Alibaba Group Holdings Ltd. (BABA) is a holding company legally domiciled in the Cayman Islands but which conducts its e-commerce businesses through its Chinese subsidiaries and variable interest entities (VIEs). Its primary business is to offer a digital marketplace where consumers and merchants can connect and buy and sell from each other. Alibaba operates its business through four primary segments, led by its giant e-commerce operations.

Chief among its competitors are other established Chinese e-commerce and Internet companies, such as Tencent Holdings Ltd., as well as global and regional e-commerce companies, such as Amazon.com Inc. (AMZN). Since Alibaba also operates in the cloud-computing business and digital-media and digital-entertainment businesses, it competes with companies specializing in those markets as well.

Key Takeaways

  • Alibaba provides digital marketplaces for merchants and consumers.
  • Alibaba's largest business is its core e-commerce operations, but cloud computing is growing the fastest.
  • Alibaba aims to be a leader in the development of the infrastructure of commerce.
  • Alibaba faces possible delisting from U.S. stock exchanges under recent Trump administration proposal.

Alibaba's Financials

Alibaba files financial statements with the U.S. Securities and Exchange Commission (SEC) and does so in accordance with generally accepted accounting principles (GAAP). The company follows a reporting schedule where the end of its fiscal year (FY) occurs at the end of March. Alibaba also reports certain non-GAAP financial measures, such as adjusted earnings before interest, taxes, amortization, and depreciation (EBITDA), and adjusted EBITA, which refers to earnings before interest, taxes, and amortization. Although Alibaba's reporting currency is the Renminbi, the company provides conversions into U.S. dollars, which are used in this story.

The company's revenue rose 33.8% to $21.8 billion in Q1 FY 2021, which ended June 30, 2020. It was slightly lower than the 35.3% annual rate of growth posted for all of FY 2020, which ended March 31, 2020. Alibaba's net income rose 142.8% to $6.6 billion in Q1 FY 2021 compared to the same quarter a year ago. The company noted that the increase was mainly driven by a net gain arising from increases in the market prices of its equity investments. The rate of net income growth was nearly twice that of the 74.9% pace posted for FY 2020.

Alibaba’s Business Segments

Alibaba monetizes its services through four main business segments that it formally names as: core commerce, cloud computing, digital media and entertainment, and innovation initiatives and others. The company provides segment break downs of revenue and adjusted EBITA, the latter of which was reported as $6.4 billion for the company for Q1 FY 2021.

Core Commerce

Alibaba's core commerce segment is comprised of its various digital retail and wholesale marketplaces, as well as logistics and local consumer services. The company generates revenue from merchants through the sale of a variety of marketing services, membership fees, customer management services, product sales, commissions on transactions, and software service fees. The company generates revenue from local consumers through platform commissions and on-demand delivery service fees.

Core commerce is Alibaba's largest source of revenue at $18.9 billion, or about 87% of the company's total revenue, as of Q1 FY 2021. Revenue for the segment grew 33.9% compared to the same three-month period a year ago.

In terms of income measures, the core commerce segment represents 100% of the company's adjusted EBITA, which grew 24.9% to $7.3 billion in Q1 FY 2021. Losses in Alibaba's other business segments partly account for the higher-reported figure in the core commerce segment than in adjusted EBITA for the company as a whole.

Cloud Computing

Alibaba Cloud provides enterprise customers with a complete suite of cloud services, including database, storage, management and application services, big data analytics, a machine-learning platform, and other services. The company's cloud computing segment generates revenue from enterprise customers based on the duration and specific usage of the services.

Cloud computing is Alibaba's second largest source of revenue at $1.7 billion, or about 8% of total revenue, as of Q1 FY 2021. The segment is also the company's fastest-growing source of revenue. Revenue grew 58.5% compared to the year-ago quarter. Alibaba reported a loss in adjusted EBITA of $48 million for its cloud computing segment in Q1 FY 2021.

Digital Media and Entertainment

Alibaba's digital media and entertainment segment exists as part of the company's strategy to capture revenue from consumption beyond its core commerce businesses. The segment generates revenue primarily from customer management services and membership subscription fees.

Digital media and entertainment is Alibaba's third largest source of revenue at $990 million, or about 5% of total revenue, as of Q1 FY 2021. Revenue for the segment grew 8.8% compared to the same quarter a year ago. Alibaba reported a $187 million loss in adjusted EBITA during in Q1 FY 2021.

Innovation Initiatives and Others

Alibaba's innovation initiatives and others segment aims to innovate and develop new services and products that can meet the needs of its customers. Past innovations include digital-navigation app Amap and network-communication app DingTalk. The segment generates revenue primarily through services fees and product sales to enterprise customers and consumers.

Innovation initiatives and others comprise the smallest share of Alibaba's revenue at $155 million, or less than 1% of total revenue, as of Q1 FY 2021. Revenue for the segment declined 6.3% compared to the same three-month period a year ago. Alibaba posted a $383 million loss in adjusted EBITA in Q1 FY 2021.

Alibaba's Recent Developments

Alibaba announced in late September 2019 its goal of reaching 1 billion annual active consumers in its China consumer business by the end of its 2024 FY, as part of its latest five-year plan. As of June 30, 2020, the company was just 258-million annual active consumers short of its goal.

Alibaba is currently facing the possibility of having its stock delisted from U.S. stock exchanges. The Trump administration earlier this month proposed a plan that would force Chinese companies listed on U.S. exchanges to comply with U.S. financial audit requirements. The proposal follows bipartisan legislation that passed the U.S. Senate in May, which would give non-compliant Chinese companies three years to delist in the U.S. Alibaba's shares trade on several global stock exchanges, including the New York Stock Exchange (NYSE).

How Alibaba Reports Diversity & Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Alibaba and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Alibaba releases to show you how it reports the diversity of its board and workforce to help readers make educated purchasing and investing decisions.

Below is a table of potential diversity measurements. It shows whether Alibaba discloses its data about the diversity of its board of directors, C-Suite, general management, and employees overall, as is marked with a ✔. It also shows whether Alibaba breaks down those reports to reveal the diversity of itself by race, gender, ability, veteran status, and LGBTQ+ identity.

Alibaba Diversity & Inclusiveness Reporting
  Race Gender Ability Veteran Status Sexual Orientation
Board of Directors        
C-Suite        
General Management          
Employees