Alibaba (BABA) income statement Q1. June quarter
Alibaba has faced growth challenges due to regulatory tightening on China’s domestic technology sector and a slowdown in the world’s second-largest economy. But analysts believe the e-commerce giant’s growth could pick up through the rest of 2022.
Kuang Da | Jiemian News | VCG | Getty Images
Alibaba reported fiscal first-quarter results on Thursday that beat expectations, sending the stock higher in U.S. premarket trading.
Shares of the Chinese e-commerce giant in Hong Kong rose more than 4% ahead of the earnings report. Alibaba̵[ads1]7;s US-listed shares were as much as 7% higher, before pairing gains.
Here’s how Alibaba did in its financial first quarter, versus Refinitiv consensus estimates:
- Revenue: 205.55 billion Chinese yuan ($30.68 billion) versus an expected 203.19 billion yuan, remaining flat year-over-year.
- Earnings per American depositary share (ADS): 11.73 yuan versus expectations of 10.39 yuan, down 29% year-on-year.
- Net income: 22.73 billion yuan versus an expected 18.72 billion yuan.
Despite Alibaba beating estimates, it is the first time the company has had flat growth in its history.
In the quarter, Alibaba faced a number of headwinds, including a resurgence of Covid in China that led to the lockdown of major cities, such as the financial metropolis of Shanghai. This led to a sluggish Chinese economy in the second quarter of the year.
However, as cities emerged from lockdown in late May and early June, growth began to pick up.
“After a relatively slow April and May, we saw signs of improvement across our businesses in June,” Daniel Zhang, CEO of Alibaba, said in a press release.
Meanwhile, the e-commerce giant continues to face a tough regulatory environment following Beijing’s more than a year and a half crackdown on the domestic technology sector.
While Alibaba had a tough quarter, analysts expect growth to pick up in the coming months.
China e-commerce in focus
Revenue from Alibaba’s biggest business, its China trading division, which includes popular marketplace Taobao, fell 1% year-on-year to 141.93 billion yuan. This was mainly due to a 10% drop in customer administration revenue. CMR is revenue Alibaba receives from services such as marketing that the company sells to merchants on its Taobao and Tmall e-commerce platforms.
Alibaba said CMR declined because overall physical online sales on the Taobao and Tmall platforms were down “mid-single digits year-over-year” and there were increased order cancellations due to the impact of the Covid outbreak and ” restrictions that led to supply chain and logistics disruptions in April and most of May.”
In June, Alibaba said it saw an improvement in so-called gross merchandise volume (GMV) thanks to improved logistics and the annual 6.18 shopping festival in China that culminates in June. GMV is a measure of sales across Alibaba’s platforms, but does not directly equate to revenue. The shopping event sees e-commerce players offering huge discounts to customers.
Under its Chinese commerce business, Alibaba has also sought to expand revenue and users for its discount platform called Taobao Deals and grocery and fresh food service Taocaicai. The Hangzhou-headquartered company sees these newer businesses as a way to attract less affluent customers in smaller Chinese cities.
Investors have been watching to see if Alibaba can keep costs under control while growing these businesses. Alibaba said Taobao Deals “significantly reduced losses year-over-year as well as quarter-over-quarter driven by optimizing spend in user acquisition as well as improving average spend for active consumers.” The company did not disclose the losses for Taobao Deals.
Alibaba said in the June quarter that Taocaicai GMV grew by more than 200% year-over-year, while losses “increased moderately compared to the same quarter last year.”
Cloudfall
While cloud computing only accounts for 9% of Alibaba’s overall revenue, it is seen as an important part of the company’s future growth and profitability.
Alibaba had revenue of 17.68 billion yuan from cloud computing in the June quarter, up 10% from a year earlier. But that was down from the 12% year-on-year revenue growth seen in the March quarter and 29% increase seen in the same period last year.
The company’s cloud division has been hurt by the loss of a major customer, as well as the Chinese government’s crackdown on industries such as online education that used Alibaba’s products.
But Alibaba said the increase in cloud revenue reflects the “restored growth of general non-internet industries, driven by financial services, public services and telecommunications industries.”
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