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Will Cloud Strength Benefit Alibaba's (BABA) Q2 Earnings?

Alibaba Group Holding Limited’s BABA second-quarter fiscal 2022 results, slated to release on Nov 18, are expected to reflect the impacts of the strengthening cloud computing segment.

The segment has turned out to be one of the key contributors to the company’s overall top-line growth. In the last reported quarter, revenues from the cloud computing segment increased 29% from the prior-year period to RMB 16.1 billion ($2.5 billion), accounting for 8% of the total revenues.

The Zacks Consensus Estimate for fiscal second-quarter cloud computing segment revenues is pegged at $2.9 billion, indicating growth of 32% from the year-ago reported figure.

Click here to know how the company’s overall fiscal second-quarter results are expected to be.

Alibaba Group Holding Limited Revenue (TTM)

Alibaba Group Holding Limited Revenue (TTM)
Alibaba Group Holding Limited Revenue (TTM)

Alibaba Group Holding Limited revenue-ttm | Alibaba Group Holding Limited Quote

Key Factors to Note

Alibaba’s expanding footprint in the booming cloud market is expected to have been encouraging.

The company’s cloud computing business has been gaining a lot of traction in China as well as international regions. BABA’s strengthening global data center network is anticipated to have been beneficial in the to-be-reported quarter.

The company has been witnessing solid momentum across the Asia Pacific region for the past few quarters. The trend is expected to have persisted in the quarter under review.

Increasing spending from enterprise customers, driven by the company’s continued efforts to add features to its cloud offerings, is likely to have driven the segment’s top-line growth in the fiscal second quarter.

Alibaba’s strong cloud services portfolio, powered by advanced technologies like AI, Machine Learning and Internet of Things, is expected to have aided it in addressing the rising demand for cloud architecture.

The growing momentum across BABA’s cloud computer, which is its first device that enables users to utilize unlimited computing resources anytime and anywhere, is expected to have captured customer attention.

The impacts of the Hybrid Cloud Partner Program of the company, which has been gaining strong traction, are expected to get reflected in the upcoming results.

However, rising competition from big market players is anticipated to have been a significant concern in the to-be-reported quarter. Growth of Alibaba in the cloud market has been hindered by the strengthening efforts of Amazon AMZN, Microsoft MSFT and Alphabet GOOGL.

Per the Canalys data, in second-quarter 2021, Amazon’s AWS sustained its dominant position by acquiring 31% of the market share, while Microsoft’s Azure and Alphabet’s Google Cloud accounted for 22% and 8%, respectively.

Rest 39% of the market share was contributed by other cloud players.

Nevertheless, Alibaba’s strong cloud initiatives and robust cloud portfolio are expected to have helped it maintain its leading position in China’s cloud market in the to-be-reported quarter.

Currently, Alibaba carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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