may address the customers needs from one angle. But actually for Taobao, we are the only destination who can meet the customers’ purpose from different — to meet the customers’ different purposes for someone who have very specific shopping purposes they can — Taobao to them is positioned as a mobile, as a shopping search and also Taobao has a lot of applications to facilitate people to enjoy the fun of discovery. And over the years, we’ve built our live streaming business as well as the short video business and the social — social content business. So we are a platform with multi-formats, I mean, consumer journeys for people with different purposes. I think we will continue to invest in this and to give people most comprehensive selections and most efficient and guaranteed consumer experiences.

[Foreign Speech]

As to your question about the slower GMV growth reasons, how much from — close from macro conditions, how much from the competition. Actually, it’s very difficult to quantify the impacts, I would say. So that’s why we believe that these two reasons are all, I mean, are all the factors we should consider. Actually, we are — because we are the market leader in the retail commerce, so that’s why I think our performance to some extent will reflect the overall market, I mean, condition.

[Foreign Speech]

Rob Lin — Head of Investor Relations

Operator, next question.

Operator

Thank you. Next question is from the line of Piyush Mubayi of Goldman Sachs. Please go ahead.

Piyush Mubayi — Goldman Sachs — Analyst

Thank you for taking my question. Just looking ahead, your guidance seems to suggest you’ll grow between 11% and 15%, 16% in the second half of 2022 and that’s a step down from the pace of growth you had in the first half. If we accept that pace as being in the continuation of where we are today, so what are you seeing that gives you the conviction that this space has slowed — this slow pace will be maintained through the second half of 2022 fiscal? And I wonder if you could look beyond that and give us what you think is a normalized pace of growth for your business and for China GMV in general? So really focusing on growth here, if you don’t mind.

[Foreign Speech]

Maggie Wei WU — Director and Chief Financial Officer

Hi Piyush, this is Maggie. Let me try to answer your question. Yes, if you look at our guidance and then try to drive the second half growth for our revenue indicates revenue growth at the teens. That assumption is mainly based on the GMV growth expectations and the impact on the revenue growth is mainly placed in the core commerce and China retail commerce. So we do think if you look at the total China’s GDP and consumption this quarter compared to previous quarter, it comes down significant to single digit. We see this may continue for the following quarters. And we as in size the biggest player right now accounts for — we have approximately RMB8 trillion GMV versus 44, 45 of the total national GMV. So the impact will be largely on us.

And if you look forward beyond this year and in the following years, how we see it, our revenue growth. I think first of all, our revenue growth engine now is already beyond China consumption, beyond the CMR. So CMR, if you look at this quarter accounts for around 36% of total revenue, where it used to be over 50% several quarters ago. So this is because all of these car computing and international businesses, China local service, they all start contributing and increases contribution to our total revenue. So this is where we talk about multi-engine growth and continue to expect to see growth in these areas. At the same time within core commerce, so Daniel talked about our multi app strategy and talks about — If we look in the mid-term, long-term, we don’t believe the monetization kind of yearly coming from these traffic and GMV growth, but more from the infrastructure capability we’re building and to enable merchants. We don’t have exact monetization plan to communicate at this stage. We’ll share more later on during Investor Day. We’re also going to share with you how we measured value creation. And then eventually this always seems that once merchants stay, consumer stay and retention rates here and they enjoy the service, we’ll find out ways to monetize. So if you look at the investment we are making nowadays, we actually — this is our decision to invest and to move towards our target. First target is the user base of over RMB1 billion in China. I think in that aspect we’re pretty much on track. And then the multi-app strategy makes the engagement of these users being enhanced. And then the merchant side, we have a lot going on in terms of merchant service provision, which we’ll also share next month. So the value creation and then eventually we believe the return will be there.

Piyush Mubayi — Goldman Sachs — Analyst

Thank you.

Operator

Thank you.

[Foreign Speech]

Rob Lin — Head of Investor Relations

Operator, next question.

Operator

Thank you. Our next question is from the line of Alicia Yap of Citigroup. Please go ahead.

Alicia Yap — Citigroup — Analyst

Hi, good evening. Management. Thanks for taking my questions. I have a question related to CMR and GMV. So the slowdown of the CMR, is it more temporary and also a function of GMV and has CMR actually experienced slower growth than GMV in the past — past couple of quarters given we have been providing many service to support merchant share, especially given it’s is a tough macro. So if GMV reaccelerate later, could CMR reaccelerate even faster since we have been still under monetized and the way that we can further create value for merchants, we can still add on to the entire value chain for the merchant? So, any color that you could help us on that would be great. And also in ways of GMV could reaccelerate when the macro is recovered, is there any way that we are preparing to help us capture when the macro recover, we can actually further boost our GMV faster than the macro recover? Thank you.

[Foreign Speech]

Maggie Wei WU — Director and Chief Financial Officer

Thank you, Alicia. Yes, you’re right, the CMR growth actually to some extent tied to the GMV growth and in the past several quarters we’ve seen that CMR growth is slower than the growth of GMV, which is mainly due to our merchant support program. So if we add back those merchant support standing, then the CMR growth is going to be — would have been pretty much in line with the GMV growth. So eventually if the China consumption growth recovers and GMV growth comes back and get accelerated, we believe that CMR growth will also be consistent with the growth of GMV. But in our view when we look at the future revenue component, we believe that all of these efforts we have been making and not only the user base expansion, but also the services, look at our livestreaming, all of these are second hand and luxury products and a lot of other supplies and also user experience, building exercise will bring value to consumers. We should have new revenue streams coming into the total Group revenue pie. And so these will be adding to our future revenue growth.

Daniel Yong Zhang — Chairman and Chief Executive Officer

Yeah, maybe let me add a few words on…

[Foreign Speech]

Let me add a few words on the question. Actually, we always made our self ready for any new market opportunities. And even more, we are always trying to to do something — do anything we can to create new market opportunities. I think today if you look at the landscape, the e-commerce actually account for like a 20% to 25% of the total retail. But if you look at the penetration rate by categories, actually it varies. So I think it’s still a big room to — first to digitalize the existing, I mean, total retail. But furthermore, is to create a new demand by leveraging the power of technology to improve the efficiency of the supply and demand and also create the digitize retail formats, no matter it’s online or offline or integrated, to give people superior experiences to unlock the potential of consumption. So we will always try to innovate and incubate new animals and to capture these new opportunities and even create new opportunities. Thank you.

[Foreign Speech]

Rob Lin — Head of Investor Relations

Operator, next question.

Operator

Thank you. The next question is from the line of Yang Bai [Phonetic] of CICC. Please go ahead.

Yang Bai — CICC — Analyst

On behalf of Yang from CICC, thanks for taking our questions. Our questions, we have two questions. Our first question is regarding to the livestreaming business. What’s our current strategy in livestreaming business as we know that more traffic and GMV are concentrating to the top KOLs in Cobalt. How should we think this trend going forward? Are we going to balance the course and the traffic between the top two and the long tail KOLs, any color would be very helpful.

And the second question is regarding to the Personal Information Protection Law impact. Are we seeing any significant impact to our CMR business? How should we change in the future? Thank you.

[Foreign Speech]

For your first question for livestreaming, actually for our Taobao live streaming today is a very important. I mean, applications in our — in our mobile Taobao and we — we observe that for a lot of friends and customers, they love seeing this livestreaming format, but we don’t view this livestreaming as a independent application, but part of the sort of application to enable seller to engage with the customers through themselves, through their own stores or through the KOLs.

[Foreign Speech]

If you look at the ecosystem in livestreaming business, actually we — we do have some top players. They have because of very good popularity among their fans, but as the same time we have many KOLs second tier, third tier and many new KOLs and the most — the very unique, I mean situation in Taobao mobile app — in Taobao livestreaming is the store livestreaming, which initiated by the star operator, by the setters, even by the staff and associate in the seller. So I think we provide a very dynamic, I mean ecosystem in this Taobao livestreaming. And as a platform, operator, we don’t intend to so called balance the traffic. Actually, we never do anything to balance the traffic or rebalance the traffic. I think we should keep the market open to the customers. And if their option to select which one to follow and which one they’re in favor of. But for us, we always try to help and incur with more and more diversified KOLs and diversified, I mean young starts in the sellers to become new generation starts.

[Foreign Speech]

As to your second question for the new effective PIPL, actually we did very necessary preparation for the law, which took effective on November 1. And based on our preliminary assessment, we don’t see — we don’t expect PIPL will have a material impact on our business. But because this is still a very short timeframe, we still need more time to assess, but so far so good. Thank you.

[Foreign Speech]

Rob Lin — Head of Investor Relations

Operator, next question.

Operator

Thank you. Our next question is from the line of Gary Yu of Morgan Stanley. Please go ahead.

Gary Yu — Morgan Stanley — Analyst

Hi. Thank you Management for the opportunity to ask questions. I have two questions. First one is on some of the kind of new growth business that you highlighted at the press release, including both the international business and also the cloud computing business. How should we look at the growth outlook in the future? What kind of competitiveness are we seeing in overseas market? And particularly on cloud is the kind of headwind from major customer loss already be high and therefore we should continue to see a stagnation in growth going forward.

My second question is related to strategic investment. How should we look at the level of investment going into fiscal 2023 given we have already achieved some early success. Should we expect continue to step up investment in Taobao Deals and marketplace — commodity in marketplace are going into fiscal 2023? Thank you.

[Foreign Speech]

Thank you. For the first question. Today, as we said, we are taking the multi-engine growth approach to to grow our business. So today you will see that both cloud and international business show a very robust growth. The revenue — the cloud this quarter resumed that growth to 33% year-on-year and for international business — for International wholesale and retail business as a whole reached year-on-year growth rate of 34%. So I think for both business to date — both of them are in the early stage of development, early stage of growth. We still to try to build — do the right thing to build the right infrastructure to make sure we capture the long-term opportunities and to maintain a sustainable growth. Take example, like for cloud, today we enhanced our investment in technologies and products and in our — as I just shared in my script, we announced a couple of very important technology and product upgrading in our Apsara conference this September, and this is a reflection of our continuous efforts in cloud relevant technologies and products. And going forward, we will continue to do so and we believe that for cloud opportunities in China, in the world it’s not only a replacement of the existing IT infra, but instead actually because of cloud you get new opportunities in intelligence services, you have got new opportunities in 5G for not only for cloud, but also for network and terminal and edge. So we will get ourselves ready for all of these new opportunities. And I think this is relevant to all the — all the industry all the sectors in the economy and not only in China, but also in many other markets in the world.

And as to the international business, today we reported that our AAC for international market reached RMB285. I think we witnessed a very healthy growth and very rapid growth. And if you look at the penetration of e-commerce in many other markets outside China, I think still in very early stage. We strongly believe that with our perpetual technology and experiences in this sector, we are in a good position to capture this opportunity in many other markets. But as we always said, we focus on growth. But we focus on quality as well. So we focus on a sustainable growth in capturing this new opportunities, but long-term wise, we are very confident about this up multi-engine growth strategy. Thank you.

[Foreign Speech]

Maggie Wei WU — Director and Chief Financial Officer

Right. Regarding your second question on whether we will continue to invest and to what level our investment would be in the future. I think first of all, we for sure will continue to invest, while monitoring the business progress in this strategic initiative areas. So when you look at where we invest nowadays is user base, right, through our Taobao Deal, Taocaicai, etc., and also the services provide more services to our user base like local service segment, we, there is still quite a lot of potential there. And also globalization, Lazada and Trendyol, etc. These areas I think will — it’s not a one-year investment kind of a period, it’s several years, and, but there might be say adjustments in terms of the mix of the investment. For example, we expect to achieve 1 billion annual active consumer in the following two quarters and then by the time we achieve that, we’re going to focus more on the engagement and those multi- app user growth. So you asked about ’23 physical years investment outlook. I think we — we will start our business planning and budgeting session soon. So that will provide more color and guidance later on.

[Foreign Speech]

Rob Lin — Head of Investor Relations

Hi, everyone, this is Rob. I just wanted to make two comments from our earnings call today. First I just want to make a slight, I guess to error change in your script. We said double 11 [Phonetic] GMV was RMB54.03 billion, it was actually RMB540.3 billion. That’s the first note. The second, we are having our Investor Day on December 16 and 17. We look forward to hosting you. I’m sure there are a lot of questions you may still have and we look forward to address all those questions on the two-day event.

[Foreign Speech] Thank you, and this is the end of our call today. I’ll pass back to the operator. Thank you.

Operator

[Operator Closing Remarks]