Alibaba’s e-commerce business allows it to self-finance growth initiatives that may take years to bear fruit.
Despite operating several money-losing ventures, Alibaba trades at an earnings multiple discount to the general market.
Some of those bets — like AI cloud hosting — have already turned the corner of profitability.
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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 (NYSE: BABA).
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?
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).
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.