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BABA · Forward model · Unallocated and inter-segment elimination · Bear case

What has to happen in Unallocated and inter-segment elimination

Model as of

This page changes Unallocated and inter-segment elimination inside the complete BABA model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

BABA forward model
Horizon
Consolidated fair value $49.25 all other verticals held in this portfolio case
Final-quarter revenue −$3.10B -6% of company revenue
Explicit segment contribution −$340M EBITDA less segment capex, before corporate items

The June quarter is the run-rate, not a trough. China e-commerce revenue keeps falling and customer management revenue with it, on what the release calls weaker transaction activities. Subsidy competition with Meituan and JD holds quick-commerce margins down. AI Labs keeps losing roughly four dollars for every dollar it earns and no date is ever set for that to stop. All others takes a second impairment. Capital expenditure stays at 2.5x group adjusted EBITA anyway, because stopping concedes the market, and the equity has to be raised again. The market never pays more than one times revenue for the operating business.

Unallocated and inter-segment elimination

Basis quarter−$2.58B
Final quarter−$3.10B
Final revenue mix-6%

Not a business - the reconciling line the four operating segments need in order to sum to consolidated revenue. Unallocated revenue of RMB783 million less inter-segment elimination of RMB18,270 million nets to -RMB17,487 million in the June quarter, against -RMB16,089 million a year earlier. It is carried explicitly, with negative revenue, so no operating segment has to absorb it.

Last four quarters
2026 Q2 −$2.58B Reported
Unallocated revenueInter-segment elimination
Sequential growth +2.1%/qtr decaying toward +1.4% 2.1% a quarter reproduces the 8.7% year-over-year growth in the netted line; revenue is negative, so it deepens.
Unallocated and inter-segment elimination

Latest: −$3.10B (2031Q2E)

Period Value
2026Q2 −$2.58B
2026Q3E −$2.61B
2026Q4E −$2.64B
2027Q1E −$2.67B
2027Q2E −$2.70B
2027Q3E −$2.73B
2027Q4E −$2.76B
2028Q1E −$2.79B
2028Q2E −$2.81B
2028Q3E −$2.84B
2028Q4E −$2.86B
2029Q1E −$2.89B
2029Q2E −$2.91B
2029Q3E −$2.94B
2029Q4E −$2.96B
2030Q1E −$2.98B
2030Q2E −$3.01B
2030Q3E −$3.03B
2030Q4E −$3.05B
2031Q1E −$3.07B
2031Q2E −$3.10B

Assumptions & reasoning

  • The alternative to carrying this line explicitly is netting RMB18.3 billion of elimination into All others, which would make that vertical's revenue and margin non-comparable with the segment Alibaba actually reports. The engine accepts negative revenue in a growth driver, so the explicit form is used and the five verticals sum to the reported RMB268,953 million exactly.
  • The positive 4.83% margin is arithmetic, not a margin story: unallocated adjusted EBITA of -RMB163 million plus elimination of -RMB681 million, over -RMB17,487 million of netted revenue. In cash terms it is a drag of about US$124 million a quarter, and it is held flat because a reconciling line should not carry a margin trajectory.
  • Because this line already contains the group's unallocated corporate cost, corporate overhead in this model is set to zero. Charging a further percentage of group revenue as overhead would count the same RMB163 million twice.
  • This drag is not fixed. Inter-segment elimination grows as e-commerce and AI Labs consume more internal cloud, which is why it is modelled with a growth rate rather than held constant.
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