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Alibaba Group Announces March Quarter and Full Fiscal Year 2019 Results

HANGZHOU, China--(BUSINESS WIRE)--

Alibaba Group Holding Limited (BABA) today announced its financial results for the quarter and fiscal year ended March 31, 2019.

“More and more, Alibaba is becoming synonymous with everyday consumption in China, growing our base to 654 million annual active consumers and extending our penetration in less-developed cities,” said Daniel Zhang, Chief Executive Officer of Alibaba Group. “Our cloud and data technology and tremendous traction in New Retail have enabled us to continuously transform the way businesses operate in China and other emerging markets, which will contribute to our long-term growth.”

“We delivered another strong quarter and excellent fiscal year, led by fiscal year revenue growth of 51% as well as robust user growth and engagement across our ecosystem. Excluding the effects of consolidating acquired businesses, revenue would have increased by 39% year-over-year,” said Maggie Wu, Chief Financial Officer of Alibaba Group. “Over the years, our steady profit growth and cash flow have enabled us to strengthen our core business, invest in new businesses and create unique value for our customers. These investments have expanded our total addressable market and positioned us well for long-term growth. Looking ahead to fiscal 2020, we expect revenue to be over RMB500 billion, reflecting our confidence and positive momentum going forward.”

BUSINESS HIGHLIGHTS

In the quarter ended March 31, 2019:

  • Revenue was RMB93,498 million (US$13,932 million), an increase of 51% year-over-year.
  • Annual active consumers on our China retail marketplaces reached 654 million, an increase of 18 million from the 12-month period ended December 31, 2018.
  • Mobile MAUs on our China retail marketplaces reached 721 million in March 2019, an increase of 22 million over December 2018.
  • Income from operations was RMB8,765 million (US$1,306 million), a decrease of 5% year-over-year mainly due to our US$250 million settlement of a U.S. federal class action lawsuit. Adjusted EBITDA increased 29% year-over-year to RMB25,166 million (US$3,750 million).
  • Adjusted EBITA for core commerce was RMB27,484 million (US$4,095 million), an increase of 24% year-over-year. Our marketplace-based core commerce adjusted EBITA (see definition at the end of this results announcement), a non-GAAP measurement, increased 38% year-over-year to RMB34,688 million (US$5,169 million).
  • Net income attributable to ordinary shareholders was RMB25,830 million (US$3,849 million), and net income was RMB23,379 million (US$3,484 million). Non-GAAP net income was RMB20,056 million (US$2,988 million), an increase of 42% year-over-year.
  • Diluted EPS was RMB9.84 (US$1.47) and non-GAAP diluted EPS was RMB8.57 (US$1.28), an increase of 50% year-over-year.
  • Net cash provided by operating activities was RMB18,553 million (US$2,764 million) and non-GAAP free cash flow was RMB10,714 million (US$1,596 million).

In the fiscal year ended March 31, 2019:

  • Revenue was RMB376,844 million (US$56,152 million), an increase of 51% year-over-year. Excluding the effects of consolidating acquired businesses, revenue would have increased by 39% year-over-year.
  • Annual active consumers on our China retail marketplaces reached 654 million, an increase of 102 million from the 12-month period ended March 31, 2018.
  • Mobile MAUs on our China retail marketplaces reached 721 million in March 2019, an increase of 104 million over March 2018.
  • GMV transacted on our China retail marketplaces was RMB5,727 billion (US$853 billion) for fiscal year 2019, representing a year-over-year growth rate of 19%. Excluding unpaid orders, total physical goods GMV from our China retail marketplaces grew 25% year-over-year, Tmall physical goods GMV increased 31% year-over-year and Taobao physical goods GMV increased 19% year-over-year.
  • Income from operations was RMB57,084 million (US$8,506 million) and adjusted EBITDA increased 15% year-over-year to RMB121,943 million (US$18,170 million);
  • Adjusted EBITA for core commerce was RMB136,167 million (US$20,290 million), an increase of 19% year-over-year. Our marketplace-based core commerce adjusted EBITA, a non-GAAP measurement, increased 31% year-over-year to RMB161,589 million (US$24,078 million).
  • Net income attributable to ordinary shareholders was RMB87,600 million (US$13,053 million) and net income was RMB80,234 million (US$11,955 million). Non-GAAP net income was RMB93,407 million (US$13,918 million), an increase of 12% year-over-year.
  • Diluted EPS was RMB33.38 (US$4.97) and non-GAAP diluted EPS was RMB38.40 (US$5.72), an increase of 17% year-over-year.
  • Net cash provided by operating activities was RMB150,975 million (US$22,496 million) and non-GAAP free cash flow was RMB104,478 million (US$15,568 million).

BUSINESS AND STRATEGIC UPDATES

Core Commerce

Our Core Commerce segment delivered robust revenue growth of 51% year-over-year in fiscal year 2019. The strong performance of the Core Commerce segment was primarily driven by:

  • effective user acquisition and penetration into less developed cities;
  • solid revenue growth of China retail marketplaces reflecting higher user engagement driving improving click-through rate and better purchase conversion; and
  • expansion of our total addressable market by investing in local consumer services and New Retail businesses that captured additional consumer wallet share and improved user loyalty.

China Retail – Solid increase in annual active users catalyzes GMV growth; improved merchant sentiment in allocating marketing spend.

In March 2019, our China retail marketplaces had 721 million mobile MAUs, representing an annual and quarterly net increase of 104 million and 22 million, respectively. Annual active consumers on our China retail marketplaces was 654 million for the 12 months ended March 31, 2019, representing an annual and quarterly net increase of 102 million and 18 million, respectively. This robust growth reflects successful user acquisition programs, such as referrals through the Alipay app, and has been a leading indicator of increased consumption activities on our platforms. In fiscal year 2019, more than 70% of the increase in annual active consumers was from less developed cities.

During fiscal year 2019, our China retail marketplaces recorded total GMV of RMB5,727 billion (US$853 billion), up 19% year-over-year, primarily driven by an increase in the number of annual active consumers, putting us on track to achieve our US$1 trillion total GMV target by fiscal year end 2020. Total physical goods GMV from our China retail marketplaces, excluding unpaid orders, exhibited strong growth of 25% year-over-year in fiscal year 2019. Tmall physical goods GMV, excluding unpaid orders, grew 31% year-over-year, which continued to exceed the sector average. Taobao physical goods GMV, excluding unpaid orders, delivered healthy and accelerated growth of 19% in fiscal year 2019.

The number of paying merchants that generate customer management revenue increased during the quarter, which we believe reflects improved merchant confidence in allocating marketing spend. We are making progress on the monetization of recommendation feeds and enhancing recommendation algorithms. During the quarter, we allocated more traffic for testing of recommendation monetization, which generated incremental customer management revenue in a quarter with seasonally lower revenue.

Taobao – fast growing consumer community and new shopping experience. Taobao is a fast growing consumer community that continues to redefine the shopping experience through content innovation and intelligent personalized recommendations. We are improving the user experience and adding greater value to merchants with our proprietary consumption knowledge graph.

In fiscal year 2019, we successfully launched a new Taobao app interface, which delivers a customized shopping experience by segmenting users based on behavior data and providing them with more recommendations to enhance product and content discovery. The new interface also includes Taobao’s innovative content, such as curated posts, short-form videos and live-broadcast events. These initiatives drove strong growth in user engagement, purchase conversion and annual active consumers.

Tmall – the leading consumer engagement and distribution platform for brands in China. Tmall continues to gain wallet share and grow faster than the sector average. The growth of physical goods GMV, excluding unpaid orders, accelerated to 33% year-over-year in the quarter ended March 31, 2019, compared to the year-on-year growth rate of 29% in the previous quarter. This robust growth was driven primarily by strong performance of fast-moving consumer goods (FMCG), apparel, electronics and home furnishing categories during the March quarter.

In fiscal year 2019, Tmall extended its leadership position as the consumer engagement and distribution platform of choice for brands in China. We have had great success in identifying new consumption trends in China that drove robust sub-category growth within consumer electronics and personal care product categories. To help brands build awareness of new products with our large base of annual active consumers, we developed a suite of product-launch marketing solutions, including tools that assist brands to measure the effectiveness of new product-launch campaigns along the full consumer journey, from discovery to purchase.

As an example of Tmall’s powerful capabilities to enable brands to build their business in China, Alexander McQueen and Mulberry launched flagship stores on Tmall and joined the premium Luxury Pavilion channel during this quarter. As of March 31, 2019, our Tmall Luxury Pavilion had more than 100 luxury brands, all of which have also opened Tmall flagship stores.

New Retail – digital transformation of brick-and-mortar retailing. Through our New Retail strategy, we are at the forefront of transforming the retail industry by digitizing all aspects of store-based operations. We enable traditional retailers to deliver an unrivalled consumer experience and achieve operating efficiency through our consumer insight technology, on-demand delivery, inventory tracking, supply chain management and mobile payments.

In fiscal year 2019, Alibaba Group and Starbucks Coffee Company jointly announced a comprehensive strategic New Retail partnership to enable a seamless Starbucks Experience and enhance the way customers enjoy their food and beverages. By the end of April 2019, we had enabled on-demand delivery of Starbucks offerings in more than 2,100 stores across 35 cities throughout China. We have also helped accelerate membership acquisition for its new Starbucks Reward program through the Alipay and Taobao apps.

At the end of March 2019, we had digitized about 470 Sun Art stores with our New Retail know-how and proprietary technology. The transformation enables these stores to accelerate the integration of their various retail systems, while allowing consumers to place orders through the Taobao app and secure delivery through our on-demand delivery platform operated by Ele.me.

Our self-owned-and-operated grocery retail chain Freshippo (known as “Hema” in Chinese) continues to achieve robust same-store sales growth, expand its footprint, optimize its stores and introduce new initiatives to improve customer experience. As of March 31, 2019, we had 135 self-operated Freshippo stores in China, primarily located in tier one and tier two cities.

Local consumer services – ecosystem synergy and focus on market share gains in less developed cities.

In fiscal year 2019, we acquired the on-demand food delivery platform Ele.me and integrated it with restaurant and local service guide platform Koubei to create a business which revenues are reported under “local consumer services” within the core commerce segment. Our strategy for the local consumer services business is to leverage the 654 million annual active consumers on our China retail marketplaces and our data technology to expand our offerings from shopping to services, further tapping into new addressable markets for consumption in China.

We are focused on gaining market share by integrating the local consumer services business with the Alibaba ecosystem and penetrating into less developed cities. For example, the local consumer services business has acquired users and increased orders by leveraging the Alipay and Taobao apps, which have more than 600 million MAUs each and have gained a significant number of users in less developed cities in recent quarters. Approximately 30% of Ele.me platform’s total orders are generated through these two mobile apps.

Cainiao Network and logistics investments – achieving progress in last-mile solutions as well as international and cross-border fulfillment. During the 2019 fiscal year, Cainiao Network focused on delivering a comprehensive last-mile solution to consumers through both organic growth and strategic investments. In urban areas, Cainiao Network has developed neighborhood delivery solutions with a combination of community and campus stations and residential self-pickup lockers, which we call Cainiao Post. These solutions have become an important complement to the last-mile delivery network of Cainiao’s express delivery partners. In March 2019, these Cainiao Post stations handled over 10% of total daily packages generated by our China retail marketplaces. In addition, during the fiscal year, we enhanced our relationship with the express delivery industry through our investments in ZTO Express and STO Express, two of the major express delivery companies in China.

In international logistics, Cainiao Network and the logistics arm of Lazada have developed a strong and growing network of assets and partners to support our international commerce retail businesses (AliExpress and Lazada). In March 2019, our proprietary fulfillment and logistics solutions served over 75% of AliExpress packages and about 80% of Lazada packages were delivered out of its own sortation centers. From a China import standpoint, Cainiao Network is focused on developing cross-border fulfillment solutions for Tmall Global, utilizing a combination of bonded warehouses in China and direct shipping from foreign countries. In March 2019, these cross-border fulfillment solutions served over 90% of all Tmall Global packages.

International – building foundation for long-term growth. Our cross-border and international retail businesses continue to show promising growth. In the twelve months ended March 31, 2019, Lazada and AliExpress had a total of more than 120 million annual active consumers.

In fiscal year 2019, we strengthened Lazada’s third party marketplace business, management team and technology infrastructure. At the same time, Lazada reduced its exposure to direct product sales of low-margin categories, such as electronics, as we believe this strategy will better position Lazada for sustainable, scalable and less capital-intensive long-term growth. Lazada will continue to invest in logistics infrastructure in order to improve user experience and reduce delivery cost, as factors such as delivery speed and convenience have become key competitive advantages in the Southeast Asian market.

To address increasing Chinese consumer demand for international products and brands, Tmall Global serves as the premier platform that helps overseas brands and merchants reach Chinese consumers directly, build brand awareness and gain valuable consumer insight that inform their overall China strategy. Some of the brands and merchants that have a presence on Tmall Global are well established names, such as nutritional products from Chemists Warehouse and Blackmores, baby products from Pampers, accessories from Emporio Armani and nuts from Kirkland. Tmall Global was the number one e-commerce import platform in China based on transaction value in calendar year 2018, according to Analysys.

Cloud Computing

Cloud computing revenue grew 76% year-over-year to RMB7,726 million (US$1,151 million) during the March 2019 quarter, primarily driven by an increase in average spending per customer. We are seeing significant traction and diversification of customers and revenue. In fiscal year 2019, Alibaba Cloud served more than half of the A-share listed companies in China. We will continue to invest to further expand our market share by developing value-added products and features.

During the March 2019 quarter, Alibaba Cloud launched major products in the areas of graph database, anti-bot protection, blockchain-as-a-service and real time communications. We continue to use our scale to lower the pricing of products and services in the areas of content delivery network, security, database and network infrastructure so that we are able to pass on cost savings to our customers.

According to Gartner (April 2019), Alibaba Cloud is the largest cloud computing service provider in Asia Pacific, as measured by market share for IaaS (Infrastructure as a Service) and IUS (Infrastructure Utility Service).

Digital Media and Entertainment

Digital Media and Entertainment is a key piece of our Live@Alibaba vision and an extension of our strategy to capture consumption beyond our core commerce businesses. In fiscal year 2019, we emphasized developing our original content production capabilities in order to attain greater control over content quality, format and scheduling. We will continue to execute this strategy as we believe original content will drive paying subscriber and advertising revenue growth. Youku’s daily average subscriber base continues to grow at a healthy rate, increasing about 88% and 50% year-over-year during fiscal year 2019 and March 2019 quarter, respectively.

In March 2019, we increased our shareholding in Alibaba Pictures to 51% and aligned the management of Digital Media and Entertainment and Alibaba Pictures. Alibaba Pictures is principally engaged in the production, promotion and distribution of theatrical entertainment, serving consumers, studios, and cinema operators. Alibaba Pictures was involved in the production, promotion and distribution of highly popular films, including Chinese box-office hit The Wandering Earth, which to-date is the second highest grossing domestic film in China, and the Oscar-winning movie Green Book. We believe the alignment of management and content strategy between Alibaba Pictures and our Digital Media and Entertainment businesses will support and enhance our original content strategy in the future.

Innovation Initiatives & Technology Development

Amap app is the largest provider of mobile digital map, navigation and real-time traffic information in China by daily active users. Amap also operates a leading open digital maps platform that powers many major mobile apps in different industries, such as food delivery, ride service, taxi-hailing and social networking.

Tmall Genie, our AI-powered smart speaker, connects consumers with interactive services offered by participants in our digital economy. Since Tmall Genie’s official launch in August 2017, more than 10 million units have been activated.

Cash Flow from Operating Activities and Free Cash Flow

In the quarter ended March 31, 2019, net cash provided by operating activities was RMB18,553 million (US$2,764 million), an increase of 29% compared to RMB14,383 million in the same quarter of 2018. Free cash flow, a non-GAAP measurement of liquidity, in the quarter ended March 31, 2019 increased by 22% to RMB10,714 million (US$1,596 million), from RMB8,767 million in the same quarter of 2018.

In the fiscal year ended March 31, 2019, net cash provided by operating activities was RMB150,975 million (US$22,496 million), an increase of 20% compared to RMB125,805 million in the fiscal year 2018. Free cash flow, a non-GAAP measurement of liquidity, in fiscal year 2019 increased by 4% to RMB104,478 million (US$15,568 million), from RMB99,996 million in fiscal year 2018, primarily due to an increase in capital expenditures (excluding acquisition of land use rights and construction in progress relating to office campus) by RMB16,735 million and an increase in acquisition of licensed copyrights and other intangible assets by RMB3,953 million.

A reconciliation of net cash provided by operating activities to free cash flow is included at the end of this results announcement.

Share Repurchase

In September 2018, we announced an ADS repurchase plan to implement the previously announced US$6 billion share repurchase program. As of the end of March 2019, we had repurchased approximately 10.9 million of our ADSs for a total of approximately US$1.57 billion.

Guidance

Looking ahead, we are confident about our value proposition to consumers and merchants, and we will focus on solid execution to build our businesses. In fiscal year 2020, we expect to generate over RMB500 billion in revenue.

KEY OPERATIONAL METRICS*

 

March 31,
2018

 

December 31,
2018

 

March 31,
2019

  Net adds
YoY   QoQ
 
China Commerce Retail:
Annual active consumers(1) (in millions) 552 636 654 102 18
Mobile monthly active users (MAUs)(2) (in millions) 617 699 721 104 22

__________________

*   For definitions of terms used but not defined in this results announcement, please refer to our annual report on Form 20-F for the fiscal year ended March 31, 2018.
(1) For the twelve months ended on the respective dates.
(2) For the month ended on the respective dates.
 

MARCH QUARTER SUMMARY FINANCIAL RESULTS

  Three months ended March 31,  
2018     2019
RMB RMB   US$(1)

YoY %
Change

(in millions, except percentages and per share amounts)
 
Revenue 61,932 93,498 13,932 51%
 
Income from operations 9,221 8,765 1,306 (5)%(3)
Operating margin 15 % 9 %
Adjusted EBITDA(2) 19,454 25,166 3,750 29%
Adjusted EBITDA margin(2) 31 % 27 %
Adjusted EBITA(2) 16,805 20,757 3,093 24%
Adjusted EBITA margin(2) 27 % 22 %
 
Net income 6,641 23,379 3,484 252%(4)
Net income attributable to ordinary shareholders 7,561 25,830 3,849 242%(4)
Non-GAAP net income(2) 14,099 20,056 2,988 42%
 
Diluted earnings per share/ADS (EPS) 2.88 9.84 1.47 242%
Non-GAAP diluted EPS(2) 5.73 8.57 1.28 50%

__________________

(1)   This results announcement contains translations of certain Renminbi (“RMB”) amounts into U.S. dollars (“US$”) for the convenience of the reader. Unless otherwise stated, all translations of RMB into US$ were made at RMB6.7112 to US$1.00, the exchange rate on March 29, 2019 as set forth in the H.10 statistical release of the Federal Reserve Board. The percentages stated in this announcement are calculated based on the RMB amounts.
(2) See the sections entitled “Information about Segments,” “Non-GAAP Financial Measures” and “Reconciliations of Non-GAAP Measures to the Nearest Comparable GAAP Measures” for more information about the non-GAAP measures referred to within this results announcement.
(3)

The year-over-year decrease was primarily due to our US$250 million settlement of a U.S. federal class action lawsuit. Excluding this impact, our income from operations would have increased by 13%.

(4) Includes revaluation gains of investments and businesses, as discussed in detail in “Interest and investment income, net” below.
 

MARCH QUARTER INFORMATION BY SEGMENTS

The table below sets forth selected financial information of our operating segments for the periods indicated:

  Three months ended March 31, 2019

Core
commerce

 

Cloud
computing

 

Digital media
and
entertainment

 

Innovation
initiatives
and others

 

 

Unallocated(1)

 

 

Consolidated

RMB RMB RMB RMB RMB RMB   US$
(in millions, except percentages)
Revenue 78,894 7,726 5,671 1,207

 

93,498 13,932
 
Income (loss) from operations 21,632 (1,036 ) (3,854 ) (3,270 ) (4,707 ) 8,765 1,306
Add: Share-based compensation expense 3,054 869 691 1,318 1,178 7,110 1,060
Add: Amortization of intangible assets 2,798 3 335 20 47 3,203 477

Add: Settlement of U.S. federal class action lawsuit

        1,679   1,679  

250

 
 
Adjusted EBITA

27,484

(2)

(164 ) (2,828 ) (1,932 ) (1,803 ) 20,757   3,093  
Adjusted EBITA margin 35 % (2 )% (50 )% (160 )%

 

22 %
 
Three months ended March 31, 2018

Core
commerce

Cloud
computing

Digital media
and
entertainment

Innovation
initiatives
and others

 

Unallocated(1)

 

Consolidated

RMB RMB RMB RMB RMB RMB
(in millions, except percentages)
Revenue 51,287 4,385 5,272 988 61,932
 
Income (loss) from operations 18,660 (1,063 ) (3,541 ) (2,019 ) (2,816 )

 

9,221

Add: Share-based compensation expense

2,693

707

536

1,153

1,166

6,255

Add: Amortization of intangible assets

833   3   410   6   77   1,329  
 
Adjusted EBITA 22,186   (353 ) (2,595 ) (860 ) (1,573 ) 16,805  
Adjusted EBITA margin 43 % (8 )% (49 )% (87 )% 27 %

__________________

(1)   Unallocated expenses are primarily related to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.
(2) Marketplace-based core commerce adjusted EBITA increased 38% year-over-year to RMB34,688 million (US$5,169 million).
 

MARCH QUARTER OPERATIONAL AND FINANCIAL RESULTS

Revenue

Revenue for the quarter ended March 31, 2019 was RMB93,498 million (US$13,932 million), an increase of 51% compared to RMB61,932 million in the same quarter of 2018. The increase was mainly driven by the robust revenue growth of our China commerce retail business, the consolidation of Ele.me, as well as strong revenue growth of Alibaba Cloud.

The following table sets forth a breakdown of our revenue by segment for the periods indicated:

  Three months ended March 31,  
2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

YoY %
Change

(in millions, except percentages)
Core commerce:
China commerce retail
- Customer management 22,993 37% 30,119 4,488 32% 31%
- Commission 11,367 18% 14,790 2,204 16% 30%
- Others 5,825 10% 13,532 2,016 15% 132%
40,185 65% 58,441 8,708 63% 45%
China commerce wholesale 1,883 3% 2,547 380 3% 35%
International commerce retail 3,967 6% 4,944 737 5% 25%
International commerce wholesale 1,699 3% 2,133 318 2% 26%
Cainiao logistics services 2,852 5% 3,861 575 4% 35%
Local consumer services 5,266 785 5% N/A
Others 701 1% 1,702 253 2% 143%
Total core commerce 51,287 83% 78,894 11,756 84% 54%
 
Cloud computing 4,385 7% 7,726 1,151 8% 76%
Digital media and entertainment 5,272 8% 5,671 845 6% 8%
Innovation initiatives and others 988 2% 1,207 180 2% 22%
Total 61,932 100% 93,498 13,932 100% 51%
 

Core commerce

  • China commerce retail business

    Revenue Revenue from our China commerce retail business in the quarter ended March 31, 2019 was RMB58,441 million (US$8,708 million), an increase of 45% compared to RMB40,185 million in the same quarter of 2018. Revenue from our China retail marketplaces continued to see strong growth. Combined customer management and commission revenues grew 31% year-over-year, which represents an increase of 31% in customer management revenue and an increase of 30% in commission revenue. The growth of customer management revenue was primarily the result of increases in the volume of paid clicks. The growth of commission revenue was primarily due to the strong 33% year-over-year growth of Tmall physical goods GMV (excluding unpaid orders). “Others” revenue was RMB13,532 million (US$2,016 million), a significant increase compared to RMB5,825 million in the same quarter of 2018, primarily driven by contributions from direct sale businesses, including Tmall Direct Import and Freshippo.
  • China commerce wholesale business

    Revenue from our China commerce wholesale business in the quarter ended March 31, 2019 was RMB2,547 million (US$380 million), an increase of 35% compared to RMB1,883 million in the same quarter of 2018. The increase was primarily due to an increase in the average revenue from paying members on 1688.com, our domestic wholesale marketplace.
  • International commerce retail business

    Revenue from our international commerce retail business in the quarter ended March 31, 2019 was RMB4,944 million (US$737 million), an increase of 25% compared to RMB3,967 million in the same quarter of 2018. The increase was primarily due to our consolidation of Trendyol, Turkey’s leading e-commerce platform, and to a lesser extent an increase in revenue from AliExpress. Lazada’s revenue decreased by 4% in the quarter ended March 31, 2019 primarily due to a decrease in revenue generated from its direct sales business (where revenue is recorded on a gross basis including the cost of inventory). Last quarter, Lazada strengthened its core marketplace businesses and reduced exposure to direct sales in select merchandise categories. This business model shift continued to drive third-party marketplace GMV growth, although direct sales revenue declined during the same period.
  • International commerce wholesale business

    Revenue from our international commerce wholesale business in the quarter ended March 31, 2019 was RMB2,133 million (US$318 million), an increase of 26% compared to RMB1,699 million in the same quarter of 2018. The increase was primarily due to increases in the average revenue from paying members and the number of paying members on Alibaba.com, our global wholesale marketplace.
  • Cainiao logistics services

    Revenue from Cainiao logistics services, which represents revenue from the domestic and international one-stop-shop logistics services and supply chain management solutions provided by Cainiao Network, after elimination of inter-company transactions, was RMB3,861 million (US$575 million), an increase of 35% compared to RMB2,852 million in the same quarter of 2018.
  • Local consumer services

    Revenue from local consumer services, which primarily represents revenues from platform commissions, provision of food delivery services and other services provided by our on-demand food delivery platform Ele.me, was RMB5,266 million (US$785 million). We started to consolidate Ele.me in May 2018 and Koubei in December 2018.

Cloud computing

Revenue from our cloud computing business in the quarter ended March 31, 2019 was RMB7,726 million (US$1,151 million), an increase of 76% compared to RMB4,385 million in the same quarter of 2018, primarily driven by an increase in average spending per customer.

Digital media and entertainment

Revenue from our digital media and entertainment business in the quarter ended March 31, 2019 was RMB5,671 million (US$845 million), an increase of 8% compared to RMB5,272 million in the same quarter of 2018. The increase was primarily due to an increase in revenue from mobile value-added services provided by UCWeb, such as mobile search and game publishing.

Innovation initiatives and others

Revenue from innovation initiatives and others in the quarter ended March 31, 2019 was RMB1,207 million (US$180 million), an increase of 22% compared to RMB988 million in the same quarter of 2018. The increase was mainly due to an increase in revenue from Tmall Genie and Amap.

Costs and Expenses

The following tables set forth a breakdown of our costs and expenses, share-based compensation expense and costs and expenses excluding share-based compensation expense by function for the periods indicated.

  Three months ended March 31,  

% of
Revenue
YoY
change

2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

(in millions, except percentages)
Costs and expenses:
Cost of revenue 32,504 53% 55,610 8,286 60% 7%
Product development expenses 6,686 11% 8,659 1,290 10% (1)%
Sales and marketing expenses 7,641 12% 9,649 1,439 10% (2)%
General and administrative expenses 4,551 7% 7,612 1,134 8% 1%
Amortization of intangible assets 1,329 2% 3,203 477 3% 1%
Total costs and expenses 52,711 85% 84,733 12,626 91% 6%
 
Share-based compensation expense by function:
Cost of revenue 1,680 3% 1,951 291 2% (1)%
Product development expenses 2,461 4% 2,801 417 3% (1)%
Sales and marketing expenses 671 1% 764 114 1% 0%
General and administrative expenses 1,443 2% 1,594 238 2% 0%
Total share-based compensation expense 6,255 10% 7,110 1,060 8% (2)%
 
Costs and expenses excluding share-based compensation expense:
Cost of revenue 30,824 50% 53,659 7,995 58% 8%
Product development expenses 4,225 7% 5,858 873 7% 0%
Sales and marketing expenses 6,970 11% 8,885 1,325 9% (2)%
General and administrative expenses 3,108 5% 6,018 896 6% 1%
Amortization of intangible assets 1,329 2% 3,203 477 3% 1%
Total costs and expenses excluding share-based compensation expense 46,456 75% 77,623 11,566 83% 8%
 

Cost of revenue – Cost of revenue in the quarter ended March 31, 2019 was RMB55,610 million (US$8,286 million), or 60% of revenue, compared to RMB32,504 million, or 53% of revenue, in the same quarter of 2018. Without the effect of share-based compensation expense, cost of revenue as a percentage of revenue would have increased from 50% in the quarter ended March 31, 2018 to 58% in the quarter ended March 31, 2019. The increase was primarily due to our consolidation of Ele.me, as well as an increase of the cost of inventory and logistics from our New Retail and direct sale businesses.

Product development expenses – Product development expenses in the quarter ended March 31, 2019 were RMB8,659 million (US$1,290 million), or 10% of revenue, compared to RMB6,686 million, or 11% of revenue, in the same quarter of 2018. Without the effect of share-based compensation expense, product development expenses as a percentage of revenue would have remained stable at 7% in the quarter ended March 31, 2019 and the same quarter last year.

Sales and marketing expenses – Sales and marketing expenses in the quarter ended March 31, 2019 were RMB9,649 million (US$1,439 million), or 10% of revenue, compared to RMB7,641 million, or 12% of revenue, in the same quarter of 2018. Without the effect of share-based compensation expense, sales and marketing expenses as a percentage of revenue would have decreased from 11% in the quarter ended March 31, 2018 to 9% in the quarter ended March 31, 2019.

General and administrative expenses – General and administrative expenses in the quarter ended March 31, 2019 were RMB7,612 million (US$1,134 million), or 8% of revenue, compared to RMB4,551 million, or 7% of revenue, in the same quarter of 2018. Without the effect of share-based compensation expense, general and administrative expenses as a percentage of revenue would have increased from 5% in the quarter ended March 31, 2018 to 6% in the quarter ended March 31, 2019, primarily due to our US$250 million settlement of a U.S. federal class action lawsuit.

Share-based compensation expense – Total share-based compensation expense included in the cost and expense items above in the quarter ended March 31, 2019 was RMB7,110 million (US$1,060 million), an increase of 14% compared to RMB6,255 million in the same quarter of 2018. Share-based compensation expense as a percentage of revenue decreased to 8% in the quarter ended March 31, 2019, as compared to 10% in the same quarter last year. The following table sets forth our analysis of share-based compensation expense for the quarters indicated by type of share-based awards:

  Three months ended    

March 31,
2018

 

December 31,
2018

 

March 31,
2019

% Change

RMB  

% of
Revenue

RMB  

% of
Revenue

RMB   US$  

% of
Revenue

YoY QoQ
(in millions, except percentages)

By type of awards:

Alibaba Group share-based awards granted to:

- Our employees

4,176 7% 5,853 5% 5,613 836 6% 34% (4)%

- Ant Financial employees and other consultants(1)

389 1% 26

 

0%

486 73

 

1%

 

25%

1,769%

Ant Financial share-based awards granted to our employees(1)

1,483 2% 505

 

0%

435 65

 

0%

(71)%

(14)%
Others 207 0% 576 1% 576 86 1% 178% 0%
Total share-based compensation expense 6,255 10% 6,960 6% 7,110 1,060 8%

 

14%

 

2%

__________________

(1) Awards subject to mark-to-market accounting treatment.

 

Share-based compensation expense related to Alibaba Group share-based awards granted to our employees remained stable in this quarter compared to the previous quarter. Share-based compensation expense related to Alibaba Group share-based awards granted to Ant Financial employees and other consultants increased from the previous quarter, due to the increase in the fair value of Alibaba Group share-based awards.

We expect that our share-based compensation expense will continue to be affected by changes in the fair value of our shares, our subsidiaries’ share-based awards and the quantity of awards we grant to our employees and consultants in the future. Furthermore, we expect that our share-based compensation expense will continue to be affected by future changes in the valuation of Ant Financial, although any such changes will be non-cash and will not result in any economic cost or equity dilution to our shareholders.

Amortization of intangible assets – Amortization of intangible assets in the quarter ended March 31, 2019 was RMB3,203 million (US$477 million), an increase of 141% from RMB1,329 million in the same quarter of 2018, primarily due to an increase in amortization of intangible assets acquired from business combinations of Ele.me and Koubei.

Income from operations and operating margin

Income from operations in the quarter ended March 31, 2019 was RMB8,765 million (US$1,306 million), or 9% of revenue, a decrease of 5% compared to RMB9,221 million, or 15% of revenue, in the same quarter of 2018, primarily due to our US$250 million settlement of a U.S. federal class action lawsuit. Excluding this impact, our income from operations would have increased by 13%.

Adjusted EBITDA and Adjusted EBITA

Adjusted EBITDA increased 29% year-over-year to RMB25,166 million (US$3,750 million) in the quarter ended March 31, 2019, compared to RMB19,454 million in the same quarter of 2018. Adjusted EBITA increased 24% year-over-year to RMB20,757 million (US$3,093 million) in the quarter ended March 31, 2019, compared to RMB16,805 million in the same quarter of 2018. Reconciliations of net income to adjusted EBITDA and adjusted EBITA are included at the end of this results announcement.

Adjusted EBITA and adjusted EBITA margin by segments

Adjusted EBITA and adjusted EBITA margin by segments are set forth in the table below. See the section entitled “Information about Segments” above for a reconciliation of income from operations to adjusted EBITA.

  Three months ended March 31,
2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

(in millions, except percentages)
 
Core commerce 22,186 43 % 27,484 4,095 35 %
Cloud computing (353 ) (8 )% (164 ) (24 ) (2 )%
Digital media and entertainment (2,595 ) (49 )% (2,828 ) (421 ) (50 )%
Innovation initiatives and others (860 ) (87 )% (1,932 ) (288 ) (160 )%
 

Core commerce segment – Adjusted EBITA increased by 24% to RMB27,484 million (US$4,095 million) in the quarter ended March 31, 2019, compared to RMB22,186 million in the same quarter of 2018. Marketplace-based core commerce adjusted EBITA increased 38% year-over-year to RMB34,688 million (US$5,169 million). Adjusted EBITA margin decreased from 43% in the quarter ended March 31, 2018 to 35% in the quarter ended March 31, 2019 due to strategic investments, primarily including aggressive investment in local consumer services and gradual revenue mix shift towards self-operated New Retail and direct sale businesses where revenue is recorded on a gross basis including the cost of inventory. A reconciliation of adjusted EBITA for core commerce to marketplace-based core commerce adjusted EBITA is included at the end of this results announcement.

We expect that our core commerce adjusted EBITA margin will continue to be affected by the pace of our investments in new businesses and revenue mix shift to self-operated New Retail and direct sale businesses.

Cloud computing segment – Adjusted EBITA in the quarter ended March 31, 2019 was a loss of RMB164 million (US$24 million), compared to a loss of RMB353 million in the same quarter of 2018. Adjusted EBITA margin improved to negative 2% in the quarter ended March 31, 2019 from negative 8% in the quarter ended March 31, 2018.

Digital media and entertainment segment – Adjusted EBITA in the quarter ended March 31, 2019 was a loss of RMB2,828 million (US$421 million), compared to a loss of RMB2,595 million in the same quarter of 2018. Adjusted EBITA margin decrease from negative 49% in the quarter ended March 31, 2018 to negative 50% in the quarter ended March 31, 2019.

Innovation initiatives and others segment – Adjusted EBITA in the quarter ended March 31, 2019 was a loss of RMB1,932 million (US$288 million), compared to a loss of RMB860 million in the same quarter of 2018. The increase in adjusted EBITA loss was primarily due to investments in new business initiatives, including Tmall Genie, as well as our investments in technological research and innovation.

Interest and investment income, net

Interest and investment income, net in the quarter ended March 31, 2019 was RMB18,665 million (US$2,781 million), which mainly included net gains arising from the change in fair value of listed equity investments and a non-cash gain of RMB5,825 million (US$868 million) arising from the revaluation of our previously held equity interest in Alibaba Pictures when we obtained control in March 2019. The above-mentioned gains were excluded from our non-GAAP net income.

Other income, net

Other income, net in the quarter ended March 31, 2019 was RMB1,449 million (US$216 million), compared to RMB884 million in the same quarter of 2018. Royalty fees and software technology service fees under our profit sharing arrangement with Ant Financial amounted to RMB517 million (US$77 million) in the quarter ended March 31, 2019. In the current quarter, Ant Financial continued its strategic investments to acquire new users and capture growth opportunities in the offline payment market. Currently, Alipay and its local e-wallet partners have over 1 billion annual active users globally.

Income tax expenses

Income tax expenses in the quarter ended March 31, 2019 were RMB5,025 million (US$748 million), compared to RMB4,164 million in the same quarter of 2018.

Our effective tax rate was 18% in the quarter ended March 31, 2019, compared to 38% in the same quarter of 2018. Excluding share-based compensation expense, investment gain/loss and impairment of investments, our effective tax rate would have been 21% in the quarter ended March 31, 2019.

Share of results of equity investees

Share of results of equity investees in the quarter ended March 31, 2019 was a profit of RMB828 million (US$123 million), compared to a loss of RMB70 million in the same quarter of 2018. We record our share of results of equity investees one quarter in arrears. Share of results of equity investees in the quarter ended March 31, 2019 and the comparative periods consisted of the following:

  Three months ended
March 31, 2018   December 31, 2018   March 31, 2019
RMB RMB RMB   US$
(in millions)
Share of profit of equity investees 480 22 1,306 194
Impairment loss (493 )
Dilution (loss) gain (75 ) 26 (62 ) (9 )
Others(1) (475 ) (416 ) (416 ) (62 )
Total (70 ) (861 ) 828   123  

__________________

(1)   Others mainly include amortization of intangible assets of equity investees and share-based compensation expense.
 

The share of profit of equity investees in the quarter ended March 31, 2019 primarily included our share of profit in Suning.

Net income and Non-GAAP net income

Our net income in the quarter ended March 31, 2019 was RMB23,379 million (US$3,484 million), an increase of 252% compared to RMB6,641 million in the same quarter of 2018.

Excluding share-based compensation expense, investment gain/loss, impairment of investments and certain other items, non-GAAP net income in the quarter ended March 31, 2019 was RMB20,056 million (US$2,988 million), an increase of 42% compared to RMB14,099 million in the same quarter of 2018. A reconciliation of net income to non-GAAP net income is included at the end of this results announcement.

Net income attributable to ordinary shareholders

Net income attributable to ordinary shareholders in the quarter ended March 31, 2019 was RMB25,830 million (US$3,849 million), an increase of 242% compared to RMB7,561 million in the same quarter of 2018.

Diluted EPS and non-GAAP diluted EPS

Diluted EPS in the quarter ended March 31, 2019 was RMB9.84 (US$1.47) on a weighted average of 2,625 million diluted shares outstanding during the quarter, an increase of 242% compared to RMB2.88 on a weighted average of 2,619 million diluted shares outstanding during the same quarter of 2018. Excluding share-based compensation expense, investment gain/loss, impairment of investments and certain other items, non-GAAP diluted EPS in the quarter ended March 31, 2019 was RMB8.57 (US$1.28), an increase of 50% compared to RMB5.73 in the same quarter of 2018. A reconciliation of diluted EPS to non-GAAP diluted EPS is included at the end of this results announcement.

Cash, cash equivalents and short-term investments

As of March 31, 2019, cash, cash equivalents and short-term investments were RMB193,238 million (US$28,794 million), compared to RMB192,317 million as of December 31, 2018. The increase in cash, cash equivalents and short-term investments during the quarter ended March 31, 2019 was primarily due to free cash flow generated from operations of RMB10,714 million (US$1,596 million), partly offset by net cash used in investment and acquisition activities of RMB9,218 million (US$1,374 million).

Cash flow from operating activities and free cash flow

Net cash provided by operating activities in the quarter ended March 31, 2019 was RMB18,553 million (US$2,764 million), an increase of 29% compared to RMB14,383 million in the same quarter of 2018. Free cash flow, a non-GAAP measurement of liquidity, in the quarter ended March 31, 2019 was RMB10,714 million (US$1,596 million), compared to RMB8,767 million in the same quarter of 2018. A reconciliation of net cash provided by operating activities to free cash flow is included at the end of this results announcement.

Net cash used in investing activities

During the quarter ended March 31, 2019, net cash used in investing activities of RMB16,751 million (US$2,496 million) primarily reflected (i) cash outflow of RMB11,855 million (US$1,766 million) for investment and acquisition activities, including those relating to STO Express and iKang Healthcare, (ii) capital expenditures of RMB6,537 million (US$973 million), which included cash outflow for acquisition of land use rights and construction in progress relating to office campus of RMB849 million (US$126 million), as well as (iii) acquisition of licensed copyrights and other intangible assets of RMB2,151 million (US$321 million). These cash outflows were partly offset by cash inflow of RMB2,637 million (US$392 million) from disposal of various investments.

Employees

As of March 31, 2019, we had a total of 101,958 employees, compared to 101,550 as of December 31, 2018.

FULL FISCAL YEAR 2019 SUMMARY FINANCIAL RESULTS

  Year ended March 31,  
2018   2019
RMB RMB   US$(1)

YoY %
Change

(in millions, except percentages and per share amounts)
 
Revenue 250,266 376,844 56,152 51 %
 
Income from operations 69,314 57,084 8,506 (18

)%(3)

Operating margin 28 % 15 %
Adjusted EBITDA(2) 105,792 121,943 18,170 15 %
Adjusted EBITDA margin(2) 42 % 32 %
Adjusted EBITA(2) 97,003 106,981 15,941 10 %
Adjusted EBITA margin(2) 39 % 28 %
 
Net income 61,412 80,234 11,955 31 %
Net income attributable to ordinary shareholders 63,985 87,600 13,053 37 %
Non-GAAP net income(2) 83,214 93,407 13,918 12 %
 
Diluted earnings per share/ADS (EPS) 24.51 33.38 4.97 36 %
Non-GAAP diluted EPS(2) 32.86 38.40 5.72 17 %

__________________

(1)   This results announcement contains translations of certain Renminbi (“RMB”) amounts into U.S. dollars (“US$”) for the convenience of the reader. Unless otherwise stated, all translations of RMB into US$ were made at RMB6.7112 to US$1.00, the exchange rate on March 29, 2019 as set forth in the H.10 statistical release of the Federal Reserve Board. The percentages stated in this announcement are calculated based on the RMB amounts.
(2) See the sections entitled “Information about Segments,” “Non-GAAP Financial Measures” and “Reconciliations of Non-GAAP Measures to the Nearest Comparable GAAP Measures” for more information about the non-GAAP measures referred to within this results announcement.
(3)

The year-over-year decrease was primarily due to an increase in share-based compensation expense and our US$250 million settlement of a U.S. federal class action lawsuit. Excluding these impacts, our income from operations would have increased by 8%. The increase in share-based compensation expense was mainly due to the increase in share-based compensation expense related to Ant Financial share-based awards granted to our employees as a result of the increase in the fair value of such awards during the year.

 

FULL FISCAL YEAR 2019 INFORMATION BY SEGMENTS

The table below sets forth selected financial information of our operating segments for the fiscal year 2019:

  Year ended March 31, 2019

Core
commerce

 

Cloud
computing

 

Digital media
and
entertainment

 

Innovation
initiatives
and others

 

 

Unallocated(1)

 

 

Consolidated

RMB RMB RMB RMB RMB RMB   US$
(in millions, except percentages)
Revenue 323,400 24,702 24,077 4,665

 

376,844

56,152
 
Income (loss) from operations 109,312 (5,508 ) (20,046 ) (11,795 ) (14,879 )

 

57,084

8,506
Add: Share-based compensation expense 17,694 4,332 2,988 5,774 6,703

 

37,491

5,586
Add: Amortization of intangible assets 9,161 18 1,262 50 236

 

10,727

1,599

Add: Settlement of U.S. federal class action lawsuit

       

1,679

 

 

1,679

  250  
 
Adjusted EBITA 136,167((2 )) (1,158 ) (15,796 ) (5,971 ) (6,261 )

 

106,981

  15,941  
Adjusted EBITA margin 42 % (5 )% (66 )% (128 )%

 

 

28

%

 
Year ended March 31, 2018

Core
commerce

Cloud
computing

Digital media
and
entertainment

Innovation
initiatives
and others

 

Unallocated(1)

 

Consolidated

RMB RMB RMB RMB RMB RMB
(in millions, except percentages)
Revenue 214,020 13,390 19,564 3,292

 

250,266

 
Income (loss) from operations 102,743 (3,085 ) (14,140 ) (6,901 ) (9,303 )

 

69,314

Add: Share-based compensation expense

8,466

2,274

2,142

3,707

3,486

 

20,075

Add: Amortization of intangible assets 2,891 12 3,693 198 326

 

7,120

Add: Impairment of goodwill        

494

 

 

494

 
 
Adjusted EBITA 114,100   (799 ) (8,305 ) (2,996 ) (4,997 )

 

97,003

 
Adjusted EBITA margin 53 % (6 )% (42 )% (91 )%

 

39

%

__________________

(1)   Unallocated expenses are primarily related to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.
(2) Marketplace-based core commerce adjusted EBITA increased 31% year-over-year to RMB161,589 million (US$24,078 million).
 

FULL FISCAL YEAR 2019 OPERATIONAL AND FINANCIAL RESULTS

Revenue

Revenue in fiscal year 2019 was RMB376,844 million (US$56,152 million), an increase of 51% compared to RMB250,266 million in fiscal year 2018. The increase was mainly driven by the robust revenue growth of our China commerce retail business, the consolidation of newly acquired businesses, mainly Ele.me, as well as strong revenue growth of Alibaba Cloud.

The following table sets forth a breakdown of our revenue by segment for the periods indicated:

  Year ended March 31,  
2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

YoY %
Change

(in millions, except percentages)
Core commerce:
China commerce retail
- Customer management 114,285 46% 145,684 21,708 39% 27%
- Commission 46,525 19% 61,847 9,215 16% 33%
- Others 15,749

6%

40,084 5,973 11% 155%
176,559 71% 247,615 36,896 66% 40%
China commerce wholesale 7,164 3% 9,988 1,488 3% 39%
International commerce retail 14,216 6%

19,558

2,914 5% 38%
International commerce wholesale 6,625 2% 8,167 1,217 2% 23%
Cainiao logistics services 6,759 3% 14,885 2,218 4% 120%
Local consumer services 18,058 2,691 5% N/A
Others 2,697 1% 5,129 764 1% 90%
Total core commerce 214,020 86% 323,400 48,188 86% 51%
 
Cloud computing 13,390 5% 24,702 3,681 7% 84%
Digital media and entertainment 19,564 8% 24,077 3,588 6% 23%
Innovation initiatives and others 3,292 1% 4,665 695 1% 42%
Total 250,266 100% 376,844 56,152 100% 51%
 

Core commerce

  • China commerce retail business

    Revenue Revenue from our China commerce retail business in fiscal year 2019 was RMB247,615 million (US$36,896 million), an increase of 40% compared to RMB176,559 million in fiscal year 2018. Revenue from our China retail marketplaces continued to see strong growth. Combined customer management and commission revenues grew 29% year-over-year, which represents an increase of 27% in customer management revenue and an increase of 33% in commission revenue. The growth of customer management revenue was primarily the result of increases in the volume of paid clicks and to a lesser extent the increase in price per click. The growth of commission revenue was primarily due to strong 31% year-over-year growth of Tmall physical goods GMV (excluding unpaid orders). “Others” revenue was RMB40,084 million (US$5,973 million), a significant increase compared to RMB15,749 million in fiscal year 2018, primarily driven by contributions from direct sale businesses, including Tmall Direct Import and Freshippo. We expect that the proportion of revenue of our direct sales businesses will continue to increase as we further implement our New Retail strategy.
  • China commerce wholesale business

    Revenue from our China commerce wholesale business in fiscal year 2019 was RMB9,988 million (US$1,488 million), an increase of 39% compared to RMB7,164 million in fiscal year 2018. The increase was primarily due to an increase in the average revenue from paying members on 1688.com, our domestic wholesale marketplace.
  • International commerce retail business

    Revenue from our international commerce retail business in fiscal year 2019 was RMB19,558 million (US$2,914 million), an increase of 38% compared to RMB14,216 million in fiscal year 2018. The increase was primarily due to an increase in revenue from Lazada, our consolidation of Trendyol, Turkey’s leading e-commerce platform, as well as an increase in revenue from AliExpress.
  • International commerce wholesale business

    Revenue from our international commerce wholesale business in fiscal year 2019 was RMB8,167 million (US$1,217 million), an increase of 23% compared to RMB6,625 million in fiscal year 2018. The increase was primarily due to increases in the average revenue from paying members and the number of paying members on Alibaba.com, our global wholesale marketplace.
  • Cainiao logistics services

    Revenue from Cainiao logistics services, which represents revenue from the domestic and international one-stop-shop logistics services and supply chain management solutions provided by Cainiao Network, after elimination of inter-company transactions, was RMB14,885 million (US$2,218 million), an increase of 120% compared to RMB6,759 million. The increase mainly reflected the full year effect of consolidation of Cainiao in fiscal year 2019. We started to consolidate Cainiao Network in mid-October 2017.
  • Local consumer services

    Revenue from local consumer services, which primarily represents revenues from platform commissions, provision of food delivery services and other services provided by our on-demand food delivery platform Ele.me, was RMB18,058 million (US$2,691 million). We started to consolidate Ele.me in May 2018 and Koubei in December 2018.

Cloud computing

Revenue from our cloud computing business in fiscal year 2019 was RMB24,702 million (US$3,681 million), an increase of 84% compared to RMB13,390 million in fiscal year 2018, primarily driven by an increase in average spending per customer.

Digital media and entertainment

Revenue from our digital media and entertainment business in fiscal year 2019 was RMB24,077 million (US$3,588 million), an increase of 23% compared to RMB19,564 million in fiscal year 2018. The increase was primarily due to an increase in revenue from mobile value-added services provided by UCWeb, such as mobile search and game publishing, and an increase in subscription revenue from Youku.

Innovation initiatives and others

Revenue from innovation initiatives and others in fiscal year 2019 was RMB4,665 million (US$695 million), an increase of 42% compared to RMB3,292 million in fiscal year 2018. The increase was mainly due to an increase in revenue from Tmall Genie and Amap.

Costs and Expenses

The following tables set forth a breakdown of our costs and expenses, share-based compensation expense and costs and expenses excluding share-based compensation expense by function for the periods indicated.

  Year ended March 31,  

% of
Revenue
YoY
change

2018   2019
RMB  

% of
Revenue

RMB   US$  

% of
Revenue

(in millions, except percentages)
Costs and expenses:
Cost of revenue 107,044 43% 206,929 30,833 55% 12%
Product development expenses 22,754 9% 37,435 5,578 10% 1%
Sales and marketing expenses 27,299 11% 39,780 5,928 11% 0%
General and administrative expenses 16,241 6% 24,889 3,708 6% 0%
Amortization of intangible assets 7,120 3% 10,727 1,599 3% 0%
Impairment of goodwill 494 0% 0%
Total costs and expenses 180,952 72% 319,760 47,646 85% 13%
 
Share-based compensation expense by function:
Cost of revenue 5,505 2% 8,915 1,328 2% 0%
Product development expenses 7,374 3% 15,378 2,291 4% 1%
Sales and marketing expenses 2,037 1% 4,411 657 2% 1%
General and administrative expenses 5,159 2% 8,787 1,310 2% 0%
Total share-based compensation expense 20,075 8% 37,491 5,586 10% 2%
 
Costs and expenses excluding share-based compensation expense:
Cost of revenue 101,539 41% 198,014 29,505 53% 12%
Product development expenses 15,380 6% 22,057 3,287 6% 0%
Sales and marketing expenses 25,262 10% ...