- Annual active consumers in China came in above analyst forecasts.
- The more active consumers Alibaba attracts, the more the company is able to generate advertising revenue from merchants that sell wares on its e-commerce platforms. It also creates more exposure to its cloud and entertainment businesses.
- Alibaba faces slowing economic growth in China and increased regulatory pressures.
|Alibaba Earnings Results|
|Metric||Beat/Miss/Match||Reported Value||Analysts' Prediction|
|Adjusted EPS||Miss||RMB 11.20||RMB 12.11|
|Revenue||Miss||RMB 200.7B||RMB 205.7B|
|Annual Active Consumers in China||Beat||953M||846.6M|
Source: Predictions based on analysts' consensus from Visible Alpha
Alibaba (BABA) Financial Results: Analysis
Alibaba Group Holding Ltd. (BABA) reported Q2 FY 2022 earnings that missed analysts consensus estimates. Adjusted earnings per share (EPS) came below analysts' expectations, falling 37.7% year over year (YOY) to RMB 11.20 ($1.75). It was the first decline in adjusted EPS out of any quarter in at least the past four years. Note that Alibaba shares referred to throughout this story represent Nasdaq-listed American depositary shares (ADS) with the ticker BABA.
Revenue also fell short of analyst forecasts but was up 29.4% compared to the year-ago quarter. Slowing economic growth in China compounded regulatory headwinds the company faces amid Beijing's crackdown on big tech. Alibaba's annual active consumers in China came in above estimates. The company's shares fell more than 5% in pre-market trading. Over the past year, Alibaba's shares have provided a total return of -37.1%, well below the S&P 500's total return of 29.9%.
BABA Annual Active Consumes in China
Alibaba's annual active consumers in China rose 25.9% to a total of 953 million. Annual active consumers in China represent a key metric used to track the total number of user accounts that placed at least one confirmed order through Alibaba's China retail marketplaces in the past 12 months. The metric ignores whether or not the transaction was actually settled. Retaining and attracting active consumers is important to Alibaba's business model, which in large part consists of selling marketing services to the merchants that sell their wares on the company's online platforms. The more active consumers Alibaba attracts, the more the company is able to generate advertising revenue from those merchants.
But more active consumers also means more people exposed to Alibaba's cloud and entertainment businesses, which are key areas of future growth. Revenue for Alibaba's cloud computing segment rose 33.1% compared to the year-ago quarter. The company's digital media and entertainment segment saw revenue growth of 0.2% YOY.
BABA Revenue Guidance
Alibaba said that it expects its full-year FY 2022 revenue to grow between 20% and 23% YOY.
Alibaba's next earnings report (for Q3 FY 2022) is estimated to be released on Feb. 2, 2022.