<<As you correctly point out, much of Alibaba’s earnings growth will come from these middle stage businesses rather than the present most profitable businesses, much as YouTube originally contributed nothing for Google but ultimately added a whole 11% to their growth.
Thanks for the clarification. The difficulty is in estimating the potential earning power of these businesses as they have not been making money, the cloud service turned EBITA positive just two quarters ago. On the other hand, the core commercial business (service revenue collected from Taobao and TMall with EBITA about $38b USD) has been growing around 20% until the last two quarters when the growth rate dropped to single digit, which I think reflects more on the overall economic slow down. There are good reasons to believe the core commercial will return to double digit growth in years to come and this alone could take the earning per share up to $27 in 2033 excluding negative drag from other businesses. The reasons being: 1. the online share of the total retail is still low, around 25%, and will keep growing faster than the total retail. 2. China’s total retail has been growing double digits and the trend will continue, as the population become richer, the notorious high saving rate will drop and consumer spending will grow faster than the GDP.
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China’s cloud market is much smaller than the US’s but is growing at a much faster rate. Amazon’s cloud service AWS contributes $13.5B operating income for 2020, more than 50% of Amazon’s total operating income. If only this pattern will hold true for Alibaba, the potential earning power could be huge.