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Alibaba (BABA) Beats Q2 Earnings Estimates, Lags Revenues

Zacks Equity Research
·5 min read

Alibaba Group Holding Limited BABA reported second-quarter fiscal 2021 earnings of $2.65 per ADS, which surpassed the Zacks Consensus Estimate of $2.06. Also, the bottom line increased 37% year over year.

It reported revenues of RMB155.1 billion (US$22.8 billion), up 30% from the prior-year quarter. The year-over-year revenue increase was driven by strength in the company’s China commerce retail business, cloud computing and Cainiao logistics services businesses.

However, revenues missed the Zacks Consensus Estimate of US$22.9 billion.

Alibaba Group Holding Limited Price, Consensus and EPS Surprise

Alibaba Group Holding Limited Price, Consensus and EPS Surprise
Alibaba Group Holding Limited Price, Consensus and EPS Surprise

Alibaba Group Holding Limited price-consensus-eps-surprise-chart | Alibaba Group Holding Limited Quote

Revenues by Segments

Alibaba has four reportable segments — Core Commerce, Cloud Computing, Digital Media and Entertainment, and Innovation Initiatives. The details of these segments are discussed below.

Core Commerce: This segment comprises marketplaces operating in retail and wholesale commerce in China, as well as international commerce. The segment’s revenues for the quarter totaled RMB130.9 billion (US$19.3 billion), reflecting an increase of 29% on a year-over-year basis.

China commerce retail business (accounting for 62% of total revenues) — The business vertical’s revenues for the quarter were RMB95.5 billion (US$14.1 billion), reflecting an increase of 26% year over year.

China commerce wholesale business (2% of total revenues) — This business generated revenues of RMB3.6 billion (US$536 million), reflecting an 11% increase from the year-ago quarter. The increase in average revenues from paying members on 1688.com aided revenue growth.

International commerce retail business (5% of total revenues) — Revenues for the quarter were RMB7.8 billion (US$1.1 billion), increasing 30% year over year. The increase was driven by revenue growth from Lazada and Trendyol, partially offset by decrease in revenues from AliExpress.

International commerce wholesale business (2% of total revenues) — This business generated revenues of RMB3.5 billion (US$517 million), which increased 44% from the prior-year quarter. The growth was due to an increase in the number of paying members on the alibaba.com platform and revenues generated by cross-border related value added services.

Cainiao logistics services (5% of total revenues) — This business generated revenues of RMB8.2 billion (US$1.2 billion), up 73% year over year. The segment represents revenues from growing cross-border and international commerce retail businesses.

Local consumer services (6% of total revenues) — This business generated revenues of RMB8.8 billion (US$1.3 billion), which increased 29% year over year.

Others business (2% of total revenues) — The business generated revenues of RMB3.5 billion (US$508 million), reflecting a 63% year-over-year increase.

Cloud Computing: This segment comprises Alibaba Cloud that offers a complete suite of cloud services. The top line for the quarter was RMB14.9 billion (US$2.19 billion), up 60% from the year-ago quarter, driven by growth in revenues from customers in Internet, finance and retail industries.

Digital Media and Entertainment: The segment operates businesses through media properties that include UCWeb, Youku Tudou, OTT TV service, Alibaba Music and Alibaba Sports. Revenues from the segment were RMB8.1 billion (US$1.2 billion), reflecting an increase of 8% on a year-over-year basis.

Innovation Initiatives and Others: This segment includes businesses such as the YunOS operating system, AutoNavi, DingTalk enterprise messaging and others. Revenues for the quarter were RMB1.2 billion (US$173 million), up 10% year over year.

Key Metrics

Mobile Monthly Active Users (MAUs) — Mobile MAUs were 881 million, improving 12.2% from the prior-year quarter and 0.8% sequentially.

Annual Active Consumers — China retail marketplaces had 757 million annual active buyers, reflecting 9.2% year-over-year growth and 2% sequential improvement.

Operating Results

Alibaba’s operating expenses (product development + sales and marketing + general and administrative) of RMB48.6 billion increased 64.5% from a year ago.

Operating income was RMB13.6 billion versus RMB20.4 billion in the year-ago quarter.

Adjusted EBITDA increased 28% year over year to RMB47.5 billion (US$7 billion).

Cash Flow/Share Repurchase

Net cash flow from operations was RMB54.3 billion (US$8 billion) and free cash flow was RMB40.5 billion (US$6 billion) for the fiscal second quarter.

Zacks Rank & Key Picks

Alibaba currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Marchex, Inc. MCHX, Overstock.com, Inc. OSTK and Revolve Group, Inc. RVLV, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Marchex, Overstock.com, and Revolve Group is currently projected at 15%, 20% and 17.3%, respectively.

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