Alibaba Group Holding Limited (BABA Quick QuoteBABA - Free Report) reported first-quarter fiscal 2025 non-GAAP earnings of $2.26 per ADS (RMB 16.44), which beat the Zacks Consensus Estimate by 2.7%. The figure decreased 5% from the year-ago quarter in RMB terms.

Revenues of RMB 243.24 billion ($33.47 billion) rose 4% from the year-ago quarter. The figure missed the Zacks Consensus Estimate of $34.95 billion.

The top-line increase was driven by solid momentum across the international commerce retail and wholesale businesses. Strength across the cloud business, local services and Cainiao logistics services contributed well. 

However, the sluggish performance of the Taobao and Tmall Group segment was a negative.

Revenues by Segments

Taobao and Tmall Group (46.6% of Total Revenues): The segment comprises Taobao, Tmall, Xianyu, 1688.com and other businesses operating in China’s retail and wholesale markets. Alibaba generated RMB 113.4 billion ($15.6 billion) of revenues from the segment, which fell 1% from the year-ago quarter’s figure.

China commerce retail (94.8% of the Taobao and Tmall revenues): The business vertical’s revenues were RMB 107.42 billion ($14.8 billion), reflecting a 2% fall from the year-ago quarter. The decline was attributed to direct sales and other revenues, which were down 9% year over year due to declining sales of consumer electronics and appliances.

Customer management revenues grew 1% year over year, driven by growing online GMV.

China commerce wholesale (5.2%): The business generated revenues of RMB 5.95 billion ($819 million), which grew 16% on a year-over-year basis. This upside was attributed to increasing revenues from value-added services.

Alibaba International Digital Commerce Group (12% of Total Revenues): The segment comprises Lazada, AliExpress, Trendyol, Alibaba.com and other businesses operating in the international retail and wholesale markets. Alibaba generated RMB 29.29 billion ($4.03 billion) in revenues from the segment, which grew 32% from the year-ago quarter.

International commerce retail (80.9% of international revenues): Revenues were RMB 23.7 billion ($3.3 billion), up 38% from the year-ago quarter’s figure, owing to the strong momentum in AliExpress’ Choice. Improvements in monetization were a positive.

International commerce wholesale (19.1%): The business generated revenues of RMB 5.6 billion ($771 million), which increased 12% on a year-over-year basis. Strength in cross-border-related value-added services contributed well.

Local Services Group (6.7% of Total Revenues): The segment’s revenues grossed RMB 16.23 billion ($2.23 billion), up 12% from the year-ago quarter. The rise was driven by strong order growth in the Ele.me and Amap businesses.

Cainiao Smart Logistics Network (11% of Total Revenues): Revenues were RMB 26.81 billion ($3.7 billion), up 16% from the year-ago quarter. The upside was led by solid momentum across cross-border fulfillment solutions.

Cloud Intelligence Group (10.9% of Total Revenues): The segment generated revenues of RMB 26.55 billion ($3.65 billion), up 6% from the year-ago quarter. This was attributed to strength in public cloud products, including AI related solutions.

However, weak momentum in non-public cloud products was a concern.

Digital Media and Entertainment Group (2.3% of Total Revenues): Revenues were RMB 5.6 billion ($768 million), up 4% from the year-ago quarter’s figure.

All Others (19.3% of Total Revenues): The segment’s revenues were RMB 47 billion ($6.5 billion), up 3% from the year-ago quarter. Declining revenues from Sun Art were concerning.

Operating Details

In the fiscal first quarter, sales and marketing expenses were RMB 32.7 billion ($4.5 billion), up 1.8% from the year-ago quarter. As a percentage of total revenues, the figure expanded 180 basis points (bps) to 13.4%.

General and administrative expenses were RMB 13.3 billion ($1.83 billion), up 2.4% from the year-ago quarter. As a percentage of total revenues, the figure expanded 240 bps year over year to 5.5%.

Product development expenses were RMB 13.4 billion ($1.84 billion), up 1% from the year-ago quarter. As a percentage of total revenues, the figure expanded 100 bps year over year to 5.5%.

The operating income was RMB 35.99 billion ($4.95 billion) , down 15% year over year. The operating margin was 15% in the fiscal first quarter, which contracted 300 bps from the year-ago quarter.

Adjusted EBITDA decreased 1% from the year-ago quarter to RMB 45.03 billion ($6.2 billion).

Balance Sheet & Cash Flow

As of Jun 30, 2024, cash and cash equivalents were $30.16 billion (RMB 219.2 billion), down from $34.4 billion (RMB 248.1 billion) as of Mar 31, 2024.

Short-term investments totaled $24.2 billion (RMB 176.03 billion) at the end of the fiscal first quarter of 2025, down from $36.4 billion (RMB 262.96 billion) at the end of fourth-quarter fiscal 2024.

Alibaba generated $4.63 billion (RMB 33.64 billion) in cash from operations, up from $3.2 billion (RMB 23.3 billion) in the previous quarter.

BABA’s free cash flow was $2.4 billion (RMB 17.4 billion).

Zacks Rank & Stocks to Consider  

Alibaba currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Badger Meter (BMI Quick QuoteBMI - Free Report) , Arista Networks (ANET Quick QuoteANET - Free Report) and Adobe (ADBE Quick QuoteADBE - Free Report) . Badger Meter and Arista Networks sport a Zacks Rank #1 (Strong Buy) each, Adobe carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Badger Meter shares gained 32.7% in the year-to-date period. The long-term earnings growth rate for BMI is projected at 17.91%.

Arista Networks shares gained 41.5% in the year-to-date period. The long-term earnings growth rate for ANET is projected at 17.20%.

Adobe shares gained 16.4% in the year-to-date period. The long-term earnings growth rate for ADBE is projected at 13.04%.