Alibaba Shares Rise Despite Slower Earnings Growth and Covid Warnings

Alibaba Group announced on Thursday said that it would not offer a forecast for the current fiscal year due to uncertainty of COVID-19 risks effects. This after the e-commerce giant reported its slowest quarterly revenue growth since its IPO in 2014.

Investors however were not deterred, sending the stock surging as much as 15% as they focused on the company’s quarterly revenue and earnings beat which comes amidst a weakening economy. This is a continuing rebound for the company from record lows in March.

For the quarter, Alibaba reported a 9% rise in revenue to 204.05 billion yuan ($30.35 billion). And while  the slowest pace of growth since its listing, it was ahead of the average analyst estimate of 199.25 billion yuan, according to Refinitiv.

 
 

Alibaba reported that net profit in the full year ended March 31 dropped to 62 billion yuan ($9.2 billion), which marks the lowest in five years – down from 150.3 billion in the previous year.

“We delivered healthy results this quarter with revenue growth of 9% year-over-year. Total revenue for the fiscal year grew 19% year-over-year, despite a challenging macro environment. Our continued investments in strategic initiatives have generated promising growth momentum and improved operating efficiency,” said Toby Xu, Chief Financial Officer of Alibaba Group.

“Looking ahead to fiscal year 2023, we will firmly focus on generating sustainable, high-quality revenue growth and optimizing our operating cost structure to enhance overall return amidst these uncertain times.”

 
 

Alibaba’s cloud computing division saw revenue rise 12%, and sales in the core commerce unit, the company’s largest, grew 8% to 140.33 billion yuan.

The company reported that it had over 1 billion active consumers on its platforms in China for the first time, and reached about 1.31 billion for the fiscal year overall.

Ant Group, the company’s fintech affiliate, reported a profit of about 22 billion yuan for the quarter ended December, compared with 21.76 billion yuan a year ago.

“Despite macro challenges that impacted supply chains and consumer sentiment, we continued to focus on customer value proposition and building the capabilities to deliver value,” Daniel Zhang, chairman and CEO of Alibaba Group, said in a statement.

“We saw tangible progress across our businesses, especially in operational improvements in key strategic areas.”

Highlights

In the quarter ended March 31, 2022:

  • Revenue was RMB204,052 million (US$32,188 million), an increase of 9% year-over-year that was primarily driven by the revenue growth of the China commerce segment by 8% year-over-year to RMB140,330 million (US$22,137 million), Local consumer services segment by 29% year-over-year to RMB10,445 million (US$1,647 million) and Cloud segment by 12% year-over-year to RMB18,971 million (US$2,993 million).
  • Annual active consumers of Alibaba Group across the world reached approximately 1.31 billion for the twelve months ended March 31, 2022, an increase of 28.3 million from the twelve months ended December 31, 2021. This included over 1 billion consumers in China, a historic milestone, and 305 million consumers overseas, representing quarterly net increases of approximately 24.6 million and 3.7 million, respectively, and annual net increases of 113 million and 64 million, respectively.
  • Income from operations was RMB16,717 million (US$2,637 million), compared to a loss from operations of RMB7,663 million in the same quarter of 2021. Excluding one-off and certain other items as identified in “March Quarter Operational and Financial Results” below, income from operations would have decreased by RMB6,894 million year-over-year primarily due to our increased investments in Taocaicai and Taobao Deals, the continued impact of COVID-19 as well as asset impairment and special provisions made by Sun Art. Adjusted EBITA, a non-GAAP measurement, decreased 30% or RMB6,801 million year-over-year to RMB15,811 million (US$2,494 million).
  • Net loss attributable to ordinary shareholders was RMB16,241 million (US$2,562 million) and net loss was RMB18,357 million (US$2,896 million), primarily due to decreases in the market prices of our equity investments in publicly-traded companies, which we excluded from our non-GAAP measures, partly offset by income from operations. Non-GAAP net income was RMB19,799 million (US$3,123 million), a decrease of 24% year-over-year.
  • Diluted loss per ADS was RMB6.07 (US$0.96) and diluted loss per share was RMB0.76 (US$0.12 or HK$0.94). Non-GAAP diluted earnings per ADS was RMB7.95 (US$1.25), a decrease of 23% year-over-year and non-GAAP diluted earnings per share was RMB0.99 (US$0.16 or HK$1.22), a decrease of 23% year-over-year.
  • Net cash used in operating activities was RMB7,040 million (US$1,111 million). Free cash flow, a non-GAAP measurement of liquidity, was an outflow of RMB15,070 million (US$2,377 million), compared to an outflow of RMB658 million in the same quarter of 2021, mainly due to the payment of the final installment of RMB9,114 million (US$1,438 million) of the RMB18,228 million fine levied by China’s State Administration for Market Regulation pursuant to China’s Anti-monopoly Law (the “Anti-monopoly Fine”), and a decrease in profit.

In the fiscal year ended March 31, 2022:

  • Revenue was RMB853,062 million (US$134,567 million), an increase of 19% year-over-year that was primarily driven by the revenue growth of the China commerce segment by 18% year-over-year to RMB592,705 million (US$93,497 million), Cloud segment by 23% year-over-year to RMB74,568 million (US$11,763 million) and International commerce segment by 25% year-over-year to RMB61,078 million (US$9,635 million). Excluding the consolidation of Sun Art, our revenue would have grown 14% year-over-year to RMB770,734 million (US$121,580 million).
  • Income from operations was RMB69,638 million (US$10,985 million), a decrease of 22% year-over-year. Excluding one-off and certain other items as identified in “Full Fiscal Year Operational and Financial Results” below, income from operations would have decreased by RMB41,683 million year-over-year, primarily due to our increased investments in Taobao Deals and Taocaicai, our increased spending for user growth, as well as our support to merchants. Adjusted EBITA, a non-GAAP measurement, decreased 23% or RMB40,056 million year-over-year to RMB130,397 million (US$20,570 million).
  • Net income attributable to ordinary shareholders was RMB61,959 million (US$9,774 million) and net income was RMB47,079 million (US$7,427 million), showing year-over-year decreases of 59% and 67%, respectively, primarily due to the net losses arising from decreases in the market prices of our equity investments in publicly-traded companies, compared to net gains from these investments in last year, which we excluded from our non-GAAP measures. Non-GAAP net incomewas RMB136,388 million (US$21,515 million), a decrease of 21% year-over-year.
  • Diluted earnings per ADS was RMB22.74 (US$3.59) and diluted earnings per share was RMB2.84 (US$0.45 or HK$3.50). Non-GAAP diluted earnings per ADS was RMB52.69 (US$8.31), a decrease of 19% year-over-year and non-GAAP diluted earnings per share was RMB6.59 (US$1.04 or HK$8.13), a decrease of 19% year-over-year.
  • Net cash provided by operating activities was RMB142,759 million (US$22,520 million), a decrease of 38% compared to RMB231,786 million in fiscal year 2021. Free cash flow, a non-GAAP measurement, was RMB98,874 million (US$15,597 million), a decrease of 43% year-over-year from RMB172,662 million in fiscal year 2021, mainly due to a decrease in profit and the full payment in the amount of RMB18,228 million of the Anti-monopoly Fine.

 

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