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Alibaba (BABA) Beats Q2 Earnings Estimates, Lags Revenues

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Alibaba Group Holding Limited (BABA - Free Report) 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.

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 - Free Report) , Overstock.com, Inc. and Revolve Group, Inc. (RVLV - Free Report) , 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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