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TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS

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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-252669

The information in this preliminary prospectus supplement is not complete and may be changed. Neither this preliminary prospectus supplement nor the accompanying prospectus is an offer to sell these securities, nor does it solicit offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION. DATED FEBRUARY 2, 2021.

Prospectus Supplement
(to Prospectus dated February 2, 2021)

LOGO

US$                

Alibaba Group Holding Limited

US$            % Notes due 20  
US$            % Notes due 20  
US$            % Notes due 20   
US$            % Notes due 20    



We are offering US$            of our        % Notes due 20             (the "20    Notes"), US$            of our        % Notes due 20    (the "20    Notes" or the "Sustainability Notes"), US$            of our        % Notes due 20    (the "20    Notes"), US$            of our        % Notes due 20    (the "20    Notes" and, together with the 20    Notes, the 20    Notes and the 20     Notes, the "Notes"). The 20    Notes will mature on February    , 20    , the 20    Notes will mature on February    , 20    , the 20    Notes will mature on February    , 20    and the 20    Notes will mature on February    , 20    . Interest on the Notes will accrue from February    , 2021 and be payable on February    and August    of each year, beginning on August    , 2021.

We may at our option redeem the Notes at any time, in whole or in part, at a price equal to the greater of 100% of the principal amount of such Notes and the make whole amount plus accrued and unpaid interest, if any, to (but not including) the redemption date. We may also redeem the Notes at any time upon the occurrence of certain tax events. Upon the occurrence of a triggering event, we must make an offer to repurchase all Notes outstanding at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to (but not including) the date of repurchase. For a more detailed description of the Notes, see "Description of the Notes" in this prospectus supplement.

The Notes are our senior unsecured obligations and will: rank senior in right of payment to all of our existing and future obligations expressly subordinated in right of payment to the Notes; rank at least equal in right of payment with all of our existing and future unsecured unsubordinated obligations (subject to any priority rights pursuant to applicable law); be effectively subordinated to all of our existing and future secured obligations, to the extent of the value of the assets serving as security therefor; and be structurally subordinated to all existing and future obligations and other liabilities of our subsidiaries and consolidated affiliated entities.



Investing in the Notes involves certain risks. See the "Risk Factors" beginning on page S-33 of this prospectus supplement.



           
 
 
  Public Offering Price(1)
  Underwriting Discounts
  Proceeds to us(1)
 

Per 20    Note

              %               %               %
 

Total

  US$               US$               US$            
 

Per 20    Note

              %               %               %
 

Total

  US$               US$               US$            
 

Per 20    Note

              %               %               %
 

Total

  US$               US$               US$            
 

Per 20    Note

              %               %               %
 

Total

  US$               US$               US$            
 

Total

  US$               US$               US$            

 

(1)
Plus accrued interest, if any, from            , 2021, if settlement occurs after that date.

Neither the Securities Exchange Commission, nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

Approval in-principle has been received for the listing and quotation of the Notes on the Singapore Exchange Securities Trading Limited, or the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or information contained in this prospectus supplement. Approval in-principle granted by the SGX-ST for the listing of the Notes on the SGX-ST is not to be taken as an indication of the merits of the offering, us, any of our subsidiaries or affiliates or the Notes. Currently, there is no public trading market for the Notes. The Notes will be traded on the SGX-ST in a minimum board lot size of US$200,000 for so long as the Notes are listed and quoted on the SGX-ST and the rules of the SGX-ST so require.

We expect to deliver the Notes to investors through the book-entry delivery system of The Depository Trust Company and its direct participants, including Euroclear Bank SA/NV, or Euroclear, and Clearstream Banking, S.A., or Clearstream, on or about                        , 2021, which is the third business day following the date of this prospectus supplement. Purchasers of the Notes should note that trading of the Notes may be affected by this settlement date.

Joint Bookrunners

Citigroup   Credit Suisse   Morgan Stanley   J.P. Morgan   CICC

Co-Managers

ANZ   Bank of China (Hong Kong)   BNP PARIBAS   DBS Bank Ltd.   HSBC   ING   Mizuho   Wells Fargo

Prospectus Supplement dated            , 2021.

 


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TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT


PROSPECTUS

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You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus or any other offering materials we file with the SEC. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on such different or inconsistent information. We are not, and the underwriters are not, making an offer of the Notes in any jurisdiction where such offer is not permitted. You should not assume that the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus or in any other offering material is accurate as of any date other than the respective dates thereof. Our business, financial condition, results of operations and prospects may have changed since those dates. Neither this prospectus supplement nor the accompanying prospectus constitutes an offer, or an invitation on our behalf or the underwriters to subscribe for and purchase, any of the Notes and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

Notification under Section 309B of the Singapore Securities and Futures Act, Chapter 289: The Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

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ABOUT THIS PROSPECTUS SUPPLEMENT

This document consists of two parts. The first part is this prospectus supplement, which describes the terms of the offering of the Notes and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference in this prospectus supplement and the accompanying prospectus. The second part is the accompanying prospectus dated February 2, 2021 included in the registration statement on Form F-3 (No. 333-252669), which provides more general information. Generally, when we refer only to the "prospectus," we are referring to both parts combined, and when we refer to the "accompanying prospectus," we are referring to the accompanying prospectus as updated through incorporation by reference.

To the extent there is a conflict between the information contained in this prospectus supplement, on the one hand, and the information contained in the accompanying prospectus or any document incorporated by reference in this prospectus supplement or the accompanying prospectus, on the other hand, you should rely on the information in this prospectus supplement.

In this prospectus supplement, unless otherwise indicated or unless the context otherwise requires, references to:

    "ADSs" are to the American depositary shares, each of which represents eight Shares;

    "Alibaba," "Alibaba Group," "company," "our company," "we," "our" or "us" are to Alibaba Group Holding Limited, a company incorporated in the Cayman Islands with limited liability on June 28, 1999 and, where the context requires, its consolidated subsidiaries and its affiliated consolidated entities, including its variable interest entities and their subsidiaries, from time to time;

    "Ant Group" are to Ant Group Co., Ltd. (formerly known as Ant Financial), a company organized under the laws of the PRC on October 19, 2000 and, as context requires, its consolidated subsidiaries; we hold 33% of the equity interest in Ant Group;

    "board" and "board of directors" are to our board of directors, unless otherwise stated;

    "China" and the "PRC" are to the People's Republic of China;

    "director(s)" are to member(s) of our board, unless otherwise stated;

    "DTC" are to The Depository Trust Company, the central book-entry clearing and settlement system for the Notes;

    "Eligible Projects" are to investments and expenditures made by us or any of our subsidiaries in assets and projects that are aligned with one or more of the project categories set forth in the "Use of Proceeds — Use of Proceeds for the Sustainability Notes."

    "foreign private issuer" are to such term as defined in Rule 3b-4 under the U.S. Exchange Act;

    "Hong Kong" or "Hong Kong S.A.R." are to the Hong Kong Special Administrative Region of the PRC;

    "Hong Kong Stock Exchange" are to The Stock Exchange of Hong Kong Limited;

    "NYSE" are to the New York Stock Exchange;

    "RMB" or "Renminbi" are to Renminbi, the legal currency of the PRC;

    "SEC" are to the United States Securities and Exchange Commission;

    "shareholder(s)" are to holder(s) of Shares and, where the context requires, ADSs;

    "Share(s)" are to ordinary share(s) in our capital with par value of US$0.000003125 each;

    "U.S." or "United States" are to the United States of America, its territories, its possessions and all areas subject to its jurisdiction;

    "US$" or "U.S. dollars" are to the legal currency of the United States;

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    "U.S. Exchange Act" are to the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;

    "U.S. GAAP" are to accounting principles generally accepted in the United States;

    "variable interest entities" or "VIE(s)" are to our variable interest entities that are 100% owned by PRC citizens or by PRC entities owned by PRC citizens, where applicable, that hold the Internet content provider licenses, or ICP licenses, or other business operation licenses or approvals, and generally operate the various websites and/or mobile apps for our Internet businesses or other businesses in which foreign investment is restricted or prohibited, and are consolidated into our consolidated financial statements in accordance with U.S. GAAP as if they were our wholly-owned subsidiaries; and

    "VAT" are to value-added tax; all amounts are exclusive of VAT in this prospectus supplement except where indicated otherwise.

All discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

Unless otherwise noted, all translations from Renminbi to U.S. dollars in this prospectus supplement were made at RMB6.7896 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on September 30, 2020. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, at the rates stated below, or at all.

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FORWARD-LOOKING STATEMENTS

This prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein contain forward-looking statements that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about us, our industry and the regulatory environment in which we and companies integral to our ecosystem operate. All statements other than statements of historical facts are forward-looking statements. These statements are made under the "Safe Harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These forward-looking statements can be identified by words or phrases such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "potential," "continue," "ongoing," "targets," "guidance," and similar expressions. The forward-looking statements included in this prospectus relate to, among others:

    our growth strategies and business plans;

    our future business development, results of operations and financial condition;

    trends in commerce, the overall technology and the other industries in which we operate, both in China and globally;

    competition in our industries;

    fluctuations in general economic and business conditions in China and globally;

    expected changes in our revenues and certain cost and expense items and our margins;

    the completion of our investment transactions and regulatory approvals as well as other conditions that must be met in order to complete investment transactions;

    expected results of regulatory investigations, litigations and other proceedings;

    the completion of the process of enhancing the structure of our material variable interest entities and certain other variable interest entities;

    international trade policies, protectionist policies and other policies (including those relating to export control and economic or trade sanctions) that could place restrictions on economic and commercial activity;

    the regulatory environment in which we and companies integral to our ecosystem, including Ant Group, operate in China and globally;

    impacts of the COVID-19 pandemic;

    our sustainability goals; and

    assumptions underlying or related to any of the foregoing.

Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in the documents incorporated by reference in this prospectus or in any accompanying prospectus supplement for a more complete discussion of the risks of an investment in our securities.

The forward-looking statements made in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein relate only to events or information as of the date on which the statements are made herein and are based on current expectations, assumptions, estimates and projections. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events unless required by applicable laws and regulations. You should read such documents completely and with the understanding that our actual future results may be materially different from what we expect.

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SUMMARY

This summary highlights information contained elsewhere in or incorporated by reference into this prospectus supplement. This summary is not complete and does not contain all of the information that you should consider before investing in the Notes. You should carefully read the entire prospectus supplement, including the section titled "Risk Factors" of this prospectus supplement, the accompanying prospectus and the documents incorporated by reference, including "Updated Risk Factors"and "Updated Information Relating to Alibaba Group," our financial statements and the notes to those financial statements, which are incorporated by reference, and the other financial information appearing elsewhere in or incorporated by reference into this prospectus supplement. See "Incorporation of Documents by Reference."

Company Overview

To fulfill our mission "to make it easy to do business anywhere," we enable businesses to transform the way they market, sell and operate and improve their efficiencies. We provide the technology infrastructure and marketing reach to help merchants, brands and other businesses to leverage the power of new technology to engage with their users and customers and operate in a more efficient way. Our businesses are comprised of core commerce, cloud computing, digital media and entertainment, and innovation initiatives. In addition, Ant Group, an unconsolidated related party, provides digital payment services and offers digital financial services for consumers and merchants on our platforms. An ecosystem has flourished around our platforms and businesses that consists of consumers, merchants, brands, retailers, third-party service providers, strategic alliance partners and other businesses.

Recent Developments

On February 2, 2021, we announced our financial results as of and for the quarter ended December 31, 2020 presented below. The consolidated financial results for the three months ended December 31, 2019 and 2020 and the nine months ended December 31, 2019 and 2020 included in this prospectus supplement have not been audited or reviewed by our independent registered public accounting firm, PricewaterhouseCoopers.

Unless otherwise stated, all translations of RMB into US$ in this section titled "Recent Developments" were made at RMB6.5250 to US$1.00, the exchange rate on December 31, 2020 as set forth in the H.10 statistical release of the Federal Reserve Board, and all translations of RMB into HK$ were made at RMB0.84164 to HK$1.00, the middle rate on December 31, 2020 as published by the People's Bank of China.

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Unaudited Consolidated Income Statements Data

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions, except
per share data)

  (in millions, except
per share data)

 

Revenue

    161,456     221,084     33,883     395,397     529,894     81,210  

Cost of revenue

    (84,332 )   (121,268 )   (18,585 )   (209,865 )   (295,751 )   (45,326 )

Product development expenses

    (11,077 )   (13,607 )   (2,086 )   (32,493 )   (43,934 )   (6,733 )

Sales and marketing expenses

    (15,800 )   (25,343 )   (3,884 )   (38,494 )   (56,366 )   (8,639 )

General and administrative expenses

    (7,415 )   (8,692 )   (1,332 )   (20,326 )   (27,490 )   (4,213 )

Amortization of intangible assets

    (3,272 )   (3,172 )   (486 )   (9,344 )   (9,012 )   (1,381 )

Impairment of goodwill

                (576 )        

Income from operations

    39,560     49,002     7,510     84,299     97,341     14,918  

Interest and investment income, net

    17,136     40,036     6,135     80,671     72,683     11,139  

Interest expense

    (1,309 )   (1,092 )   (167 )   (4,015 )   (3,316 )   (508 )

Other income, net

    987     2,826     433     6,259     5,467     838  

Income before income tax and share of results of equity method investees

    56,374     90,772     13,911     167,214     172,175     26,387  

Income tax expenses

    (8,407 )   (9,194 )   (1,409 )   (17,934 )   (22,229 )   (3,407 )

Share of results of equity method investees

    2,165     (3,601 )   (552 )   (9,278 )   992     152  

Net income

    50,132     77,977     11,950     140,002     150,938     23,132  

Net loss attributable to noncontrolling interests

    2,042     1,558     239     6,211     5,006     767  

Net income attributable to Alibaba Group Holding Limited

    52,174     79,535     12,189     146,213     155,944     23,899  

Accretion of mezzanine equity

    135     (108 )   (16 )   (112 )   (157 )   (24 )

Net income attributable to ordinary shareholders

    52,309     79,427     12,173     146,101     155,787     23,875  

Earnings per share attributable to ordinary shareholders(1)

                                     

Basic

    2.48     3.67     0.56     7.00     7.21     1.10  

Diluted

    2.44     3.61     0.55     6.89     7.09     1.09  

Earnings per ADS attributable to ordinary shareholders(1)

                                     

Basic

    19.87     29.36     4.50     55.98     57.68     8.84  

Diluted

    19.55     28.85     4.42     55.14     56.71     8.69  

Weighted average number of shares used in calculating earnings per ordinary share (million shares)(1)

                                     

Basic

    21,058     21,643           20,878     21,608        

Diluted

    21,393     22,021           21,187     21,969        

(1)
Each ADS represents eight ordinary shares.

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Information About Segments

The following table sets forth our revenue by segments for the periods indicated:

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions)
  (in millions)
 

Core commerce(1)

    141,475     195,541     29,968     342,239     459,781     70,465  

Cloud computing(2)

    10,721     16,115     2,470     27,799     43,359     6,645  

Digital media and entertainment(3)(5)

    8,028     8,079     1,238     21,896     23,139     3,546  

Innovation initiatives and others(4)(5)

    1,232     1,349     207     3,463     3,615     554  

Total

    161,456     221,084     33,883     395,397     529,894     81,210  

(1)
Revenue from core commerce is primarily generated from our China retail marketplaces, Freshippo, Sun Art, 1688.com, Lazada, AliExpress, Alibaba.com, local consumer services and Cainiao logistics services.

(2)
Revenue from cloud computing is primarily generated from the provision of services, such as elastic computing, database, storage, network virtualization services, large scale computing, security, management and application services, big data analytics, a machine learning platform and IoT services.

(3)
Revenue from digital media and entertainment is primarily generated from Youku, online games business and UCWeb.

(4)
Revenue from innovation initiatives and others is primarily generated from businesses such as Amap, Tmall Genie and other innovation initiatives. Other revenue also includes SME annual fee received from Ant Group and its affiliates.

(5)
Beginning on April 1, 2020, we reclassified revenue from our self-developed online games business, which was previously reported under the innovation initiatives and others segment, as revenue from digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.

The following table sets forth our income (loss) from operations by segments for the periods indicated:

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions)
  (in millions)
 

Core commerce

    51,347     59,513     9,120     118,465     135,599     20,781  

Cloud computing

    (1,822 )   (2,044 )   (313 )   (5,259 )   (7,614 )   (1,167 )

Digital media and entertainment(1)

    (4,094 )   (2,387 )   (366 )   (10,911 )   (6,756 )   (1,035 )

Innovation initiatives and others(1)

    (2,722 )   (3,454 )   (529 )   (8,464 )   (11,301 )   (1,732 )

Unallocated

    (3,149 )   (2,626 )   (402 )   (9,532 )   (12,587 )   (1,929 )

Total

    39,560     49,002     7,510     84,299     97,341     14,918  

(1)
Beginning on April 1, 2020, we reclassified the results of our self-developed online games business, which was previously reported under the innovation initiatives and others segment, to the digital

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    media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.

The following table sets forth our adjusted EBITA by segments for the periods indicated:

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions)
  (in millions)
 

Core commerce

    58,075     66,637     10,213     137,674     163,832     25,108  

Cloud computing

    (356 )   24     3     (1,235 )   (474 )   (72 )

Digital media and entertainment(1)

    (3,400 )   (1,389 )   (213 )   (8,111 )   (3,420 )   (524 )

Innovation initiatives and others(1)

    (1,768 )   (1,992 )   (305 )   (5,379 )   (7,078 )   (1,085 )

Unallocated

    (1,889 )   (2,027 )   (311 )   (5,640 )   (5,019 )   (769 )

Total

    50,662     61,253     9,387     117,309     147,841     22,658  

(1)
Beginning on April 1, 2020, we reclassified the results of our self-developed online games business, which was previously reported under the innovation initiatives and others segment, to the digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.

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The table below sets forth selected financial information of our operating segments for the periods indicated:

 
  Three months ended December 31, 2020  
 
  Core
commerce
  Cloud
computing
  Digital
media and
entertainment(1)
  Innovation
initiatives
and
others(1)
  Unallocated(2)   Consolidated  
 
  RMB   RMB   RMB   RMB   RMB   RMB   US$  
 
  (in millions, except percentages)
 

Revenue

    195,541     16,115     8,079     1,349         221,084     33,883  

Income (Loss) from operations

    59,513     (2,044 )   (2,387 )   (3,454 )   (2,626 )   49,002     7,510  

Add: Share-based compensation expense

    4,269     2,063     770     1,439     538     9,079     1,391  

Add: Amortization of intangible assets

    2,855     5     228     23     61     3,172     486  

Adjusted EBITA

    66,637 (3)   24     (1,389 )   (1,992 )   (2,027 )   61,253     9,387  

Adjusted EBITA margin

    34 %   0 %   (17 )%   (148 )%         28 %      

 

 
  Three months ended December 31, 2019  
 
  Core
commerce
  Cloud
computing
  Digital
media and
entertainment(1)
  Innovation
initiatives
and
others(1)
  Unallocated(2)   Consolidated  
 
  RMB   RMB   RMB   RMB   RMB   RMB  
 
  (in millions, except percentages)
 

Revenue

    141,475     10,721     8,028     1,232         161,456  

Income (Loss) from operations

    51,347     (1,822 )   (4,094 )   (2,722 )   (3,149 )   39,560  

Add: Share-based compensation expense

    3,863     1,460     364     931     1,212     7,830  

Add: Amortization of intangible assets

    2,865     6     330     23     48     3,272  

Adjusted EBITA

    58,075     (356 )   (3,400 )   (1,768 )   (1,889 )   50,662  

Adjusted EBITA margin

    41 %   (3 )%   (42 )%   (144 )%         31 %

(1)
Beginning on April 1, 2020, we reclassified the results of our self-developed online games business, which was previously reported under the innovation initiatives and others segment, to the digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.

(2)
Unallocated expenses primarily relate to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.

(3)
Marketplace-based core commerce adjusted EBITA for the quarter ended December 31, 2020 was RMB73,327 million (US$11,238 million). See "—Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures."

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The table below sets forth selected financial information of our operating segments for the nine months ended December 31, 2020:

 
  Nine months ended December 31, 2020  
 
  Core
commerce
  Cloud
computing
  Digital
media and
entertainment(1)
  Innovation
initiatives
and others(1)
  Unallocated(2)   Consolidated  
 
  RMB   RMB   RMB   RMB   RMB   RMB   US$  
 
  (in millions, except percentages)
 

Revenue

    459,781     43,359     23,139     3,615         529,894     81,210  

Income (Loss) from operations

    135,599     (7,614 )   (6,756 )   (11,301 )   (12,587 )   97,341     14,918  

Add: Share-based compensation expense

    20,177     7,123     2,635     4,156     7,397     41,488     6,359  

Add: Amortization of intangible assets

    8,056     17     701     67     171     9,012     1,381  

Adjusted EBITA

    163,832 (3)   (474 )   (3,420 )   (7,078 )   (5,019 )   147,841     22,658  

Adjusted EBITA margin

    36 %   (1 )%   (15 )%   (196 )%         28 %      
 
  Nine months ended December 31, 2019  
 
  Core
commerce
  Cloud
computing
  Digital
media and
entertainment(1)
  Innovation
initiatives
and others(1)
  Unallocated(2)   Consolidated  
 
  RMB   RMB   RMB   RMB   RMB   RMB  
 
  (in millions, except percentages)
 

Revenue

    342,239     27,799     21,896     3,463         395,397  

Income (Loss) from operations

    118,465     (5,259 )   (10,911 )   (8,464 )   (9,532 )   84,299  

Add: Share-based compensation expense

    11,074     4,007     1,810     3,022     3,177     23,090  

Add: Amortization of intangible assets

    8,135     17     990     63     139     9,344  

Add: Impairment of goodwill

                    576     576  

Adjusted EBITA

    137,674     (1,235 )   (8,111 )   (5,379 )   (5,640 )   117,309  

Adjusted EBITA margin

    40 %   (4 )%   (37 )%   (155 )%         30 %

(1)
Beginning on April 1, 2020, we reclassified the results of our self-developed online games business, which was previously reported under the innovation initiatives and others segment, to the digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.

(2)
Unallocated expenses primarily relate to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.

(3)
Marketplace-based core commerce adjusted EBITA for the nine-months ended December 31, 2020 was RMB179,743 million (US$27,547 million). A reconciliation of adjusted EBITA for core commerce to marketplace-based core commerce adjusted EBITA is included below. See "—Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures."

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Unaudited Consolidated Balance Sheets Data

 
  As of
March 31,
  As of
December 31,
 
 
  2020   2020  
 
  RMB   RMB   US$  
 
  (in millions)
 

Assets

                   

Current assets:

                   

Cash and cash equivalents

    330,503     312,137     47,837  

Short-term investments

    28,478     144,177     22,096  

Restricted cash and escrow receivables

    15,479     16,431     2,518  

Equity securities and other investments

    4,234     5,847     896  

Prepayments, receivables and other assets

    84,229     119,134     18,259  

Total current assets

    462,923     597,726     91,606  

Equity securities and other investments

    161,329     240,259     36,821  

Prepayments, receivables and other assets

    57,985     97,357     14,921  

Investment in equity method investees

    189,632     185,509     28,430  

Property and equipment, net

    103,387     147,082     22,541  

Intangible assets, net

    60,947     73,940     11,332  

Goodwill

    276,782     293,393     44,964  

Total assets

    1,312,985     1,635,266     250,615  

Liabilities, Mezzanine Equity and Shareholders' Equity

                   

Current liabilities:

                   

Current bank borrowings

    5,154     5,272     808  

Current unsecured senior notes

        9,775     1,498  

Income tax payable

    20,190     28,414     4,354  

Escrow money payable

    3,014     298     46  

Accrued expenses, accounts payable and other liabilities

    161,536     224,910     34,469  

Merchant deposits

    13,640     28,142     4,313  

Deferred revenue and customer advances

    38,338     61,349     9,402  

Total current liabilities

    241,872     358,160     54,890  

Deferred revenue

    2,025     2,723     417  

Deferred tax liabilities

    43,898     59,031     9,047  

Non-current bank borrowings

    39,660     38,151     5,847  

Non-current unsecured senior notes

    80,616     64,501     9,885  

Other liabilities

    25,263     30,346     4,651  

Total liabilities

    433,334     552,912     84,737  

Commitments and contingencies

             

Mezzanine equity

    9,103     8,443     1,294  

Shareholders' equity:

                   

Ordinary shares

    1     1      

Additional paid-in capital

    343,707     388,755     59,579  

Treasury shares at cost

        (773 )   (118 )

Subscription receivables

    (51 )   (47 )   (7 )

Statutory reserves

    6,100     7,150     1,096  

Accumulated other comprehensive loss

    (643 )   (19,206 )   (2,944 )

Retained earnings

    406,287     561,181     86,005  

Total shareholders' equity

    755,401     937,061     143,611  

Noncontrolling interests

    115,147     136,850     20,973  

Total equity

    870,548     1,073,911     164,584  

Total liabilities, mezzanine equity and equity

    1,312,985     1,635,266     250,615  

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Unaudited Condensed Consolidated Statements of Cash Flows Data

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions)
  (in millions)
 

Net cash provided by operating activities(1)

    96,505     103,208     15,817     178,443     207,603     31,817  

Net cash used in investing activities(1)

    (32,588 )   (79,712 )   (12,216 )   (75,077 )   (216,493 )   (33,179 )

Net cash provided by (used in) financing activities

    61,287     (5,685 )   (871 )   67,886     (188 )   (29 )

Effect of exchange rate changes on cash and cash equivalents, restricted cash and escrow receivables

    (1,952 )   (4,132 )   (634 )   1,778     (8,336 )   (1,278 )

Increase (Decrease) in cash and cash equivalents, restricted cash and escrow receivables

    123,252     13,679     2,096     173,030     (17,414 )   (2,669 )

Cash and cash equivalents, restricted cash and escrow receivables at beginning of period

    248,272     314,889     48,259     198,494     345,982     53,024  

Cash and cash equivalents, restricted cash and escrow receivables at end of period

    371,524     328,568     50,355     371,524     328,568     50,355  

(1)
We adopted ASU 2019-02, "Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350)," on April 1, 2020. As a result of our adoption of this new accounting update, we are now reporting cash outflows for the acquisition of licensed copyrights as operating activities in the consolidated statements of cash flows prospectively beginning on April 1, 2020. Prior to our adoption of ASU 2019-02, cash outflows for the acquisition of licensed copyrights were previously classified as investing activities in the consolidated statements of cash flows.

Non-GAAP financial measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: for our consolidated results, adjusted EBITDA (including adjusted EBITDA margin), adjusted EBITA (including adjusted EBITA margin), marketplace-based core commerce adjusted EBITA, non-GAAP net income, non-GAAP diluted earnings per share/ADS and free cash flow. For more information on these non-GAAP financial measures, please refer to the section entitled "Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures."

We believe that adjusted EBITDA, adjusted EBITA, marketplace-based core commerce adjusted EBITA, non-GAAP net income and non-GAAP diluted earnings per share/ADS help identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in income from operations, net income and diluted earnings per share/ADS. We believe that these non-GAAP measures provide useful information about our core operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. We present three different income measures, namely adjusted EBITDA, adjusted EBITA and non-GAAP net income, as well as one measure that provides supplemental information on our core commerce segment, namely marketplace-based core commerce adjusted EBITA, in order to provide more information and greater transparency to investors about our operating results.

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We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic corporate transactions, including investing in our new business initiatives, making strategic investments and acquisitions and strengthening our balance sheet.

Adjusted EBITDA, adjusted EBITA, marketplace-based core commerce adjusted EBITA, non-GAAP net income, non-GAAP diluted earnings per share/ADS and free cash flow should not be considered in isolation or construed as an alternative to income from operations, adjusted EBITA for core commerce, net income, diluted earnings per share/ADS, cash flows or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here do not have standardized meanings prescribed by U.S. GAAP and may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.

Adjusted EBITDA represents net income before (i) interest and investment income, net, interest expense, other income, net, income tax expenses and share of results of equity method investees, (ii) certain non-cash expenses, consisting of share-based compensation expense, amortization of intangible assets, depreciation of property and equipment, operating lease cost relating to land use rights and impairment of goodwill, which we do not believe are reflective of our core operating performance during the periods presented.

Adjusted EBITA represents net income before (i) interest and investment income, net, interest expense, other income, net, income tax expenses and share of results of equity method investees, (ii) certain non-cash expenses, consisting of share-based compensation expense, amortization of intangible assets and impairment of goodwill, which we do not believe are reflective of our core operating performance during the periods presented.

Marketplace-based core commerce adjusted EBITA represents adjusted EBITA for core commerce excluding the effects of (i) local consumer services, (ii) Lazada, (iii) New Retail and direct import and (iv) Cainiao Network. Marketplace-based core commerce adjusted EBITA reflects the performance of our most established businesses, namely, those of our China retail marketplaces and wholesale marketplaces which primarily adopt a marketplace-based approach. By excluding certain businesses that are in the earlier stages of their development and with business approaches that continue to evolve, marketplace-based core commerce adjusted EBITA enables investors to clearly evaluate the performance of our most established businesses on a like-for-like basis.

Non-GAAP net income represents net income before share-based compensation expense, amortization of intangible assets, impairment of investments and goodwill, gain or loss on deemed disposals/disposals/revaluation of investments, gain in relation to the receipt of the 33% equity interest in Ant Group, amortization of excess value receivable arising from the restructuring of commercial arrangements with Ant Group and others, as adjusted for the tax effects on non-GAAP adjustments.

Non-GAAP diluted earnings per share represents non-GAAP net income attributable to ordinary shareholders divided by the weighted average number of shares outstanding during the periods on a diluted basis. Non-GAAP diluted earnings per ADS represents non-GAAP diluted earnings per share after adjustment to the ordinary share-to-ADS ratio.

Free cash flow represents net cash provided by operating activities as presented in our consolidated cash flow statement less purchases of property and equipment (excluding acquisition of land use rights and construction in progress relating to office campuses) and other intangible assets, as well as adjustments to exclude from net cash provided by operating activities the consumer protection fund deposits from merchants on our China retail marketplaces. Prior to April 1, 2020, we also deducted acquisition of licensed copyrights from cash flows from investing activities. After our adoption of ASU 2019-02, "Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350)," on April 1, 2020, we changed the classification of cash outflows for the acquisition of licensed copyrights from investing activities to operating activities in the consolidated statements of cash flows, prospectively beginning on April 1, 2020. We deduct certain items of cash flows from investing activities in order to provide greater transparency into cash flow from our revenue-generating business operations. We exclude "acquisition of land use

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rights and construction in progress relating to office campuses" because the office campuses are used by us for corporate and administrative purposes and are not directly related to our revenue-generating business operations. We also exclude consumer protection fund deposits from merchants on our China retail marketplaces because these deposits are restricted for the purpose of compensating consumers for claims against merchants.

The section entitled "Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures" has more details on the non-GAAP financial measures that are most directly comparable to GAAP financial measures and the related reconciliations between these financial measures.

Reconciliations of Non-GAAP Measures to the Nearest Comparable U.S. GAAP Measures

The table below sets forth a reconciliation of our net income to adjusted EBITA and adjusted EBITDA for the periods indicated:

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions)
  (in millions)
 

Net income

    50,132     77,977     11,950     140,002     150,938     23,132  

Less: Interest and investment income, net

    (17,136 )   (40,036 )   (6,135 )   (80,671 )   (72,683 )   (11,139 )

Add: Interest expense

    1,309     1,092     167     4,015     3,316     508  

Less: Other income, net

    (987 )   (2,826 )   (433 )   (6,259 )   (5,467 )   (838 )

Add: Income tax expenses

    8,407     9,194     1,409     17,934     22,229     3,407  

Add: Share of results of equity method investees

    (2,165 )   3,601     552     9,278     (992 )   (152 )

Income from operations

    39,560     49,002     7,510     84,299     97,341     14,918  

Add: Share-based compensation expense

    7,830     9,079     1,391     23,090     41,488     6,359  

Add: Amortization of intangible assets

    3,272     3,172     486     9,344     9,012     1,381  

Add: Impairment of goodwill

                576          

Adjusted EBITA

    50,662     61,253     9,387     117,309     147,841     22,658  

Add: Depreciation of property and equipment, and operating lease cost relating to land use rights

    5,218     7,127     1,093     14,910     19,103     2,927  

Adjusted EBITDA

    55,880     68,380     10,480     132,219     166,944     25,585  

The table below sets forth a reconciliation of adjusted EBITA for core commerce to marketplace-based core commerce adjusted EBITA for the periods indicated:

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions)
  (in millions)
 

Adjusted EBITA for core commerce

    58,075     66,637     10,213     137,674     163,832     25,108  

Less: Effects of local consumer services, Lazada, New Retail and direct import and Cainiao Network

    8,296     6,690     1,025     21,107     15,911     2,439  

Marketplace-based core commerce adjusted EBITA

    66,371     73,327     11,238     158,781     179,743     27,547  

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The table below sets forth a reconciliation of our net income to non-GAAP net income for the periods indicated:

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions)
  (in millions)
 

Net income

    50,132     77,977     11,950     140,002     150,938     23,132  

Add: Share-based compensation expense

    7,830     9,079     1,391     23,090     41,488     6,359  

Add: Amortization of intangible assets

    3,272     3,172     486     9,344     9,012     1,381  

Add: Impairment of investments and goodwill

    4,842     8,436     1,293     24,947     14,205     2,177  

Less: Gain on deemed disposals/disposals/ revaluation of investments and others

    (17,015 )   (37,639 )   (5,768 )   (15,098 )   (69,390 )   (10,635 )

Less: Gain in relation to the receipt of the 33% equity interest in Ant Group

    (2,336 )           (71,561 )        

Add: Amortization of excess value receivable arising from the restructuring of commercial arrangements with Ant Group

                97          

Adjusted for tax effects on non-GAAP adjustments(1)

    (232 )   (1,818 )   (278 )   (629 )   (484 )   (74 )

Non-GAAP net income

    46,493     59,207     9,074     110,192     145,769     22,340  

(1)
Tax effects on non-GAAP adjustments primarily comprised of tax effects relating to certain gains and losses from investments, share-based compensation expense and amortization of intangible assets.

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The table below sets forth a reconciliation of our diluted earnings per share/ADS to non-GAAP diluted earnings per share/ADS for the periods indicated:

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions, except
per share data)

  (in millions, except
per share data)

 

Net income attributable to ordinary shareholders—basic

    52,309     79,427     12,173     146,101     155,787     23,875  

Dilution effect on earnings arising from option plans operated by equity method investees and subsidiaries

    (32 )   (27 )   (4 )   (47 )   (53 )   (8 )

Net income attributable to ordinary shareholders—diluted

    52,277     79,400     12,169     146,054     155,734     23,867  

Add: Non-GAAP adjustments to net income(1)

    (3,639 )   (18,770 )   (2,876 )   (29,810 )   (5,169 )   (792 )

Non-GAAP net income attributable to ordinary shareholders for computing non-GAAP diluted earnings per share/ADS

    48,638     60,630     9,293     116,244     150,565     23,075  

Weighted average number of shares on a diluted basis (million shares)(5)

    21,393     22,021           21,187     21,969        

Diluted earnings per share(2)(5)

    2.44     3.61     0.55     6.89     7.09     1.09  

Add: Non-GAAP adjustments to net income per share(3)(5)

    (0.17 )   (0.86 )   (0.13 )   (1.40 )   (0.24 )   (0.04 )

Non-GAAP diluted earnings per share(4)(5)

    2.27     2.75     0.42     5.49     6.85     1.05  

Diluted earnings per ADS(2)(5)

    19.55     28.85     4.42     55.14     56.71     8.69  

Add: Non-GAAP adjustments to net income per ADS(3)(5)

    (1.36 )   (6.82 )   (1.04 )   (11.26 )   (1.88 )   (0.29 )

Non-GAAP diluted earnings per ADS(4)(5)

    18.19     22.03     3.38     43.88     54.83     8.40  

(1)
See the table above for the reconciliation of net income to non-GAAP net income for more information of these non-GAAP adjustments.

(2)
Diluted earnings per share is derived from net income attributable to ordinary shareholders for computing diluted earnings per share divided by weighted average number of shares on a diluted basis. Diluted earnings per ADS is derived from the diluted earnings per share after adjustment to the ordinary share-to-ADS ratio.

(3)
Non-GAAP adjustments to net income per share is derived from non-GAAP adjustments to net income divided by weighted average number of shares on a diluted basis. Non-GAAP adjustments to net income per ADS is derived from the non-GAAP adjustments to net income per share after adjustment to the ordinary share-to-ADS ratio.

(4)
Non-GAAP diluted earnings per share is derived from non-GAAP net income attributable to ordinary shareholders for computing non-GAAP diluted earnings per share divided by weighted average number of shares on a diluted basis. Non-GAAP diluted earnings per ADS is derived from the non-GAAP diluted earnings per share after adjustment to the ordinary share-to-ADS ratio.

(5)
Each ADS represents eight ordinary shares.

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The table below sets forth a reconciliation of net cash provided by operating activities to free cash flow for the periods indicated:

 
  Three months ended
December 31,
  Nine months ended
December 31,
 
 
  2019   2020   2019   2020  
 
  RMB   RMB   US$   RMB   RMB   US$  
 
  (in millions)
  (in millions)
 

Net cash provided by operating activities(1)

    96,505     103,208     15,817     178,443     207,603     31,817  

Less: Purchase of property and equipment (excluding land use rights and construction in progress relating to office campuses)

    (5,749 )   (4,869 )   (746 )   (20,781 )   (30,117 )   (4,616 )

Less: Acquisition of licensed copyrights(1) and other intangible assets

    (5,274 )   (15 )   (2 )   (10,120 )   (1,733 )   (266 )

Less: Changes in the consumer protection fund deposits

    (7,203 )   (2,114 )   (324 )   (12,414 )   (2,433 )   (373 )

Free cash flow

    78,279     96,210     14,745     135,128     173,320     26,562  

(1)
We adopted ASU 2019-02, "Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350)," on April 1, 2020. As a result of our adoption of this new accounting update, we are now reporting cash outflows for the acquisition of licensed copyrights as operating activities in the consolidated statements of cash flows prospectively beginning on April 1, 2020. Prior to our adoption of ASU 2019-02, cash outflows for the acquisition of licensed copyrights were previously classified as investing activities in the consolidated statements of cash flows.

Discussion of the Financial Results for the Quarter Ended December 31, 2020

Revenue

Revenue for the quarter ended December 31, 2020 was RMB221,084 million (US$33,883 million), an increase of 37% compared to RMB161,456 million in the same quarter of 2019. The increase was mainly driven by the robust revenue growth of our China commerce retail business, which includes the consolidation of Sun Art starting in October 2020, and the strong revenue growth of our cloud computing business. Excluding the consolidation of Sun Art, our revenue would have grown 27% year-over-year.

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The following table sets forth a breakdown of our revenue by segment for the periods indicated:

 
  Three months ended December 31,    
 
 
  2019   2020    
 
 
  RMB   % of
Revenue
  RMB   US$   % of
Revenue
  YoY %
Change
 
 
  (in millions, except percentages)
 

Core commerce:

                                     

China commerce retail

                                     

—Customer management(1)

    84,644     52 %   101,919     15,620     46 %   20 %

—Others(2)

    25,814     16 %   51,760     7,932     23 %   101 %

    110,458     68 %   153,679     23,552     69 %   39 %

China commerce wholesale

    3,365     2 %   3,831     587     2 %   14 %

International commerce retail

    7,396     5 %   10,158     1,557     5 %   37 %

International commerce wholesale

    2,457     1 %   3,762     577     2 %   53 %

Cainiao logistics services

    7,518     5 %   11,360     1,741     5 %   51 %

Local consumer services

    7,584     5 %   8,348     1,279     4 %   10 %

Others

    2,697     2 %   4,403     675     2 %   63 %

Total core commerce

    141,475     88 %   195,541     29,968     89 %   38 %

Cloud computing

    10,721     7 %   16,115     2,470     7 %   50 %

Digital media and entertainment(3)

    8,028     5 %   8,079     1,238     4 %   1 %

Innovation initiatives and others(3)

    1,232     0 %   1,349     207     0 %   9 %

Total

    161,456     100 %   221,084     33,883     100 %   37 %

(1)
We presented our commission revenue as part of customer management revenue in order to better reflect our value proposition to merchants on our platforms. Comparative figures were presented in the same manner accordingly.

(2)
"Others" revenue under China commerce retail is primarily generated by our New Retail and direct sales businesses, comprising mainly Sun Art, Tmall Supermarket, Freshippo, direct import and Intime.

(3)
Beginning on April 1, 2020, we reclassified revenue from our self-developed online games business, which was previously reported under the innovation initiatives and others segment, as revenue from digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.

Core commerce

    China commerce retail business

    Revenue from our China commerce retail business in the quarter ended December 31, 2020 was RMB153,679 million (US$23,552 million), an increase of 39% compared to RMB110,458 million in the same quarter of 2019. Customer management revenue grew 20% year-over-year, primarily due to robust growth in revenue from new monetization formats, such as recommendation feeds, an increase in the average unit price per click in search monetization, as well as the 19% year-over-year growth of Tmall online physical goods GMV, excluding unpaid orders.

    "Others" revenue under China commerce retail business was RMB51,760 million (US$7,932 million), achieving year-over-year growth of 101% compared to RMB25,814 million in the same quarter of 2019. The

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    increase was primarily driven by the consolidation of Sun Art, as well as the contributions from our direct sales businesses, including Tmall Supermarket and Freshippo.

    The proportion of revenue from our direct sales businesses increased this quarter after we began to consolidate Sun Art in October 2020. We expect that the proportion of revenue of our direct sales businesses will continue to increase as we further implement our New Retail strategy.

    China commerce wholesale business

    Revenue from our China commerce wholesale business in the quarter ended December 31, 2020 was RMB3,831 million (US$587 million), an increase of 14% compared to RMB3,365 million in the same quarter of 2019. The increase was primarily due to increases in both average revenue from paying members and the number of paying members on 1688.com.

    International commerce retail business

    Revenue from our international commerce retail business in the quarter ended December 31, 2020 was RMB10,158 million (US$1,557 million), an increase of 37% compared to RMB7,396 million in the same quarter of 2019. The increase was primarily due to the growth in revenue generated by Lazada and Trendyol.

    International commerce wholesale business

    Revenue from our international commerce wholesale business in the quarter ended December 31, 2020 was RMB3,762 million (US$577 million), an increase of 53% compared to RMB2,457 million in the same quarter of 2019. The increase was primarily due to increases in both the number of paying members and average revenue from paying members on Alibaba.com, as well as an increase in revenue generated by cross-border related value-added services.

    Cainiao logistics services

    Revenue from Cainiao Network's logistics services, which represents revenue from its domestic and international one-stop-shop logistics services and supply chain management solutions, after elimination of inter-company transactions, was RMB11,360 million (US$1,741 million) in the quarter ended December 31, 2020, an increase of 51% compared to RMB7,518 million in the same quarter of 2019, primarily due to the increase in volume of orders fulfilled from our fast growing cross-border and international commerce retail businesses.

    Local consumer services

    Revenue from local consumer services, which primarily represents platform commissions, fees from provision of delivery services and other services provided by our on-demand delivery and local services platform Ele.me, was RMB8,348 million (US$1,279 million) in the quarter ended December 31, 2020, an increase of 10% compared to RMB7,584 million in the same quarter of 2019, primarily due to an increase in GMV as well as more efficient use of subsidies that is contra revenue.

Cloud computing

Revenue from our cloud computing business in the quarter ended December 31, 2020 was RMB16,115 million (US$2,470 million), an increase of 50% compared to RMB10,721 million in the same quarter of 2019, primarily driven by robust growth in revenue from customers in the Internet and retail industries and the public sector.

Digital media and entertainment

Revenue from our digital media and entertainment segment in the quarter ended December 31, 2020 was RMB8,079 million (US$1,238 million), an increase of 1% compared to RMB8,028 million in the same quarter of

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2019. The slight increase was primarily due to the increase in revenue from online games business, largely offset by the decrease in revenue from customer management.

Innovation initiatives and others

Revenue from innovation initiatives and others in the quarter ended December 31, 2020 was RMB1,349 million (US$207 million), an increase of 9% compared to RMB1,232 million in the same quarter of 2019.

Costs and Expenses

The following tables set forth a breakdown of our costs and expenses, share-based compensation expense and costs and expenses excluding share-based compensation expense by function for the periods indicated.

 
  Three months ended December 31,    
 
 
  2019   2020    
 
 
  RMB   % of
Revenue
  RMB   US$   % of
Revenue
  % of Revenue
YoY change
 
 
  (in millions, except percentages)
 

Costs and expenses:

                                     

Cost of revenue

    84,332     52 %   121,268     18,585     55 %   3 %

Product development expenses

    11,077     7 %   13,607     2,086     6 %   (1 )%

Sales and marketing expenses

    15,800     9 %   25,343     3,884     11 %   2 %

General and administrative expenses

    7,415     5 %   8,692     1,332     4 %   (1 )%

Amortization of intangible assets

    3,272     2 %   3,172     486     2 %   0 %

Total costs and expenses

    121,896     75 %   172,082     26,373     78 %   3 %

Share-based compensation expense:

                                     

Cost of revenue

    1,685     1 %   2,143     329     1 %   0 %

Product development expenses

    3,644     2 %   4,022     616     2 %   0 %

Sales and marketing expenses

    961     0 %   1,085     166     0 %   0 %

General and administrative expenses

    1,540     1 %   1,829     280     1 %   0 %

Total share-based compensation expense

    7,830     4 %   9,079     1,391     4 %   0 %

Costs and expenses excluding share-based compensation expense:

                                     

Cost of revenue

    82,647     51 %   119,125     18,256     54 %   3 %

Product development expenses

    7,433     5 %   9,585     1,470     4 %   (1 )%

Sales and marketing expenses

    14,839     9 %   24,258     3,718     11 %   2 %

General and administrative expenses

    5,875     4 %   6,863     1,052     3 %   (1 )%

Amortization of intangible assets

    3,272     2 %   3,172     486     2 %   0 %

Total costs and expenses excluding share-based compensation expense

    114,066     71 %   163,003     24,982     74 %   3 %

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Cost of revenue

Cost of revenue in the quarter ended December 31, 2020 was RMB121,268 million (US$18,585 million), or 55% of revenue, compared to RMB84,332 million, or 52% of revenue, in the same quarter of 2019. Without the effect of share-based compensation expense, cost of revenue as a percentage of revenue would have increased from 51% in the quarter ended December 31, 2019 to 54% in the quarter ended December 31, 2020. The increase was primarily attributable to higher proportion of our direct sales businesses from the consolidation of Sun Art as well as the growth of our Tmall Supermarket and New Retail businesses, which resulted in increased cost of inventory, partly offset by a decrease in delivery costs per order of our local consumer services and a decrease in content costs of our digital media and entertainment segment.

Product development expenses

Product development expenses in the quarter ended December 31, 2020 were RMB13,607 million (US$2,086 million), or 6% of revenue, compared to RMB11,077 million, or 7% of revenue, in the same quarter of 2019. Without the effect of share-based compensation expense, product development expenses as a percentage of revenue would have decreased from 5% in the quarter ended December 31, 2019 to 4% in the quarter ended December 31, 2020.

Sales and marketing expenses

Sales and marketing expenses in the quarter ended December 31, 2020 were RMB25,343 million (US$3,884 million), or 11% of revenue, compared to RMB15,800 million, or 9% of revenue, in the same quarter of 2019. Without the effect of share-based compensation expense, sales and marketing expenses as a percentage of revenue would have increased from 9% in the quarter ended December 31, 2019 to 11% in the quarter ended December 31, 2020. The increase was primarily due to an increase in marketing and promotional spending for user acquisition and retention on our China retail marketplaces.

General and administrative expenses

General and administrative expenses in the quarter ended December 31, 2020 were RMB8,692 million (US$1,332 million), or 4% of revenue, compared to RMB7,415 million, or 5% of revenue, in the same quarter of 2019. Without the effect of share-based compensation expense, general and administrative expenses as a percentage of revenue would have decreased from 4% in the quarter ended December 31, 2019 to 3% in the quarter ended December 31, 2020.

Share-based compensation expense

Total share-based compensation expense included in the cost and expense items above in the quarter ended December 31, 2020 was RMB9,079 million (US$1,391 million), an increase of 16% compared to RMB7,830 million in the same quarter of 2019. Share-based compensation expense as a percentage of revenue remained stable at 4% in the quarter ended December 31, 2020, as compared to the same quarter last year.

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The following table sets forth our analysis of share-based compensation expense for the quarters indicated by type of share-based awards:

 
  Three months ended    
   
 
 
  December 31,
2019
  September 30,
2020
  December 31,
2020
   
   
 
 
  % Change  
 
   
  % of
Revenue
   
  % of
Revenue
   
   
  % of
Revenue
 
 
  RMB   RMB   RMB   US$   YoY   QoQ  
 
  (in millions, except percentages)
 

By type of awards:

                                                       

Alibaba Group share-based awards(1)

    6,587     4 %   7,703     5 %   7,694     1,179     4 %   17 %   (0 )%

Ant Group share-based awards(2)

    347     0 %   16,056     10 %   542     83     0 %   56 %   (97 )%

Others(3)

    896     0 %   935     1 %   843     129     0 %   (6 )%   (10 )%

Total share-based compensation expense

    7,830     4 %   24,694     16 %   9,079     1,391     4 %   16 %   (63 )%

(1)
This represents Alibaba Group share-based awards granted to our employees.

(2)
This represents Ant Group share-based awards granted to our employees, which is subject to mark-to-market accounting treatment.

(3)
Others includes share-based awards of our subsidiaries.

Share-based compensation expense related to Alibaba Group share-based awards remained stable in this quarter compared to the previous quarter.

Share-based compensation expense related to Ant Group share-based awards decreased in this quarter compared to the previous quarter, mainly due to the recognition of an increase in the value of these awards in the previous quarter.

We expect that our share-based compensation expense will continue to be affected by changes in the fair value of the underlying awards and the quantity of awards we grant in the future.

Amortization of intangible assets

Amortization of intangible assets in the quarter ended December 31, 2020 was RMB3,172 million (US$486 million), a decrease of 3% from RMB3,272 million in the same quarter of 2019.

Income from operations and operating margin

Income from operations in the quarter ended December 31, 2020 was RMB49,002 million (US$7,510 million), or 22% of revenue, an increase of 24% compared to RMB39,560 million, or 25% of revenue, in the same quarter of 2019.

Adjusted EBITDA and Adjusted EBITA

Adjusted EBITDA increased 22% year-over-year to RMB68,380 million (US$10,480 million) in the quarter ended December 31, 2020, compared to RMB55,880 million in the same quarter of 2019. Excluding the consolidation of Sun Art, our adjusted EBITDA would have grown 21% year-over-year.

Adjusted EBITA increased 21% year-over-year to RMB61,253 million (US$9,387 million) in the quarter ended December 31, 2020, compared to RMB50,662 million in the same quarter of 2019. See "Non-GAAP financial measures—Reconciliations of Non-GAAP measures to the nearest comparable U.S. GAAP measures" for a reconciliation of net income to adjusted EBITDA and adjusted EBITA.

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Adjusted EBITA and adjusted EBITA margin by segments

Adjusted EBITA and adjusted EBITA margin by segments are set forth in the table below. See the section entitled "Information by Segments" above for a reconciliation of income from operations to adjusted EBITA.

 
  Three months ended December 31,  
 
  2019   2020  
 
  RMB   % of
Segment
Revenue
  RMB   US$   % of
Segment
Revenue
 
 
  (in millions, except percentages)
 

Core commerce

    58,075     41 %   66,637     10,213     34 %

Cloud computing

    (356 )   (3 )%   24     3     0 %

Digital media and entertainment(1)

    (3,400 )   (42 )%   (1,389 )   (213 )   (17 )%

Innovation initiatives and others(1)

    (1,768 )   (144 )%   (1,992 )   (305 )   (148 )%

(1)
Beginning on April 1, 2020, we reclassified the results of our self-developed online games business, which was previously reported under the innovation initiatives and others segment, to the digital media and entertainment segment because it has moved beyond the incubation stage. This reclassification conforms to the way that we manage and monitor segment performance. Comparative figures were reclassified to conform to this presentation.

Core commerce segment

Adjusted EBITA increased by 15% to RMB66,637 million (US$10,213 million) in the quarter ended December 31, 2020, compared to RMB58,075 million in the same quarter of 2019, primarily due to an increase in marketplace-based core commerce adjusted EBITA as well as reduced losses for local consumer services business. Marketplace-based core commerce adjusted EBITA increased 10% year-over-year to RMB73,327 million (US$11,238 million). The growth rate of marketplace-based core commerce adjusted EBITA has been decreasing because of our increased strategic investments in certain new businesses within China retail marketplaces. Our investments in new business initiatives within China retail marketplaces, such as Taobao Deals, Taobao Live, Taobao Short Video and Taobao Grocery, will expand our addressable market in China by enhancing consumer experience and loyalty and increasing penetration into less developed areas.

Adjusted EBITA margin decreased from 41% in the quarter ended December 31, 2019 to 34% in the quarter ended December 31, 2020, primarily due to the consolidation of Sun Art and the increased revenue contribution from our self-operated New Retail and direct sales businesses, in respect of which revenue is recorded on a gross basis, including the cost of inventory. See "Non-GAAP financial measures—Reconciliations of Non-GAAP measures to the nearest comparable U.S. GAAP measures" for a reconciliation of adjusted EBITA for core commerce to marketplace-based core commerce adjusted EBITA.

We expect that our core commerce adjusted EBITA margin will continue to be affected by the pace of our investment in new businesses and the growth of our self-operated New Retail and direct sales businesses.

Cloud computing segment

Adjusted EBITA of RMB24 million (US$3 million) in the quarter ended December 31, 2020 was profitable for the first time, compared to a loss of RMB356 million in the same quarter of 2019, primarily attributable to the realization of economies of scale.

Digital media and entertainment segment

Adjusted EBITA in the quarter ended December 31, 2020 was a loss of RMB1,389 million (US$213 million), compared to a loss of RMB3,400 million in the same quarter of 2019. Adjusted EBITA margin improved to

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negative 17% in the quarter ended December 31, 2020 from negative 42% in the quarter ended December 31, 2019, primarily due to reduced losses in Youku and increased contribution from our online games business.

Innovation initiatives and others segment

Adjusted EBITA in the quarter ended December 31, 2020 was a loss of RMB1,992 million (US$305 million), compared to a loss of RMB1,768 million in the same quarter of 2019, mainly due to our investments in technological research and innovation.

Interest and investment income, net

Interest and investment income, net in the quarter ended December 31, 2020 was RMB40,036 million (US$6,135 million), an increase from RMB17,136 million in the same quarter of 2019. The increase is primarily due to an increase in the net gain arising from increases in the market prices of our equity investments in publicly-traded companies in the quarter ended December 31, 2020. In addition, we recognized a one-time gain of RMB6.4 billion (US$981 million) arising from the revaluation of our previously held equity interests in Sun Art upon our consolidation in the quarter ended December 31, 2020, compared to a one-time gain of RMB10.3 billion recognized in relation to our deconsolidation of AliExpress Russia businesses in the same quarter of 2019.

The above-mentioned gains were excluded from our non-GAAP net income.

Other income, net

Other income, net in the quarter ended December 31, 2020 was RMB2,826 million (US$433 million), compared to RMB987 million in the same quarter of 2019. The increase in other income, net was primarily due to the increase in the amount of input VAT super-credit that can be offset against our VAT payable.

Income tax expenses

Income tax expenses in the quarter ended December 31, 2020 were RMB9,194 million (US$1,409 million), compared to RMB8,407 million in the same quarter of 2019.

Our effective tax rate was 10% in the quarter ended December 31, 2020, compared to 15% in the same quarter of 2019. Excluding share-based compensation expense, revaluation and disposal gains/losses of investments, impairment of investments, as well as deferred tax effects arising from our share of results of equity method investees, our effective tax rate would have been 17% in the quarter ended December 31, 2020.

Share of results of equity method investees

Share of results of equity method investees in the quarter ended December 31, 2020 was a loss of RMB3,601 million (US$552 million), compared to a profit of RMB2,165 million in the same quarter of 2019. Share of results of equity method investees in the quarter ended December 31, 2020 and the comparative periods consisted of the following:

 
  Three months ended  
 
  December 31,
2019
  September 30,
2020
  December 31,
2020
 
 
  RMB   RMB   RMB   US$  
 
  (in millions)
 

Share of profit (loss) of equity method investees

                         

—Ant Group

    215     4,681     4,796     735  

—Others

    2,229     987     (100 )   (15 )

Impairment loss

        (5 )   (7,196 )   (1,103 )

Dilution gain (loss)

    166     (3 )   (19 )   (3 )

Others(1)

    (445 )   (1,416 )   (1,082 )   (166 )

Total

    2,165     4,244     (3,601 )   (552 )

(1)
Others mainly include amortization of intangible assets of equity method investees and share-based compensation expense related to share-based awards granted to employees of our equity method investees.

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We record our share of results of all equity method investees one quarter in arrears. We recorded a share of loss of other equity method investees in the quarter ended December 31, 2020, compared to a share of profit of other equity method investees in the same quarter of 2019, primarily because our share of profit of Suning in the quarter ended December 31, 2019 included a significant one-time gain arising from Suning's deconsolidation of one of its subsidiaries. In addition, we recorded an impairment loss of RMB7,196 million (US$1,103 million) in this quarter with respect to certain equity method investees as a result of their prolonged decline in market values against our carrying values.

The COVID-19 pandemic has caused widespread disruption to the economy, and the businesses of our equity method investees may continue to be adversely affected, which could negatively impact our share of results of equity method investees in future periods.

Net income and Non-GAAP net income

Our net income in the quarter ended December 31, 2020 was RMB77,977 million (US$11,950 million), an increase of 56% compared to RMB50,132 million in the same quarter of 2019. The year-over-year increase was mainly due to an increase in the net gain arising from increases in the market prices of our equity investments in publicly-traded companies in the quarter ended December 31, 2020.

Excluding share-based compensation expense, revaluation and disposal gains/losses of investments, impairment of investments and certain other items, non-GAAP net income in the quarter ended December 31, 2020 was RMB59,207 million (US$9,074 million), an increase of 27% compared to RMB46,493 million in the same quarter of 2019. See "Non-GAAP financial measures—Reconciliations of Non-GAAP measures to the nearest comparable U.S. GAAP measures" for a reconciliation of net income to non-GAAP net income.

Net income attributable to ordinary shareholders

Net income attributable to ordinary shareholders in the quarter ended December 31, 2020 was RMB79,427 million (US$12,173 million), an increase of 52% compared to RMB52,309 million in the same quarter of 2019. The year-over-year increase was mainly due to an increase in the net gain arising from increases in the market prices of our equity investments in publicly-traded companies in the quarter ended December 31, 2020.

Diluted earnings per ADS/share and non-GAAP diluted earnings per ADS/share

Diluted earnings per ADS in the quarter ended December 31, 2020 was RMB28.85 (US$4.42) on a weighted average of 22,021 million diluted shares outstanding during the quarter, an increase of 48% compared to RMB19.55 on a weighted average of 21,393 million diluted shares outstanding during the same quarter in 2019. Excluding share-based compensation expense, revaluation and disposal gains/losses of investments, impairment of investments and certain other items, non-GAAP diluted earnings per ADS in the quarter ended December 31, 2020 was RMB22.03 (US$3.38), an increase of 21% compared to RMB18.19 in the same quarter of 2019.

Diluted earnings per share in the quarter ended December 31, 2020 was RMB3.61 (US$0.55 or HK$4.29), an increase of 48% compared to RMB2.44 in the same quarter of 2019. Excluding share-based compensation expense, revaluation and disposal gains/losses of investments, impairment of investments and certain other items, non-GAAP diluted earnings per share in the quarter ended December 31, 2020 was RMB2.75 (US$0.42 or HK$3.27), an increase of 21%, compared to RMB2.27 in the same quarter of 2019. See "Non-GAAP financial measures—Reconciliations of Non-GAAP measures to the nearest comparable U.S. GAAP measures" for a reconciliation of diluted earnings per ADS/share to non-GAAP diluted earnings per ADS/share. Each ADS represents eight ordinary shares.

Cash, cash equivalents and short-term investments

As of December 31, 2020, cash, cash equivalents and short-term investments were RMB456,314 million (US$69,933 million), compared to RMB405,912 million as of September 30, 2020. The increase in cash, cash equivalents and short-term investments during the quarter ended December 31, 2020 was primarily due to free cash flow generated from operations of RMB96,210 million (US$14,745 million), partly offset by cash used in investment and acquisition activities of RMB46,852 million (US$7,180 million).

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Cash flow from operating activities and free cash flow

Net cash provided by operating activities in the quarter ended December 31, 2020 was RMB103,208 million (US$15,817 million), an increase of 7% compared to RMB96,505 million in the same quarter of 2019. Free cash flow, a non-GAAP measurement of liquidity, in the quarter ended December 31, 2020 increased by 23% to RMB96,210 million (US$14,745 million), from RMB78,279 million in the same quarter of 2019, mainly due to our robust profit growth. See "Non-GAAP financial measures—Reconciliations of Non-GAAP measures to the nearest comparable U.S. GAAP measures" for a reconciliation of net cash provided by operating activities to free cash flow.

Net cash used in investing activities

During the quarter ended December 31, 2020, net cash used in investing activities of RMB79,712 million (US$12,216 million) primarily reflected (i) cash outflow of RMB46,852 million (US$7,180 million) for investment and acquisition activities, including the acquisition of Sun Art, (ii) an increase in short-term investments by RMB28,433 million (US$4,358 million), as well as (iii) capital expenditures of RMB5,844 million (US$895 million), which included cash outflow for acquisition of land use rights and construction in progress relating to office campuses of RMB975 million (US$149 million).

We adopted ASU 2019-02, "Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350)," on April 1, 2020. As a result of our adoption of this new accounting update, we are now reporting cash outflows for the acquisition of licensed copyrights as operating activities in the consolidated statements of cash flows prospectively beginning on April 1, 2020. Prior to our adoption of ASU 2019-02, cash outflows for the acquisition of licensed copyrights were previously classified as investing activities in the consolidated statements of cash flows.

Corporate Information

Alibaba Group Holding Limited is a Cayman Islands holding company established under the Companies Act of the Cayman Islands (as amended) on June 28, 1999, and we conduct our business through our subsidiaries and variable interest entities. We are listed on the NYSE under the symbol "BABA" and on the Hong Kong Stock Exchange under the stock code "9988."

The principal executive offices of our main operations are located at 969 West Wen Yi Road, Yu Hang District, Hangzhou 311121, People's Republic of China. Our telephone number at this address is +86-571-8502-2088. Our registered office in the Cayman Islands is located at the offices of Trident Trust Company (Cayman) Limited, Fourth Floor, One Capital Place, P.O. Box 847, George Town, Grand Cayman, Cayman Islands. Our agent for service of process in the United States is Corporation Service Company located at 1180 Avenue of the Americas, Suite 210, New York, New York 10036. Our corporate website is www.alibabagroup.com. The information contained on our website is not part of this prospectus.

Summary of Risk Factors

Investing in the Notes involves significant risks. You should carefully consider all of the information in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference before making an investment in the Notes. These risks include the following:

Risks Related to Our Business and Industry

Risks and uncertainties related to our business and industry include, but are not limited to, the following:

    Maintaining the trusted status of our ecosystem is critical to our success and growth, and any failure to do so could severely damage our reputation and brand, which would have a material adverse effect on our business, financial condition, results of operations and prospects;

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    Sustained investment in our business, strategic acquisitions and investments, as well as our focus on long-term performance, and on maintaining the health of our ecosystem, may negatively affect our margins and our net income;

    We may not be able to maintain or grow our revenue or our business;

    If we are unable to compete effectively, our business, financial condition and results of operations would be materially and adversely affected;

    We may not be able to maintain and improve the network effects of our ecosystem, which could negatively affect our business and prospects;

    We may not be able to maintain our culture, which has been a key to our success;

    If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected;

    Our failure to manage the significant management, operational and financial challenges involved in growing our business and operations could harm us;

    We face risks relating to our acquisitions, investments and alliances;

    We may face challenges in expanding our international and cross-border businesses and operations;

    Changes in international trade or investment policies and barriers to trade or investment, and the ongoing geopolitical conflict, may have an adverse effect on our business and expansion plans, and could lead to the delisting of our securities from U.S. exchanges and/or other restrictions or prohibitions on investing in our securities (including the Notes);

    Export control, economic or trade sanctions and a heightened trend towards trade and technology "de-coupling" could negatively affect our technology supply chain and ability to recruit talent and conduct technological collaboration, and could subject us to regulatory investigations, fines, penalties or other actions and reputational harm, which could materially and adversely affect our competitiveness and business operations, as well as lead to significant decrease in the trading prices of our ADSs, Shares and/or other securities (including the Notes);

    We may suffer reputational harm and the trading prices of our ADSs, Shares and/or other securities may decrease significantly due to business dealings by, or connections of, merchants or consumers on our marketplaces with sanctioned countries or persons;

    We and Ant Group are subject to a broad range of laws and regulations, and future laws and regulations may impose additional requirements and other obligations that could materially and adversely affect our business, financial condition and results of operations, as well as the trading prices of our ADSs, Shares and/or other securities (including the Notes);

    Anti-monopoly and unfair competition claims or regulatory actions against us may result in our being subject to fines, constraints on our business and damage to our reputation; and

    We rely on Alipay to conduct substantially all of the payment processing and all of the escrow services on our marketplaces. If services and products provided by Alipay or Ant Group's other businesses are limited, restricted, curtailed or degraded in any way, or become unavailable to us or our users for any reason, our business may be materially and adversely affected.

Risks Related to Our Corporate Structure

Risks and uncertainties related to our corporate structure include, but are not limited to, the following:

    The Alibaba Partnership and related voting agreements limit the ability of our shareholders to nominate and elect directors.

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    The interests of the Alibaba Partnership may conflict with the interests of our shareholders.

    Our Articles of Association contain anti-takeover provisions that could adversely affect the rights of holders of our ordinary shares and ADSs.

    SoftBank owns approximately 24.9% of our outstanding ordinary shares and its interests may differ from those of our other shareholders.

    If the PRC government deems that the contractual arrangements in relation to our variable interest entities do not comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations changes in the future, we could be subject to penalties, or be forced to relinquish our interests in those operations, which would materially and adversely affect our business, financial results, trading prices of our ADSs, Shares and/or other securities (including the Notes).

Risks Related to Doing Business in the People's Republic of China

Risks and uncertainties related to doing business in the People's Republic of China in general, include, but are not limited to, the following:

    Changes in the political and economic policies of the PRC government may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

    There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.

    PRC regulations regarding acquisitions impose significant regulatory approval and review requirements, which could make it more difficult for us to pursue growth through acquisitions.

    If our auditor is sanctioned or otherwise penalized by the PCAOB or the SEC as a result of failure to comply with inspection or investigation requirements, our financial statements could be determined to be not in compliance with the requirements of the U.S. Exchange Act or other laws or rules in the United States, which could ultimately result in our ADSs being delisted and materially and adversely affect our other securities.

Risks Related to Our ADSs and Shares

Risks related to our ADSs and Shares include, but are not limited to, the following:

    The trading prices of our ADSs and Shares have been and are likely to continue to be volatile, which could result in substantial losses to holders of our ADSs and/or Shares.

Risks Related to the Notes

In addition, we are subject to risks related to the Notes, including, but are not limited to, the following:

    An increase in interest rates could result in a decrease in the price of the Notes;

    The Notes will be structurally subordinated to all obligations of our existing and future subsidiaries and consolidated affiliated entities; and

    There is no clear legal and regulatory definition of or market consensus of or standardized criteria for what constitutes a "green," "social," "sustainability" or other equivalently labeled project or investment, and there can be no assurance that the use of proceeds of the Sustainability Notes to finance the Eligible Projects will be suitable for the investment criteria of an investor.

The foregoing is only a summary of some of our risks. These and other risks are discussed more fully in the section titled "Risk Factors" of this prospectus supplement, the accompanying prospectus and "Updated Risk Factors" in Exhibit 99.2 to our current report on Form 6-K, originally furnished to the SEC on February 2, 2021, which is incorporated by reference into this prospectus supplement.

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The Offering

The following summary contains basic information about the Notes and is not intended to be complete. Certain of the terms and conditions described below are subject to important limitations and exceptions. For a more complete description of the terms of the Notes, see "Description of the Notes" in this prospectus supplement.

Issuer   Alibaba Group Holding Limited

Notes Offered

 

US$            aggregate principal amount of            % Notes due 20            (the "20      Notes")

 

 

US$            aggregate principal amount of            % Notes due 20      (the "20      Notes" or the "Sustainability Notes")

 

 

US$            aggregate principal amount of            % Notes due 20      (the "20      Notes")

 

 

US$            aggregate principal amount of            % Notes due 20      (the "20      Notes")

 

 

The 20      Notes, the 20      Notes, the 20      Notes and the 20      Notes are collectively referred to in this prospectus supplement as the "Notes."

Issue Prices

 

The issue price shall equal the following percentage of aggregate principal amount issued, plus accrued interest on such amount, if any, from (and including)             , 2021 to (but excluding) the issue date:

 

 

20      Notes:            %

 

 

20      Notes:            %

 

 

20      Notes:            %

 

 

20      Notes:            %

Maturity Dates

 

20      Notes: February            , 20      

 

 

20      Notes: February            , 20      

 

 

20      Notes: February            , 20      

 

 

20      Notes: February            , 20      

Interest

 

The 20      Notes, the 20      Notes, the 20      Notes and the 20      Notes will bear interest at      %,      %,      % and      % per annum, respectively, from and including February      , 2021 and be payable semi-annually in arrears.

 

 

Interest on the Notes will be calculated on the basis of a 360-day year and twelve 30-day months.

Interest Payment Dates

 

For all Notes, the interest payment dates will be February    and August    of each year, commencing August      , 2021, and at maturity.

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Use of Proceeds   The estimated net proceeds of the sale of the Notes (excluding the Sustainability Notes) after deducting estimated underwriting discounts and commissions and estimated pro rata expenses payable in connection with the offering of such notes will be approximately US$            , which we intend to use for general corporate purposes, including working capital needs, repayment of offshore debt and potential acquisitions of or investments in complementary businesses. See "Use of Proceeds."

 

 

The estimated net proceeds of the sale of the Sustainability Notes after deducting estimated underwriting discounts and commissions and estimated pro rata expenses payable in connection with the offering of the Sustainability Notes will be approximately US$ , which we intend to allocate to finance or refinance, in whole or in part, one or more of our new or existing Eligible Projects. See "Use of Proceeds."

Ranking

 

The Notes will be our senior unsecured obligations and will:

 

rank senior in right of payment to all of our existing and future indebtedness expressly subordinated in right of payment to the Notes;

 

rank at least equally in right of payment with all of our existing and future unsecured unsubordinated indebtedness (subject to any priority rights pursuant to applicable law), including our 3.125% Senior Notes due 2021, our 2.800% Senior Notes due 2023, our 3.600% Senior Notes due 2024, our 3.400% Senior Notes due 2027, our 4.500% Senior Notes due 2034, our 4.000% Senior Notes due 2037, our 4.200% Senior Notes due 2047 and our 4.400% Senior Notes due 2057, the outstanding amount under our US$4.0 billion term loan facility due 2024, and any amount that may be outstanding from time to time under our US$5.15 billion revolving credit facility;

 

be effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets serving as security therefor; and

 

be structurally subordinated to all existing and future indebtedness and other liabilities of our subsidiaries and consolidated affiliated entities that do not guarantee the Notes.

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No Guarantee   The Notes are not guaranteed by any of our existing subsidiaries or consolidated affiliated entities, who together hold substantially all of our operating assets and conduct substantially all of our business. Additionally, the indenture governing the Notes will not contain any obligation for any of our existing or future subsidiaries or consolidated affiliated entities to guarantee the Notes. In the future we may enter into credit facilities, including revolving credit facilities, secured by the assets of, or guaranteed by, our subsidiaries or consolidated affiliated entities without obligating such subsidiaries or consolidated affiliated entities to provide security or guarantees in respect of the Notes. See "Risk Factors — Risks Related to the Notes — The Notes will be structurally subordinated to all obligations of our existing and future subsidiaries and consolidated affiliated entities."

Additional Amounts

 

In the event that certain taxes are imposed or levied by or within the Cayman Islands or the PRC in respect of payments made by us with respect to the Notes, we will, subject to certain exceptions, pay such additional amounts under the Notes as will result, after deduction or withholding of such taxes, in the payment of an amount as would have been payable in respect of the Notes had no such deduction or withholding been required. In addition, any amounts to be paid by us on the Notes will be paid net of any withholding implementing or relating to FATCA (as defined below) and we will not be required to pay additional amounts on account of any such withholding. See "Description of the Notes — Payment of Additional Amounts."

Tax Redemption

 

The Notes of any series may be redeemed at any time, at our option, in whole but not in part, at 100% of the principal amount thereof plus accrued and unpaid interest, if any, in the event we become obligated to pay certain additional amounts in respect of taxes imposed or levied by or within the Cayman Islands or the PRC in respect of the Notes. See "Description of the Notes — Tax Redemption."

Optional Redemption

 

We may redeem the 20      Notes at any time prior to            , 20      , the 20      Notes at any time prior to            , 20      , the 20      Notes at any time prior to            , 20      , and the 20      Notes at any time prior to            , 20      , in each case, in whole or in part, at a price equal to the greater of (i) 100% of the principal amount of the applicable Notes to be redeemed and (ii) the make-whole amount (as defined elsewhere in this prospectus supplement), plus, in each case, accrued and unpaid interest, if any, to (but not including) the redemption date. See "Description of the Notes — Optional Redemption."

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    We may also redeem the 20    Notes, at any time from or after            , 20      , the 20      Notes, at any time from or after            , 20      , the 20      Notes, at any time from or after            , 20      , and the 20      Notes, at any time from or after            , 20      , in each case, in whole or in part, upon giving not less than 30 days' nor more than 60 days' notice to the holders of the Notes and the Trustee, at 100% of the principal amount of the applicable Notes to be redeemed, plus accrued and unpaid interest, if any, to (but not including) the applicable redemption date. There is no sinking fund for the Notes. See "Description of the Notes — Optional Redemption."

Repurchase upon Triggering Event

 

Upon the occurrence of a Triggering Event (as defined in "Description of the Notes — Repurchase Upon Triggering Event"), we must make an offer to repurchase all Notes outstanding at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to (but not including) the date of repurchase. See "Description of the Notes — Repurchase Upon Triggering Event."

Denomination, Form and Registration

 

The Notes will be issued in minimum denominations of US$200,000 and integral multiples of US$1,000 above that amount.

 

 

The Notes will be represented by one or more Global Notes (as defined in "Description of the Notes — Book-Entry; Delivery and Form") in fully registered form without coupons deposited with The Bank of New York Mellon as custodian for and registered in the name of Cede & Co., as nominee of DTC.

 

 

DTC will credit the account of each of its participants with the principal amount of Notes being purchased by or through such participant. Beneficial interests in the Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its direct and indirect participants. See "Description of the Notes — Book-Entry; Delivery and Form."

Certain Covenants

 

We will issue the Notes under an indenture containing covenants for the holders' benefit. These covenants restrict our ability, with certain exceptions, to:

 

incur certain debt secured by liens; and

 

merge, consolidate or transfer all or substantially all of our assets.


 

 

See "Description of the Notes — Certain Covenants."

Governing Law

 

The Notes and the indenture governing the Notes will be governed by New York law.

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No Prior Market   The Notes will be new securities for which there is no market. Although the underwriters have informed us that they intend to make a market in the Notes, the underwriters are not obligated to do so and may discontinue market-making activities at any time without notice. Accordingly, we cannot assure you that a liquid market for the Notes will develop or be maintained.

Listing

 

Approval in-principle has been received for the listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or information contained in this prospectus supplement. Approval in-principle granted by the SGX-ST for the listing of the Notes on the SGX-ST is not to be taken as an indication of the merits of the offering, us, our subsidiaries or affiliates or the Notes. Currently, there is no public market for the Notes. The Notes will be traded on the SGX-ST in a minimum board lot size of US$200,000 for so long as the Notes are listed and quoted on the SGX-ST and the rules of the SGX-ST so require.

 

 

For so long as the Notes are listed and quoted on the SGX-ST and the rules of the SGX-ST so require, we will appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption, in the event that a Global Note is exchanged for definitive Notes. In addition, in the event that a Global Note is exchanged for definitive Notes, an announcement of such exchange shall be made by or on behalf of us through the SGX-ST and such announcement will include all material information with respect to the delivery of the definitive Notes, including details of the paying agent in Singapore.

Risk Factors

 

You should carefully read "Risk Factors" beginning on page S-32 and the other information included in this prospectus supplement and the accompanying prospectus, Exhibit 99.2 to our current report on Form 6-K, originally furnished to the SEC on February 2, 2021, titled "Updated Risk Factors," as well as other documents incorporated by reference herein and therein, for a discussion of factors you should carefully consider before deciding to invest in the Notes.

Trustee, Paying Agent, Transfer Agent and Registrar

 

The Bank of New York Mellon

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RISK FACTORS

You should carefully consider the risk factors set forth below and our consolidated financial statements and related notes together with the other information contained in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference, before making an investment in the Notes. In particular, you should carefully consider the matters discussed under "Updated Risk Factors" in Exhibit 99.2 to our current report on Form 6-K, originally furnished to the SEC on February 2, 2021. Any of the following risks and the risks described under "Updated Risk Factors" in Exhibit 99.2 to our current report on Form 6-K, originally furnished to the SEC on February 2, 2021, and additional risks and uncertainties not currently known to us or those we currently view to be immaterial, may also materially and adversely affect our business, financial condition or results of operations. In such case, you may lose all or part of your investment in the Notes.

Risks Related to the Notes

An increase in interest rates could result in a decrease in the price of the Notes.

In general, as market interest rates rise, debt securities bearing interest at a fixed rate generally decline in value because the premium, if any, over market interest rates will decline. Consequently, if you purchase the Notes and market interest rates increase, the price of the Notes may decline.

The Notes will be structurally subordinated to all obligations of our existing and future subsidiaries and consolidated affiliated entities.

The Notes are not guaranteed by any of our existing subsidiaries or consolidated affiliated entities, who together hold substantially all of our operating assets and conduct substantially all of our business. Additionally, the indenture governing the Notes will not contain any obligation for any of our existing or future subsidiaries or consolidated affiliated entities to guarantee the Notes. Our subsidiaries and consolidated affiliated entities will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. The Notes will be structurally subordinated to all indebtedness and other obligations of our subsidiaries and consolidated affiliated entities such that in the event of bankruptcy, insolvency, liquidation, reorganization, dissolution or other winding up of any of our subsidiary or consolidated affiliated entity, all of such subsidiary's or consolidated affiliated entity's creditors (including trade creditors) would be entitled to payment in full out of such subsidiary's or consolidated affiliated entity's assets before we would be entitled to any payment. As of September 30, 2020, without giving effect to the offering of the Notes and the use of the proceeds therefrom, we had RMB 44.30 billion (US$6.52 billion) of bank borrowings outstanding, of which RMB7.63 billion (US$1.12 billion) was secured indebtedness, and RMB77.49 billion (US$11.41 billion) of unsecured senior notes outstanding, consisting of our outstanding 3.125% Senior Notes due 2021, our outstanding 2.800% Senior Notes due 2023, our outstanding 3.600% Senior Notes due 2024, our outstanding 3.400% Senior Notes due 2027, our outstanding 4.500% Senior Notes due 2034, our outstanding 4.000% Senior Notes due 2037, our outstanding 4.200% Senior Notes due 2047 and our outstanding 4.400% Senior Notes due 2057. As of September 30, 2020, the total amount of bank borrowings of our subsidiaries was RMB17.18 billion (US$2.53 billion).

In addition, the indenture governing the Notes will permit these subsidiaries and consolidated affiliated entities to incur additional indebtedness and will not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries and consolidated affiliated entities.

For additional risks relating to our holding company structure, please see "— Risks Related to Doing Business in in the People's Republic of China" section, including "— We rely to a significant extent on dividends, loans and other distributions on equity paid by our principal operating subsidiaries in China" contained in Exhibit 99.2 titled "Updated Risk Factors" to our current report on Form 6-K, originally furnished to the SEC on February 2, 2021, which is incorporated by reference into this prospectus supplement.

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The Notes will be effectively subordinated to any of our secured indebtedness to the extent of the value of the assets securing that indebtedness.

The Notes will not be secured by any of our assets. As a result, the Notes will be effectively subordinated to our existing and future secured indebtedness with respect to the assets that secure that indebtedness. The effect of this subordination is that upon a default in payment on, or the acceleration of, any of our secured indebtedness, or in the event of bankruptcy, insolvency, liquidation, dissolution or reorganization of us, the proceeds from the sale of assets securing our secured indebtedness will be available to pay obligations on the Notes only after all such secured indebtedness has been paid in full. As a result, the holders of the Notes may receive less ratably than the holders of secured debt in the event of our bankruptcy, insolvency, liquidation, dissolution or reorganization.

The indenture does not restrict the amount of additional debt that we may incur and has limited restrictions on our ability to incur secured or guaranteed debt, which may, among other things, make it more difficult for us to satisfy our obligations with respect to the Notes.

The Notes and the indenture under which the Notes will be issued do not limit the amount of unsecured debt that may be incurred by us or our subsidiaries or consolidated affiliated entities, and permit us and our subsidiaries and consolidated affiliated entities to incur or guarantee an unlimited amount of bank debt, bank loans and securitizations as well as other types of indebtedness in certain circumstances, including Renminbi-denominated notes, bonds and debentures initially offered, marketed or issued primarily to persons resident in the PRC, without securing or guaranteeing the Notes equally and ratably therewith. In addition, we (including our controlled entities) are permitted to secure capital markets indebtedness in certain circumstances. Our and our subsidiaries' and consolidated affiliated entities' incurrence of additional debt may have important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes, a loss in the price of the Notes and a risk that the credit rating of the Notes is lowered or withdrawn.

Redemption by us of the Notes may materially reduce your investment returns.

We have the right to redeem some or all of the Notes prior to their maturity. We may redeem the Notes at times when prevailing interest rates may be relatively low. Accordingly, you may not be able to reinvest the amount received upon any such redemption in a comparable security at an effective interest rate as favorable as that of the Notes or at all.

We may not be able to repurchase the Notes upon a Change in Law.

Upon the occurrence of a "Change in Law" as described in "Description of the Notes — Repurchase Upon Triggering Event," and subject to certain other conditions, we will be required to offer to repurchase all of the Notes then outstanding at 101% of their principal amount, plus accrued and unpaid interest, if any, to (but not including) the date of repurchase. The source of funds for any purchase of the Notes would be our available cash or cash from operations generated by our subsidiaries or consolidated affiliated entities or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the Notes upon a Change in Law because we may not have sufficient financial resources to purchase all of the debt securities that are tendered upon a Change in Law and repay our other indebtedness that may become due. We may require additional financing from third parties to fund any such purchases, and we may be unable to obtain financing on satisfactory terms or at all. Furthermore, our ability to repurchase the Notes may be limited by applicable law.

Holders of the Notes may not be able to determine when a Change in Law giving rise to their right to have the Notes repurchased has occurred.

The definition of "Change in Law" in the indenture that will govern the Notes includes a phrase relating to any change in laws, regulations and rules that result in our being unable to operate "substantially all" or derive "substantially all" of the economic benefits from, our business operations. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under

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applicable law. Accordingly, the applicability of the requirement that we offer to repurchase the Notes as a result of a Change in Law may be uncertain.

The terms of the indenture and the Notes provide only limited protection against significant corporate events that could materially and adversely impact your investment in the Notes.

While the indenture and the Notes contain terms intended to provide protection to holders of the Notes upon the occurrence of certain events involving significant corporate transactions and our creditworthiness, these terms are limited and may not be sufficient to protect your investment in the Notes. For example, the indenture that will govern the Notes will not prohibit some important corporate events, such as leveraged recapitalizations, even though those corporate events could significantly increase the level of our indebtedness or otherwise materially and adversely affect our capital structure, credit ratings or the price of the Notes.

The indenture for the Notes also does not:

    require us to maintain any financial ratios or specific levels of net worth, revenue, income, cash flows or liquidity;

    limit the ability of our subsidiaries or consolidated affiliated entities to service other indebtedness;

    restrict our ability to repurchase or prepay any other of our securities or other indebtedness;

    restrict our ability to make investments or to repurchase or pay dividends or make other payments in respect of our shares or other securities ranking junior to the Notes;

    limit our ability to sell, merge or consolidate any of our subsidiaries or consolidated affiliated entities; or

    limit our ability or that of our subsidiaries or consolidated affiliated entities to secure or guarantee any bank debt, bank loans or securitizations.

As a result of the foregoing, when evaluating the terms of the Notes, you should be aware that the terms of the indenture and the Notes do not restrict our ability to engage in, or to otherwise be a party to, a variety of corporate transactions, circumstances and events that could have a material adverse impact on your investment in the Notes.

An active trading market for the Notes may not develop, and the trading price of the Notes could be materially and adversely affected.

The Notes are a new issue of securities for which there is currently no trading market. Approval in-principle has been received for listing and quotation of the Notes on the SGX-ST. However, there can be no assurance that we will be able to obtain or maintain such listing or that an active trading market will develop. If no active trading market develops, you may not be able to resell your Notes at their fair market value or at all. We have been advised that the underwriters intend to make a market in the Notes, but the underwriters are not obligated to do so and may discontinue such market making activity at any time without notice. We cannot assure you that an active trading market for the Notes will develop or be sustained. If an active trading market for the Notes does not develop or is not maintained, the value and liquidity of the Notes may be materially and adversely affected. In addition, the Notes may trade at prices that are higher or lower than the price at which the Notes have been issued. The price at which the Notes trade depends on many factors, including:

    prevailing interest rates and interest rate volatility;

    our business, results of operations, financial condition and future prospects

    market perception of us and our industries;

    speculation in the press or investment community;

    changes in our industries and competition;

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    changes in the geopolitical landscape, government policies or regulatory environment in the markets we operate;

    the market conditions for similar securities, including our existing senior unsecured notes that are outstanding; and

    general economic conditions, almost all of which are beyond our control.

As a result, there can be no assurance that you will be able to resell the Notes at prices attractive to you or at all.

Additionally, with respect to the Sustainability Notes, the market price may also be impacted by any failure by us to use the net proceeds of the Sustainability Notes to finance or refinance Eligible Projects or to meet or continue to meet the funding requirements of certain environmentally- or socially-focused investors with respect to the Sustainability Notes.

Changes in our credit ratings may materially reduce the price of the Notes.

We expect the Notes to be rated and routinely evaluated by major rating agencies. Credit ratings are limited in scope, and do not address all material risks relating to an investment in the Notes, but rather reflect only the view of each rating agency at the time the rating is issued. An explanation of the significance of a rating may be obtained from the relevant rating agency. The ratings do not address the payment of any Additional Amounts (as defined in "Description of the Notes") and do not constitute recommendations to purchase, hold or sell the Notes inasmuch as such ratings do not comment as to the value or suitability for a particular investor. Each such rating should be evaluated independently of any other rating on the Notes, on other securities of ours, or on us. We cannot assure you that the ratings will remain in effect for any given period or that the ratings will not be revised by such rating agencies in the future if in their judgment circumstances so warrant. For example, rating agencies may revise their ratings in the future based on their view of our business or the business of our affiliates and/or certain companies with which we have a significant relationship, such as Ant Group.

Actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, could materially reduce the price of the Notes and increase our corporate borrowing costs.

As a foreign private issuer in the United States, we are permitted to, and we will, rely on exemptions from certain NYSE corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of the Notes.

We are exempted from certain corporate governance requirements of the NYSE by virtue of being a foreign private issuer in the United States. We are required to provide a brief description of the significant differences between our corporate governance practices and the corporate governance practices required to be followed by domestic U.S. companies listed on the NYSE. The standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For instance, we are not required to:

    have a majority of the board be independent (although all of the members of the audit committee must be independent under the U.S. Exchange Act);

    have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors;

    have regularly scheduled executive sessions for non-management directors; or

    have executive sessions of solely independent directors each year.

We have relied on and intend to continue to rely on some of these exemptions. As a result, you may not be provided with the benefits of certain corporate governance requirements of the NYSE.

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As a foreign private issuer in the United States, we are exempt from certain disclosure requirements under the U.S. Exchange Act, which may afford less protection to you than you would enjoy if we were a domestic U.S. company.

As a foreign private issuer in the United States, we are exempt from, among other things, the rules prescribing the furnishing and content of proxy statements under the U.S. Exchange Act and the rules relating to selective disclosure of material nonpublic information under Regulation FD under the U.S. Exchange Act. In addition, our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit and recovery provisions contained in Section 16 of the U.S. Exchange Act. We are also not required under the U.S. Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic U.S. companies with securities registered under the U.S. Exchange Act. For example, in addition to annual reports with audited financial statements, domestic U.S. companies are required to file with the SEC quarterly reports that include interim financial statements reviewed by an independent registered public accounting firm and certified by the companies' principal executive and financial officers. By contrast, as a foreign private issuer, we are not required to file such quarterly reports with the SEC or to provide quarterly certifications by our principal executive and financial officers. As a result, you may be afforded less protection than you would be afforded under the U.S. Exchange Act rules applicable to domestic U.S. companies.

We will follow the applicable corporate disclosure standards for debt securities listed on the SGX-ST, which standards may be different from those applicable to companies in certain other countries.

We will be subject to reporting obligations in respect of the Notes to be listed on the SGX-ST. The disclosure standards imposed by the SGX-ST may be different than those imposed by securities exchanges in other countries or regions such as the United States or Hong Kong. As a result, the level of information that is available may not correspond to what investors in the Notes are accustomed to.

We may in the future conduct a public offering and listing of our equity securities in Shanghai or Shenzhen, which may result in increased regulatory scrutiny and compliance costs as well as increased fluctuations in the prices of the Notes.

We may conduct a public offering and/or listing of our equity securities on a stock exchange in Shanghai or Shenzhen in the future. We have not set a specific timetable or decided on any specific form for an offering in Shanghai or Shenzhen and may not ultimately conduct an offering and listing. The precise timing of the offering and/or listing of our equity securities in Shanghai or Shenzhen would depend on a number of factors, including relevant regulatory developments and market conditions. If we complete a public offering or listing in Shanghai or Shenzhen, we would become subject to the applicable laws, rules and regulations governing public companies listed in Shanghai or Shenzhen, in addition to the various laws, rules and regulations that we are subject to in the United States and Hong Kong S.A.R. as a dual-listed company. The listing and trading of our equity securities in multiple jurisdictions and multiple markets may lead to increased compliance costs for us, and we may face the risk of significant intervention by regulatory authorities in these jurisdictions and markets. Such increased regulatory scrutiny and compliance costs could cause the price of the Notes to decline.

You may face difficulties in protecting your interests, and your ability and the ability of the SEC, the U.S. Department of Justice, and other U.S. authorities to bring actions against us may be limited in the foreign jurisdictions where we operate.

We are incorporated in the Cayman Islands and conduct substantially all of our operations in China through our wholly-owned entities and the variable interest entities. Most of our directors and substantially all of our executive officers reside outside the United States and Hong Kong S.A.R. and a substantial portion of their assets are located outside of the United States and Hong Kong S.A.R. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the securities laws of the United States, Hong Kong S.A.R. or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States or China, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of

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competent jurisdiction without retrial on the merits. For more information regarding the relevant laws of the Cayman Islands and China, see "Enforceability of Civil Liabilities" in the accompanying prospectus.

Due to jurisdictional limitations, matters of comity and various other factors, the ability of U.S. authorities, such as the SEC and the U.S. Department of Justice, or the DOJ, to investigate and bring enforcement actions against companies may be limited in foreign jurisdictions, including China. Local laws may constrain our and our directors' and officers' ability to cooperate with such an investigation or action. For example, according to Article 177 of the newly amended PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide documents or materials relating to securities business activities to overseas parties.

As a result, holders of the Notes may have more difficulty in protecting their interests through actions against us, our management, our directors, our officers or our major shareholders than would holders of debt securities of a corporation incorporated in a jurisdiction in the United States or Hong Kong S.A.R. Investor protection through actions by the SEC, DOJ and other U.S. authorities also may be limited.

We are not obligated to pay additional amounts in the event withholding or deductions for taxes are imposed in any jurisdiction other than the Cayman Islands or the PRC.

In the event that any withholding or deduction on account of any present or future taxes, duties, assessments or governmental charges levied on payments of principal, premium and interest made by us in respect of the Notes are imposed in any jurisdiction other than the Cayman Islands or the PRC, we are not obligated to pay additional amounts so that investors receive the same amount as they would have received prior to such withholding or deduction. If we were considered by a taxing authority in any other jurisdiction to be a resident for tax purposes, payments on the Notes could be subject to taxes and withholding or deductions for taxes and, in such case, holders of the Notes will only receive the net proceeds of any payment on the Notes after the applicable withholding or deduction.

While we do not believe we would currently be deemed to be a tax resident in any jurisdiction other than the Cayman Islands or the PRC, to the extent any taxing authority determined otherwise, the actual cash payments on the Notes received by holders may be substantially less than what holders would have received if we were not liable to make the applicable withholding or deduction. See "Description of the Notes — Payment of Additional Amounts."

Interest payments for the Notes payable to non-PRC note holders and gains on the transfer of the Notes by non-PRC note holders may become subject to PRC taxation.

Under the Enterprise Income Tax Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to interest payments payable on debt instruments by a PRC resident enterprise to the holders of such debt instruments that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the interest payments are not effectively connected with such establishment or place of business, to the extent such interest payments are derived from sources within the PRC. Interest paid to individual non-resident holders of such debt instruments is subject to PRC withholding tax at a rate of 20% if such interest is regarded as PRC-sourced income. Similarly, any gain realized on the transfer of such debt instruments by such holders is also subject to PRC tax at a current rate of 10% (for non-resident enterprises) or 20% (for non-resident individuals), subject to any reduction or exemption set forth in relevant tax treaties, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, interest payments relating to the Notes, and any gain realized by the investors from the transfer of the Notes, would be treated as income derived from sources within the PRC and would as a result be subject to PRC taxation.

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If we were deemed a PRC resident enterprise under the PRC Enterprise Income Tax Law and its implementation regulations and required to withhold tax on interest on the Notes, we would be required to pay additional amounts as described under "Description of the Notes — Payment of Additional Amounts." As described under "Description of the Notes — Tax Redemption," we may be able to redeem the Notes in whole at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest if such requirement to pay additional amounts results from a change in law (or a change in the official application or interpretation of law).

In addition, if we are treated as a PRC tax resident and if PRC tax authorities take the view that the holders of the Notes are providing loans within the PRC, the holders of the Notes shall be subject to VAT at the rate of 6% when receiving the interest payments under the Notes.

On March 23, 2016, the Ministry of Finance and the State Taxation Administration promulgated the Circular of Taxation on Implementing the Pilot Program of Replacing Business Tax with Value-Added Tax in an All-round Manner, or Circular 36, which was further revised in 2017 and 2019. Pursuant to Circular 36 and other implementation rules, the pilot scheme on levying value-added tax in place of business tax shall be launched nation-wide on and from May 1, 2016, and taxpayers in the financial industry shall be subject to value-added tax instead of business tax. See "Taxation — People's Republic of China Taxation." Where a holder of the Notes who is located outside of the PRC resells the Notes to an entity or individual located outside of the PRC, VAT is unlikely to be applicable to any gain on such transfer. If a debt instrument holder is an entity, when it transfers a debt instrument to a PRC entity or individual, any gain realized on such transfer of debt instrument is also subject to a PRC value-added tax at a current rate of 6%.

In addition, if we are considered a PRC resident enterprise, it is unclear whether holders of the Notes would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas. If interest payments to our non-PRC holders of the Notes, or gains from the transfer of the Notes by the holders, are subject to PRC tax, the value of your investment in our Notes may decline significantly.

We have significant flexibility in allocating the net proceeds of the Sustainability Notes and there can be no assurance that such net proceeds will be totally or partially disbursed for any such Eligible Projects.

We intend to allocate an amount equal to the net proceeds from the sale of the Sustainability Notes specifically to one or more of our new or existing Eligible Projects. However, there can be no assurance that any such Eligible Projects will be implemented in part or entirety in such manner and/or accordance with any timing schedule, or that such Eligible Projects will be completed within any specified period or at all or with the results or outcome as we originally expected or anticipated. We have significant flexibility in allocating the net proceeds of the Sustainability Notes and there can be no assurance that such net proceeds will be totally or partially disbursed for any such Eligible Projects. Neither the terms of the Sustainability Notes nor the indenture governing the Notes require us to use the proceeds as described under "Use of Proceeds", and any failure by us to comply with the anticipated use of proceeds will not constitute an event of default under the Notes or the indenture or result in an increase in interest rates or other penalties. Prospective investors should carefully review the information set out in this prospectus supplement regarding such use of the net proceeds and must determine for themselves the relevance of such information for the purpose of any investment in the Sustainability Notes together with any other investigation such investor deems necessary and whether the Sustainability Notes are suitable for their investment criteria.

There is no clear legal and regulatory definition of or market consensus of or standardized criteria for what constitutes a "green," "social," "sustainability" or other equivalently labeled project or investment, and there can be no assurance that the use of proceeds of the Sustainability Notes to finance the Eligible Projects will be suitable for the investment criteria of an investor.

There is currently no clear definition (legal, regulatory or otherwise) of, nor market consensus as to what constitutes, a "green," "social," "sustainability" or an equivalently-labeled project or investment, or as to what exact characteristics or attributes may be required for a particular project to be defined as "green," "social," "sustainability" or such other equivalent label, and no assurance can be given that a clear definition of or consensus regarding such projects will develop over time.

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None of the underwriters for this offering is responsible for the assessing or verifying whether the Eligible Projects to which we allocate the net proceeds of the Sustainability Notes meet the criteria or went through the process of evaluation and selection described in "Use of Proceeds," or for the monitoring of the use of proceeds. In particular, no assurance is given by us or any underwriter of the Notes that the use of such net proceeds to fund any Eligible Projects will satisfy (or will continue to satisfy), whether in whole or in part, any present or future investor expectations or requirements, taxonomies or standards or other investment criteria or guidelines with which such investor or its investments are required to comply, whether by any present or future applicable laws or regulations or by its own by-laws or other governing rules or investment portfolio mandates, ratings mandates or other independent expectations regarding such "green," "social," "sustainability" or other equivalently-labeled performance objectives, in particular with regard to any direct or indirect environmental, social, or sustainability impact of any projects or uses, the subject of or related to, any Eligible Projects. Any failure to allocate the net proceeds from the sale of the Sustainability Notes to any Eligible Projects or the failure of those investments or financings to satisfy investor expectations or requirements could have a material adverse effect on the market price of the Sustainability Notes.

In addition, no assurance or representation is given as to the suitability or reliability for any purpose whatsoever of any opinion or certification of any third party (whether or not solicited by us) that may be made available in connection with the offering of the Sustainability Notes and, in particular, with respect to whether the Sustainability Notes or any Eligible Projects fulfill any environmental, social, sustainability and/or other criteria. For the avoidance of doubt, any such opinion or certification is not and shall not be deemed to be incorporated into and/or form part of this prospectus supplement and the accompanying prospectus. Any such opinion or certification is not, nor should be deemed to be, a recommendation by us or any underwriter, or any other person to buy, sell or hold the Sustainability Notes. Any such opinion or certification is only current as of the date that opinion or certification was initially issued. Currently, the providers of such opinions and certifications may not be subject to any specific regulatory or other regime or oversight. Any withdrawal of any such opinion or certification or any additional opinion or certification attesting that we are not complying in whole or in part with any matters for which such opinion or certification is opining or certifying may have a material adverse effect on the value of the Sustainability Notes and/or result in adverse consequences for certain investors with mandates to invest in securities to be used for a particular purpose. Prospective investors must determine for themselves the relevance of any such opinion or certification and/or the information contained therein and/or the provider of such opinion or certification for the purpose of any investment in the Sustainability Notes.

The Sustainability Notes may not be included in any dedicated "green," "environmental," "social," "sustainability" or other equivalently- labeled index, and any such inclusion may not be indicative of the suitability for the investment criteria of an investor.

While no assurance can be given that any such inclusion will happen, in the event that the Sustainability Notes are included in any dedicated "green," "environmental," "social," "sustainability" or other equivalently-labeled index, no representation or assurance can be given by us, any underwriter or any other person:

    that such inclusion would satisfy (or would continue to satisfy), whether in whole or in part, any present or future investor expectations or requirements, taxonomies or standards or other investment criteria or guidelines with which such investor or its investments are required to comply, whether by any present or future applicable laws or regulations or by its own by-laws or other governing rules or investment portfolio mandates, ratings mandates or other expectations, in particular with regard to any direct or indirect environmental, social or sustainability impact of any projects or uses, the subject of or related to, any Eligible Projects (and it should be noted that the criteria for any such inclusion in index may vary); or

    that any such inclusion will be maintained during the life of the Sustainability Notes.

In the event that the Sustainability Notes are included in such index, any change to the inclusion status of the Sustainability Notes, including but not limited to the exclusion of the Sustainability Notes from the index or the suspension or admission to trading of the Sustainability Notes, may have a material adverse effect on the value of the Sustainability Notes and/or result in adverse consequences for certain investors with portfolio mandates to invest in securities to be used for a particular purpose. Prospective investors must determine for themselves the relevance of any such inclusion for the purpose of any investment in the Sustainability Notes.

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USE OF PROCEEDS

Use of Proceeds for the Notes (excluding the Sustainability Notes)

The estimated net proceeds of the sale of the Notes (excluding the Sustainability Notes) after deducting estimated underwriting discounts and commissions and estimated pro rata expenses payable in connection with the offering of such notes will be approximately US$            million, which we intend to use for general corporate purposes including working capital needs, repayment of offshore debt and potential acquisitions of or investments in complementary businesses.

Use of Proceeds for the Sustainability Notes

The estimated net proceeds of the sale of the Sustainability Notes after deducting estimated underwriting discounts and commissions and estimated pro rata expenses payable in connection with the offering of the Sustainability Notes will be approximately US$            million. As described below, we intend to allocate this amount to finance or refinance, in whole or in part, one or more of our new or existing Eligible Projects, pursuant to our sustainable finance framework (the "Framework"). The Framework is available on our website at www.alibabagroup.com/en/ir/esg and has received a "second party opinion" by an independent consultant.

The Framework was developed in fulfillment of the following guidelines:

    Green Bond Principles 2018 ("GBP");

    Social Bond Principles 2020 ("SBP");

    Sustainability Bond Guidelines 2018 ("SBG," and together with the GBP and SBP, the "Principles"); and

    Green Loan Principles 2020.

The Sustainability Notes are aligned with the SBG, published to confirm the relevance of the Principles in the context of an issuance of sustainability bonds and facilitate the application of their guidance on transparency and disclosure to the sustainability bond market. The Sustainability Notes are aligned with the four core components of the GBP and the SBP, with the GBP being especially relevant to Eligible Projects which we believe will catalyze positive environmental benefit and the SBP, social benefit. The Principles are administered by the International Capital Markets Association.

"Eligible Projects" are investments and expenditures made by us or any of our subsidiaries in assets and projects that are aligned with one or more of the project categories set forth below. Eligible Projects will comprise investments and expenditures beginning with the issuance date of the Sustainability Notes or in the 36 months prior to the issuance of the Sustainability Notes in the case of refinancing. We expect that each of our Eligible Projects will meet one or more of the following eligibility criteria, but any Eligible Projects receiving an allocation of the net proceeds from the sale of the Sustainability Notes may or may not include any one or all of the example projects listed below:

    Green Buildings:  Acquisition, design, construction, or improvement of office space, commercial buildings, or surrounding communities, that meet certifications or qualifications such as LEED "Gold", BREEAM "Excellent" and Chinese Green Building Evaluation Label "2-Star", or which meet emissions performance or primary energy demand standards.

    Energy Efficiency:  Acquisition, development, construction, operation, or maintenance of energy-efficient facilities and infrastructure, including data centers with power usage effectiveness of no more than 1.5, digitalization and deployment of infrastructure or other networking solutions and cooling equipment that result in at least 15% improvement in energy consumed or emissions generated.

    COVID-19 Crisis Response:  Financial capital and expertise dedicated to combat the COVID-19 pandemic, including purchases, or research and development, relating to medical equipment, including testing kits and vaccines, AI technology and other technical support to promote public health development efforts, and

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      merchant relief and rural support programs each with the objective of ensuring business and employment continuity.

    Renewable Energy:  Acquisition, development, construction, operation, or maintenance of renewable energy projects, or the purchase of renewable energy, such as solar and wind.

    Circular Economy and Design:  Expenditure related to resource-efficient packaging and distribution, increasing waste diversion from landfills, and reducing waste at the source, such as recycling facilities, procurement of recycled or reused materials, and research and development of more sustainable packaging materials.

Project Evaluation and Selection

A committee that is chaired by our Deputy Chief Financial Officer and comprises members from our Corporate Social Responsibility, Corporate Finance, and Investor Relations teams will from time to time and at least annually screen potential Eligible Projects against the eligibility criteria.

Management of Proceeds

Net proceeds from the Sustainability Notes will be deposited in our general funding accounts pending allocation to Eligible Projects. Net proceeds awaiting allocation will be temporarily invested in cash or cash equivalents, or short-term investments in accordance with our corporate treasury policy and will not be knowingly placed in investments that include greenhouse gas intensive projects inconsistent with the delivery of a low carbon economy.

In the case of divestment or if a project no longer meets the relevant eligibility criteria, we will seek to reallocate the relevant amount to other Eligible Projects. Any payment of principal and interest on the Sustainability Notes will not be linked to the performance of any of our Eligible Projects.

Reporting

We will report on both allocation and impact on or before the first anniversary of settlement of the Sustainability Notes. We will report at least annually thereafter until net proceeds from the Sustainability Notes are fully allocated to Eligible Projects (and in timely fashion if a material amendment is required to past reporting).

External Review

We have worked with an independent third-party consultant with recognized expertise in environmental, social and governance research and analysis to (i) assess our Framework for alignment with the Principles; and (ii) obtain and make publicly available a "second party opinion" from such consultant with respect to such alignment.

Other

The information and materials found on our website, including without limitation the aforementioned second party opinion and the Framework, are not part of or incorporated by reference into this prospectus supplement or the accompanying prospectus or any other report or filing filed with the SEC.

The foregoing represents our current intentions to use and allocate the net proceeds of this offering based upon our present plans and business conditions. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus supplement.

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CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2020:

    on an actual basis; and

    on an adjusted basis giving effect to our issuance and sale of the Notes pursuant to this prospectus supplement, resulting in estimated net proceeds of US$            million, after deducting estimated underwriting discounts and commissions and estimated expenses payable by us.

The as adjusted information below is illustrative only. You should read this table in conjunction with our consolidated financial statements and the related notes as of March 31, 2019 and 2020, and for each of the three years ended March 31, 2020, which are contained in Exhibit 99.2 titled "Updated Part III, Item 18. Financial Statements, from the Company's Annual Report on Form 20-F for the year ended March 31, 2020, as filed with the Secu