China Market Update: Alibaba, NetEase, & KE Holdings Report Q1

Forbes

15-05-2025

CLN
Asian equities were mixed but mostly lower overnight after substantial gains from the 90-day US-China tariff deal, as India and Pakistan outperformed, while Thailand and Hong Kong underperformed.
The South China Morning Post reported that US-bound shipping orders increased nearly 300% after the 90-day pause was announced, reflecting still-strong demand from US businesses and consumers for China-made goods despite tensions. Airplane makers in Mainland China were sold off on the potential for a resurgence of purchases of US-made Boeing airplanes as a condition of a deal between China and the US.
CNY has been highly resilient amid "Art of The Deal" tariffs, appreciating 0.8% versus the US dollar since April 2nd.
Huawei has partnered with UB Tech to build humanoid robots. The collaboration will allow UB Tech, a robot manufacturer, to benefit from Huawei's newfound competency in the high-end chips required for training and maintaining AI systems. Humanoid robots are a recurring theme in China and in the markets. When visiting China, I am always impressed by the ubiquity of robots for cleaning and delivering room service.
Mainland markets outperformed Hong Kong somewhat. Volumes were near the one-year average in both markets, as Mainland investors were rare net sellers of Hong Kong-listed stocks and ETFs. Mainland investors were net sellers of Tencent after the company released stronger-than-expected Q1 results yesterday, which included high profit margin expansion. The company's success in Q1 highlights the continuing strong consumer rebound in China because it derives a significant amount of its revenue from advertising and marketing services, which are often the highest margin segments of its business.
% changes are year-over-year unless otherwise indicated.
Alibaba
Alibaba had a decent quarter, though it slightly missed estimates on net income and top-line revenue. Cloud growth accelerated significantly to 18% growth, driven by strong adoption of AI models, especially Alibaba's industry-leading Qwen. Company executives have mentioned the immense cross-selling opportunities for Alibaba Cloud as inference, i.e. large language models, become more mainstream. China commerce (Taobao & Tmall) increased 12% as 88VIP members, the high-spending category, have reached over 50 million. The company bought back $16.5 billion worth of shares during fiscal 2025, which ended 3/31/2025.
NetEase
NetEase had a strong beat on net income and a moderate beat on top line revenue for the first quarter of 2025. It is good to see that the reactivation of their games partnership with Microsoft is not curtailing margins. Games revenue accelerated quite forcefully to 15%. The company also boasts a strong games pipeline, with titles including MARVEL Mystic Mayhem, Destiny: Rising, and Ananta. NetEase's open world games will also likely benefit from its AI-enhanced non-player characters (NPCs).
KE Holdings
KE Holdings, which operates the 'Beike' online and brick-and-mortar real estate platform, which is akin to Zillow or Street Easy in the United States, reported first quarter results that missed significantly on top line revenue, but beat on net income. The recent uptick in China's real estate, especially new housing, market benefited KE's revenue growth, though not as much as analysts had expected. But, the uptick in new housing sales may have led to the better-than-expected margin.
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