Imagine being able to attempt challenging aerial feats, knowing that you have the mother of all safety nets waiting for you. When it comes to having freedom to take financial risks, the only thing better than being born a trust fund heir or a nepo baby is to be Alibaba (BABA 1.60%).
That took an unexpected turn, but as a somewhat recent Alibaba shareholder -- I've owned the Chinese e-commerce pioneer for roughly two years -- it's a point that sticks with me. Alibaba is a cash tree that generates enough dough to bankroll forward-minded bets. Why would I want to sell the stock, when it's the gift that keeps on giving?
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Peter, Paul, and marry
The old phrase "robbing Peter to pay Paul" isn't meant as a compliment. Using funds from one source to solve a problem elsewhere only creates a new problem. However, it's a strategy that makes perfect sense once you learn that nearly half of Alibaba's revenue accounts for more than its entire profitability.
It begins with China's Alibaba holding a dominant position in the country's online retail market. Its two core businesses, Taobao and Tmall, are different in theory. Taobao is China's largest consumer-to-consumer platform, where individuals and small businesses try to sell goods. Tmall tackles the more competitive business-to-consumer marketplace.
Most U.S. shoppers have likely never heard of Taobao or Tmall, although they may be familiar with Alibaba's AliExpress arm, which provides low-priced merchandise to deal seekers outside of China. The key point to remember here is that Taobao and Tmall form a potent one-two punch. Those two businesses accounted for 45% of Alibaba's consolidated revenue in fiscal 2025. They also combined to deliver 113% of Alibaba's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
NYSE: BABA
Key Data Points
Planting seeds and waiting for the harvest
With a stunning 44% adjusted EBITDA margin for the two e-commerce juggernauts combined, Alibaba has a laundry list of options. It can return money to its investors, and it does do that. Alibaba's 0.7% dividend yield is admittedly modest. The company's preferred method for returning cash to its shareholders is through stock buybacks. Alibaba has repurchased shares in 14 consecutive quarters, reducing its fully diluted share count by 13% since the end of fiscal 2021.
That's neat, but you know what's cooler? Alibaba is using the lion's share of its cash-flow proceeds to grow in emerging industries. Alibaba's overall business rose 5% -- or 15% from continuing operations -- in its latest quarter. It has some dynamic opportunities growing even faster. Its cloud intelligence business, which centers around artificial intelligence (AI) hosting, has grown 30% over the past year. It's actually profitable, but most of its side quests are not. Alibaba is working on AI chips. It just introduced AI glasses last month. It has a third-party delivery segment called Taobao Instant Commerce that surged 60% in its latest quarter.
Alibaba can afford to lose money on ambitious ventures. Many will fail. You're going to strike out a lot when you swing for the fences. The home runs that arise in the coming years -- like we're now seeing with cloud intelligence -- make the at-bats worth taking. Why would you sell a company that can self-finance its future while also improving per-share profitability with proceeds left over for buybacks? I'm sold, so I'm not selling.
