Alibaba reported fiscal year Q2 results prior to the US open. Alibaba’s fiscal year is different than the calendar year which explains why this is the company’s Q2 and not Q3. Expectations going into the release had been dropping as the company talked down analysts’ expectations. This led me to believe we might get a kitchen sink quarter i.e., the company writes down/off knowing the quarter isn’t going to be great. Alibaba ripped the band-aid as the cost of revenues increased to…….
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Alibaba reported fiscal year Q2 results prior to the US open. Alibaba’s fiscal year is different than the calendar year which explains why this is the company’s Q2 and not Q3. Expectations going into the release had been dropping as the company talked down analysts’ expectations. This led me to believe we might get a kitchen sink quarter i.e., the company writes down/off knowing the quarter isn’t going to be great. Alibaba ripped the band-aid as the cost of revenues increased to RMB 129.75B ($20.137B) from Q2 2020’s RMB 89.96B while sales/marketing expense increased to RMB 28.857B ($4.479B) from Q2 2020’s RMB 17.371B. Below you’ll notice big declines and disparities between GAAP and non-GAAP/adjusted in net income and EPS versus results a year ago.
Alibaba’s investments in publicly traded stocks are required to be written down by GAAP accounting rules. Analysts will focus on non-GAAP/adjusted net income and EPS as the company can’t control if the stock market goes up or down. The big three numbers, revenue/adjusted net income/adjusted EPS, missed analyst expectations. The company is investing heavily in its core business which resulted in increased expenses. The reality is Alibaba faces increased competition from JD.com, ByteDance’s Douyin, and others.
Ultimately, I don’t think the results are as bad as the headlines as management has navigated a tough economic and regulatory environment. Management made sure to emphasize that annual revenue guidance remains the same with expectations between 20% to 23%. It is worth noting the company bought 269mm shares in Q3. While the stock will be off today, this might be the final flush in BABA. % changes compare this quarter to the same quarter last year.
- Revenue increased +29% to RMB 200.69B versus analyst estimate of RMB 206.173B
- Revenue by segmentation: China retail commerce increased 33% to RMB 126.827B ($19.683B) accounting for 63% of revenue
- International retail commerce increased 33% to RMB 10.375B ($1.61B) driven by Lazada, a SE Asia focused business line, and AliExpress
- Total commerce increased 31% to RMB 171.17B ($26.565B) accounting for 85% of revenue
- Cloud computing increased 33% to RMB 20.007B ($3.105B)
- Annual active customers increased by 62mm to 1.24B
- Total costs/expenses increased 2% to RMB185.684B ($28.818B)
- Net Income declined -87% to RMB 3.377B ($524mm)
- Adjusted Net Income declined 81% to RMB 5.367B ($833mm) versus analyst estimates of RMB 33.2B
- EPS declined -81% to RMB 1.97 ($0.31) versus analyst expectation of RMB 8.16
- Adjusted EPS declined -38% to RMB 1.40 ($0.22) versus analyst estimate of RMB 12.37
- During the quarter, the company bought back 26.9mm shares at a cost of $5.147B
- Cash increased to RMB 443.428B ($68.819B) versus end of June’s RMB 470.824B
- Fiscal year 2022 revenue is expected to grow between 20% to 23%
JD.com’s decision to report earnings on the same day and same time as Alibaba was an …….