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Alibaba Group Holding Limited (BABA - Free Report) reported third-quarter fiscal 2023 non-GAAP earnings of $2.79 per ADS (RMB 19.26), which surpassed the Zacks Consensus Estimate by 21.8%. The figure increased 14% from the year-ago fiscal quarter’s reported figure in RMB terms.
Revenues of RMB 247.76 billion ($35.92 billion) rose 2% from the year-ago fiscal quarter’s level. Further, the top line surpassed the Zacks Consensus Estimate of $35.48 billion.
The top line increase was driven by growing momentum across Alibaba’s international commerce business. Strength across the local consumer services, Cainiao logistics services and cloud computing businesses contributed well.
However, weakness in China Commerce segment was a concern. Moreover, sluggish consumer demand, along with logistics and supply chain disruptions, remained concerns.
Alibaba Group Holding Limited Price, Consensus and EPS Surprise
China Commerce (69% of total revenues): The segment comprises marketplaces operating in China’s retail and wholesale commerce markets. Alibaba generated RMB 169.99 billion ($24.65 billion) of revenues from the segment, which fell 1% from the year-ago fiscal quarter’s reported figure.
China commerce retail (67% of total revenues): The business vertical’s revenues for the reported quarter were RMB 165.76 billion ($24.03 billion), reflecting a 1% dip from the year-ago fiscal quarter’s reported number. The downfall was attributed to the decline in customer management revenues due to sluggish growth in online physical goods GMV at Taobao and Tmall marketplaces. Nevertheless, positive contributions from Alibaba Health’s direct sales businesses and Freshippo, which aided growth in direct sales and other revenues during the reported quarter, were tailwinds.
China commerce wholesale (2% of total revenues): The business generated revenues of RMB 4.22 billion ($612 million), which remained flat on a year-over-year basis.
International Commerce (8% of total revenues): The segment comprises marketplaces operating in the international retail and wholesale commerce markets. Alibaba generated RMB 19.5 billion ($2.8 billion) in revenues from the segment, which grew 18% from the year-ago fiscal quarter’s reported figure.
International commerce retail (6% of total revenues): Revenues for the reported quarter were RMB 14.6 billion ($2.12 billion), up 26% from the year-ago fiscal quarter’s reported figure due to strong growth of Trendyol e-commerce business.
International commerce wholesale (2% of total revenues): The business generated revenues of RMB 4.82 billion ($699 million), which remained flat on a year-over-year basis.
Local consumer services (5% of total revenues): Revenues grossed RMB 13.12 billion ($1.91 billion), up 6% from the year-ago fiscal quarter’s reported figure. The rise was driven by improved average order value at Ele.me, which drove GMV growth of To-Home business.
Cainiao logistics services (7% of total revenues): Revenues summed up to RMB 16.55 billion ($2.4 billion), up 27% from the year-ago fiscal quarter’s reported figure. The upside was led by strong momentum across domestic consumer logistics services.
Cloud Computing (8% of total revenues): The segment generated revenues of RMB 20.2 billion ($2.92 billion), up 3% from the year-ago fiscal quarter’s reading, aided by solid momentum across the financial services, education and automobile industries.
Digital Media and Entertainment (3% of total revenues): Revenues logged RMB 7.6 billion ($1.1 billion), decreasing 6% from the year-ago fiscal quarter’s reported figure. This was due to sluggishness in Alibaba Pictures.
Innovation Initiatives and Others (0.3% of total revenues): Revenues from the segment were RMB 823 million ($119 million), down 20% from the year-ago fiscal quarter’s reported figure.
Operating Details
In the fiscal third quarter, sales and marketing expenses were RMB 30.6 billion ($4.4 billion), down 16.6% from the year-ago fiscal quarter’s reported figure. As a percentage of total revenues, the figure contracted 300 basis points (bps) from the year-ago fiscal quarter’s reported figure to 12%.
General and administrative expenses were RMB 10.3 billion ($1.5 billion), up 22% from the year-ago fiscal quarter’s level. As a percentage of total revenues, the figure matched the prior-year fiscal quarter’s reading of 4%.
Product development expenses were RMB 13.5 billion ($1.96 billion), down 13.9% from the year-ago fiscal quarter’s reported figure. As a percentage of total revenues, the figure remained flat year over year at 6%.
The operating income was RMB 35.03 billion ($5.1 billion) in the reported quarter, a significant jump from the $7.1 billion reported in the prior-year fiscal quarter’s level. The operating margin was 14% in the fiscal third quarter, up from 3% in the year-ago quarter.
Adjusted EBITDA increased 15% from the year-ago fiscal quarter’s reported figure to RMB 59.2 billion ($8.6 billion).
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and cash equivalents were $28.3 billion (RMB 195.25 billion), down from $29.1 billion (RMB 206.7 billion) as of Sep 30, 2022.
Short-term investments totaled $45.8 billion (RMB 315.9 billion) at the end of third-quarter fiscal 2023, up from $37.98 billion (RMB 270.2 billion) at the end of second-quarter fiscal 2022.
Alibaba generated $12.6 billion (RMB 87.4 billion) in cash from operations in the reported quarter, up from $6.6 billion (RMB 47.1 billion) in the previous fiscal quarter.
BABA’s free cash flow was $11.8 billion or RMB 81.5 billion.
Image: Bigstock
Alibaba (BABA) Q3 Earnings Beat Estimates, Revenues Rise Y/Y
Alibaba Group Holding Limited (BABA - Free Report) reported third-quarter fiscal 2023 non-GAAP earnings of $2.79 per ADS (RMB 19.26), which surpassed the Zacks Consensus Estimate by 21.8%. The figure increased 14% from the year-ago fiscal quarter’s reported figure in RMB terms.
Revenues of RMB 247.76 billion ($35.92 billion) rose 2% from the year-ago fiscal quarter’s level. Further, the top line surpassed the Zacks Consensus Estimate of $35.48 billion.
The top line increase was driven by growing momentum across Alibaba’s international commerce business. Strength across the local consumer services, Cainiao logistics services and cloud computing businesses contributed well.
However, weakness in China Commerce segment was a concern. Moreover, sluggish consumer demand, along with logistics and supply chain disruptions, remained concerns.
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
China Commerce (69% of total revenues): The segment comprises marketplaces operating in China’s retail and wholesale commerce markets. Alibaba generated RMB 169.99 billion ($24.65 billion) of revenues from the segment, which fell 1% from the year-ago fiscal quarter’s reported figure.
China commerce retail (67% of total revenues): The business vertical’s revenues for the reported quarter were RMB 165.76 billion ($24.03 billion), reflecting a 1% dip from the year-ago fiscal quarter’s reported number. The downfall was attributed to the decline in customer management revenues due to sluggish growth in online physical goods GMV at Taobao and Tmall marketplaces. Nevertheless, positive contributions from Alibaba Health’s direct sales businesses and Freshippo, which aided growth in direct sales and other revenues during the reported quarter, were tailwinds.
China commerce wholesale (2% of total revenues): The business generated revenues of RMB 4.22 billion ($612 million), which remained flat on a year-over-year basis.
International Commerce (8% of total revenues): The segment comprises marketplaces operating in the international retail and wholesale commerce markets. Alibaba generated RMB 19.5 billion ($2.8 billion) in revenues from the segment, which grew 18% from the year-ago fiscal quarter’s reported figure.
International commerce retail (6% of total revenues): Revenues for the reported quarter were RMB 14.6 billion ($2.12 billion), up 26% from the year-ago fiscal quarter’s reported figure due to strong growth of Trendyol e-commerce business.
International commerce wholesale (2% of total revenues): The business generated revenues of RMB 4.82 billion ($699 million), which remained flat on a year-over-year basis.
Local consumer services (5% of total revenues): Revenues grossed RMB 13.12 billion ($1.91 billion), up 6% from the year-ago fiscal quarter’s reported figure. The rise was driven by improved average order value at Ele.me, which drove GMV growth of To-Home business.
Cainiao logistics services (7% of total revenues): Revenues summed up to RMB 16.55 billion ($2.4 billion), up 27% from the year-ago fiscal quarter’s reported figure. The upside was led by strong momentum across domestic consumer logistics services.
Cloud Computing (8% of total revenues): The segment generated revenues of RMB 20.2 billion ($2.92 billion), up 3% from the year-ago fiscal quarter’s reading, aided by solid momentum across the financial services, education and automobile industries.
Digital Media and Entertainment (3% of total revenues): Revenues logged RMB 7.6 billion ($1.1 billion), decreasing 6% from the year-ago fiscal quarter’s reported figure. This was due to sluggishness in Alibaba Pictures.
Innovation Initiatives and Others (0.3% of total revenues): Revenues from the segment were RMB 823 million ($119 million), down 20% from the year-ago fiscal quarter’s reported figure.
Operating Details
In the fiscal third quarter, sales and marketing expenses were RMB 30.6 billion ($4.4 billion), down 16.6% from the year-ago fiscal quarter’s reported figure. As a percentage of total revenues, the figure contracted 300 basis points (bps) from the year-ago fiscal quarter’s reported figure to 12%.
General and administrative expenses were RMB 10.3 billion ($1.5 billion), up 22% from the year-ago fiscal quarter’s level. As a percentage of total revenues, the figure matched the prior-year fiscal quarter’s reading of 4%.
Product development expenses were RMB 13.5 billion ($1.96 billion), down 13.9% from the year-ago fiscal quarter’s reported figure. As a percentage of total revenues, the figure remained flat year over year at 6%.
The operating income was RMB 35.03 billion ($5.1 billion) in the reported quarter, a significant jump from the $7.1 billion reported in the prior-year fiscal quarter’s level. The operating margin was 14% in the fiscal third quarter, up from 3% in the year-ago quarter.
Adjusted EBITDA increased 15% from the year-ago fiscal quarter’s reported figure to RMB 59.2 billion ($8.6 billion).
Balance Sheet & Cash Flow
As of Dec 31, 2022, cash and cash equivalents were $28.3 billion (RMB 195.25 billion), down from $29.1 billion (RMB 206.7 billion) as of Sep 30, 2022.
Short-term investments totaled $45.8 billion (RMB 315.9 billion) at the end of third-quarter fiscal 2023, up from $37.98 billion (RMB 270.2 billion) at the end of second-quarter fiscal 2022.
Alibaba generated $12.6 billion (RMB 87.4 billion) in cash from operations in the reported quarter, up from $6.6 billion (RMB 47.1 billion) in the previous fiscal quarter.
BABA’s free cash flow was $11.8 billion or RMB 81.5 billion.
Zacks Rank & Stocks to Consider
Currently, Alibaba carries a Zacks Rank #2 (Buy).
Some better-ranked stocks in the retail-wholesale sector are Ulta Beauty (ULTA - Free Report) , Costco Wholesale (COST - Free Report) and Ross Stores (ROST - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ulta Beauty has gained 42.4% on a year-to-date basis. The long-term earnings growth rate for ULTA is currently projected at 13.75%.
Costco Wholesale has lost 1.6% on a year-to-date basis. The long-term earnings growth rate for COST is currently projected at 9.57%.
Ross Stores has gained 24.3% on a year-to-date basis. The long-term earnings growth rate for ROST is currently projected at 10.5%